Indian government has approved the Real Estate Development and Regulation Bill, which will now pave way to set up a real estate regulatory authority, akin to Dubai’s Real Estate Regulatory Agency (Rera).
The move is aimed at protecting property buyers' by bringing transparency and accountability into the sector with the bill covering commercial real estate as well.
The proposed law will ensure compulsory registration of projects with the regulator, opening escrow accounts to stop misuse of investor funds and penalties for non-compliance with the regulations
Dubai had set up Rera in 2007 following a decree by His Highness Sheikh Mohammed bin Rashid Al Maktoum, Vice-President and Prime Minister of the UAE and Ruler of Dubai.
The agency is responsible for regulating the emirate’s real estate sector, formulating strategies, regulating the activities of companies that manage residential compounds, as well as the activities of real estate brokers and the Owners Associations. It has been empowered to issues rules and regulations that qualify activities of brokerage, lease contract registration and certification, as well as issue licence for real estate development entities.
In 2013, ‘Emirates24|7’ had reported that a delegation of top Indian real estate developers, led by the then Union Housing Minister Girija Vyas, had visited Dubai to study the real estate regulations, project approval procedures and working of Rera.
In a press statement, the Indian government said ongoing projects that have not received completion certificates would fall under the purview of the bill with registration mandatory with the regulator within three months.
The amended bill ensures that promoters are not allowed to change plans and structural designs without the consent of 2/3rd of consumers of a project.
Property brokers will also be held accountable as they have been made punishable for non-compliance of the orders of regulatory authority and appellate tribunals that will be established under the proposed law.
First introduced in the Upper House (Rajya Sabha) in August 2013, the bill seeks to ensure accountability and transparency to allow the real estate developers to access capital and financial markets. Efforts have been on since 2009 for creating a regulatory mechanism for the real estate sector on the lines of other regulatory bodies for other sectors such as insurance and telecom.
Moreover, developers will have to deposit 50 per cent of funds collected from investors within 15 days in a separate bank account (escrow account) to meet construction costs.
The penal provisions under the proposed law include payment of 10 per cent of project cost for non-registration and payment of additional 10 per cent of project cost or 3 year imprisonment or both if still not complied with.
Sushil Singh, who works in Dubai, is pleased with the passage of bill.
“The proposed law makes it mandatory for the developer to deposit the unit buyers fund in a separate bank account and use it only for construction. This will ensure that the project is completed and compulsory registration with the regulator will ensure that the developer is not a fly-by-night operator,” he stated.
“The bill will bring more transparency in the real estate market and ensure that the developer deliver on their promises. We could earlier file cases against errant developers, but I hope the setting up of regulator and state tribunals will help resolve issues faster,” Rohit Kumar, a stock broker, said
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