Biz Wiz

Yet another watchdog with no fangs?

The construction industry is a major contributor to India’s gross domestic product (GDP). In fiscal 2011-12, around 8 per cent of our GDP came from this industry. The construction industry is the second highest employer in the country, with its contribution arising from (a) infrastructure creation and (b) real estate. The real estate sector has been suffering on two accounts — An almost complete lack of regulation of the transactions between the buyers and the sellers and the commitment of the seller, and over-regulated and excessive human interventions for giving the necessary approvals.
This has led to delays in the start of projects and resulted in a high increase in cost of money invested in the land, and unwarranted hidden charges being levied by promoters/ builders on buyers. This results in enormous wasteful expenditure and unproductive use of money.
The Union Government has formulated The Real Estate (Regulation and Development) Bill, 2013, which was tabled in the Rajya Sabha during the Monsoon Session of Parliament, with an introduction ‘to establish the Real Estate Regulatory Authority for regulation and promotion of the real estate sector and to ensure sale of plot, apartment or building, as the case may be, in an efficient and transparent manner and to protect the interest of consumers in the real estate sector and establish the Appellate Tribunal to hear appeals from the decisions, directions or orders of the Authority and for matters connected therewith or incidental thereto’.

The Bill, among other features, proposes the setting up of real estate regulatory authorities for each state and Union territory.  Under the Bill, a mandatory registration of the developer with the authority is required before any project is offered to the market.

The time-frame for project approval by the Authority has been fixed at 30 days, provided all requisite details are submitted. The Bill also proposes (a) the establishment of an Appellate Tribunal for hearing appeals, (b) providing guidance and support to developers for required information disclosure and adherence to approved plan and projects, and (c) protection of the rights of the buyers and the responsibilities of the buyers towards the developers.
The Bill will be applicable to new real estate projects only. It is well thought off but some areas may need revisiting as discussed below.   

The bill talks about regulation. But when it comes to development and promotion, the Regulatory Authority becomes an advisory body with no teeth.
Along with other bunches of advisors available with the Government, this will be another advisory body with no teeth and no power.
The Regulatory Authority has been designated to register developers, fix standard charges, make recommendations to government and impose penalties in case of default. The standard charges — for what and how much — have not been defined.

In addition, the Regulator should monitor provision of services, tariff regimes and ensure that builders bring in more transparency and efficiency.
Sections 29 and 30 define the functions of the Regulatory Authority. As provided in the title of the Bill and its introduction, the Regulatory Authority must also play the role of facilitator.
This is not a difficult job to do. But, these additional roles and responsibilities need to be defined and inserted in the present Bill.  Development can only take place if those involved — developer/ promoter, purchaser and government regulatory bodies — act together.

Let me cite an example. Developers/ promoters are talking about facilitation for obtaining all statutory clearances from various departments, agencies, regulatory authorities, etc.
The Government answer to this has always been single window clearance. This is not until a single agency is authorised to make a submission before any authority, eg fire department, environmental agency, water supply and sewerage and obtain clearances on behalf of a developer or promoter.
All over the world the city mayor/ municipal authority controls all these departments and gives a single window clearance. This is not the case in India. So where does the solution lie?

A web-based single platform for all clearances linked to each other with all statutory controls, building by-laws clearly defined, where human intervention is reduced to a minimum. This would facilitate faster development and create more transparency.
The Regulatory Authority as a facilitator can undertake development of such a platform. Once all approvals are automatically issued from the web-based system, the project should automatically get registered with the Regulatory Authority where other requirements of the Regulatory Authority are also met on the web based system.
This will also provide much-needed relief to the developers from the currently existing cumbersome process of getting approvals and permissions, resulting in cost overruns and perpetuation of the cycle of increasing costs of money.

One important aspect that has been missed under Section 11 (‘Duties of Promoter’) is the duty of the promoter for obtaining the occupancy certificate in a fixed time schedule.
The experience has been that promoters at the most take a provisional occupancy certificate from the local body by giving an undertaking to demolish deviation or to provide for deficiencies. But this is often not done, and so the project is not completed in the form that it was conceived and approved.

If this pendency is not checked, then scams like the White House at Bhagwandas Road in New Delhi and illegal floors across seven towers in the Campa Cola compound in Worli, Mumbai, would continue to occur and remain unchecked. This gap needs to be addressed in the proposed Bill.
The Bill must also aim to be time effective and efficient. For instance, if there are any loopholes or gaps observed by the Authority under the rules framed under the provisions of this act, instead of conferring the powers under section 73 and 74 to the appropriate government to make and/ approve rules, decide penalty, interest rates, etc, framing of new rules should be left to the Authority.

The bill already mentions under Section 75 that every rule and regulation in addition to the provisos made and notified will be placed before the parliament/ legislature. This suggestion is being made in the interest of saving time and giving more autonomy to the Authority. Lastly, the Bill is in need of editorial standardisation.

For instance, the text of the Bill refers to the sections and sub-section numbers whereas the content page refers to arrangement of clauses and gives them clause numbers.
The Bill is well drafted. It is a welcome move toward change and regulation. To give a fill up to employment generation and higher GDP growth, it is essential that the real estate sector is not only regulated but also facilitated. In order to be effective, it needs to ensure that all stakeholders are covered under its purview so that regulation is not lopsided and the industry and consumer get a much-needed boost.

Ashok Khurana is a former CPWD Director General and DDA Member (Engineering)
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