Personal Finance

Kerala plans regulatory authority

Vinson Kurian | Updated on September 17, 2011 Published on September 17, 2011

The Kerala Government has proposed to constitute a real estate regulatory authority to monitor and guide builders and developers in the State.

The Kerala Government has proposed to constitute a real estate regulatory authority to monitor and guide builders and developers in the State. The draft Act to constitute the authority is being modelled on the Real Estate Regulatory Authority Act of the Union Ministry of Housing and Urban Poverty Alleviation, according to sources in the Government.

The proposed authority would initiate steps for the growth and promotion of a healthy, transparent, efficient, and competitive real estate market.


The authority would have a tenure of three years, and comprise a chairperson and two members.

It would make recommendations on protection of interest of ‘allottees' and suggest measures to improve processes and procedures for clearance and sanction of building plans and ensure construction and maintenance of structurally safe, environmentally sustainable and cost-effective buildings and properties.

The authority would have the powers to settle disputes between promoters and the ‘allottees.' It could even seek explanations from promoters and scrutinise their accounts.


The draft Act has also mooted setting up of a Real Estate Appellate Tribunal with the powers of a civil court to adjudicate disputes related to the sector.

An order passed by the tribunal will be executed as a decree of the civil court.

The draft Act has, however, evoked a mixed reaction from the realty sector in the State.

According to Mr Antony Kunnel, President, CREDAI (Confederation of Real Estate Developers Association of India), based in Kochi, the draft document mentions standard procedures and norms for speedy processing of building approvals and licenses and dispute settlement between promoters and allottees.

These are extremely good moves, he agreed.

But he had reservations regarding the ‘proclaimed intent' of protecting the investment of the customer and on-time delivery of the product.

“While we are in full agreement with these points, it is equally important to specify and ensure that customers' responsibility and commitment are also fulfilled,” Mr Kunnel said.


Actually, there are four parties involved — promoter, customer, financial institutions and the Government, represented by various departments/bodies. All these agencies do have definite roles to play and, hence, are to be made responsible and accountable.

While the draft document deals extensively with the protection of the customer , it is almost silent on non-performance of contract clauses, including non-payment by a customer.

This makes for a very dangerous situation, as the progress of the entire project will get affected due to non-payment by a section of customers. Provisions have to be made to trigger penalty, cancellation and re-allotment in case of substantial delay in payment.

With reference to approvals and services like water, electricity, pollution control board and fire clearance, the agencies concerned shall be made accountable, Mr Kunnel said. Non-performance on their part shall also be dealt with equal severity.


There are many cases where power and water connections couldn't be made available even after one year of completing the building in all respects.

Mr Kunnel also cited a provision in the draft Act to deposit five per cent of the project value, which will be released by the authority only after production of a ‘no defect' liability certificate from the customers.

This, in effect, will result in a corresponding increase in prices, as the refund of the amount by the authority will happen only after the defect liability period, and on production of a ‘no-defect certificate' from the customers, which, in many cases, will remain a dream.

The draft Act also refers to taking over of a project by the authority, in case of inordinate delay. This will add more to the agony of a customer, as the authority may not be equipped to execute such projects.


Again, some of the provisions, such as approval for printing brochures, releasing advertisements are unnecessary and counter-productive.

Instead, guidelines and conditions for releasing ads and brochures with all relevant information can be insisted upon. These are to be meant for self-compliance and violations are to be dealt with severely.

To sum up, this initiative is a welcome move; but requires a lot of fine-tuning before implementation.

CREDAI had a meeting with the Chief Minister, ministers and officials concerned and their secretaries, a couple of weeks ago, wherein a lot of issues related to the construction industry were discussed.

All the authorities agreed that the construction industry, being the prime mover of economic growth, needs proper attention. All issues related to the industry need to be resolved urgently to ensure inclusive and sustainable growth.

The Finance Minister brought to the notice of everyone the recent issues relating to a real estate company, and the need to bring in a control system which will equitably protect the interest of the customers, the industry and the financial institutions, thereby ensuring a healthy growth.

“We appreciated the move and wholeheartedly welcomed the same. We also informed him that this is something which we have been demanding for the past five years,” he said.

The Finance Minister had also promised that it would be discussed in detail with all stakeholders before finalising the same.

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