Government introduces Real Estate Bill in Rajya Sabha

The Bill is aimed at protecting home buyers against erring developers, bring in investments and transparency in real estate sector

Paving way for regulation in the real estate sector, the government today introduced Real Estate (Regulation and Development) Bill, 2015 in the Parliament. 

The Bill, tabled in the Rajya Sabha, will protect home buyers against erring developers besides bringing in investments as well as transparency in the sector.

In December last year, the Cabinet had approved 20 major amendments to the Bill based on the recommendations of a Rajya Sabha committee.

Till now, the real estate sector had been devoid of any sort of regulation. With many developers going back on their commitments, end-consumers have suffered without any forum to register their complaints in the recent times. It also led a new form of consumer activism.

The developers will now have to deposit 70% of the sale proceeds, including the land cost, in a separate escrow account, which was earlier brought down to 50% by the NDA government.  Also, an equal rate of interest has to be paid by promoters and buyers in case of default or delays. Currently, developers pay only 2-3% interest in case of default, but a buyer pays 16-18% interest for his default, according to people in the know.

Apart from three years' imprisonment for developers proposed by the government, the liability of promoters for structural defects has been increased from the earlier two years to five years now.

Developers will have to register projects with 500 sq mt area or 8 flats with a regulatory authority instead of 1,000 sq mt and 12 flats earlier. A minimum of 50% of sale proceeds will have to be kept in a separate bank account and used for construction of that project.

In April 2015, the government had also cleared a few amendments to the Bill. It was tabled in the Rajya Sabha, but was referred to the Select Committee after the opposition called the Bill pro-developers. The Bill has been in the making since 2009. 

Earlier, the government had brought commercial real estate under the ambit of the Bill apart from residential segment. Besides, developers will need consent of two third of buyers for changing project plans.