The Hindu Business Line : Govt drafts model law for realty sector

New Delhi, Oct. 19 In a move aimed at stamping out unscrupulous practices in the largely unorganised property market, the Government has come out with the draft Model Real Estate (Regulation and Development) legislation that proposes to establish a regulator and also affixes the responsibility of promoters. Builders, however, claim that many provisions are “unfair” and “one-sided”.

Sweeping changes

The draft model legislation suggests sweeping changes in the existing system. The Ministry of Housing and Urban Poverty Alleviation, having worked on the draft legislation, has sought feedback from various stakeholders by November 6. But since land and housing is a State subject, the adoption and enforcement will be up to individual States.

“The idea is to make the project more transparent to consumers with project details on the Web site, and also to ensure that the project does not get delayed,” a government official said.

The proposed legislation mandates the registration of various projects with a regulatory authority on its Web site (each State will have its own body), and stipulates that every promoter will submit a bank guarantee equal to 5 per cent of the estimated cost of development works with the local authority (Urban Development Authority or Town Planning Authority who wields the power to give permission for construction on land).

The Bill also points out that the promoter, while registering, needs to also submit copies of approvals for real-estate projects, along with a declaration undertaking to complete the development of the project in line with the registration conditions. Once the application is submitted, the regulator, after making an enquiry into the authenticity of various approvals and the land title, will grant the registration. The registration will initially be valid for three years with provision for two-yearly renewals.

In case the promoter fails to complete the project within the registration or renewal timeline, the regulatory authority can cancel the registration of the project, declare the promoter as a defaulter on its Web site, and further urge the local authority to facilitate completion of the balance development work. This will be supported by the proceeds of the bank guarantee; the charges incurred on the pending development work can be recovered from the promoter.

Penalty and imprisonment

The draft model legislation proposes three-year imprisonment as well as a penalty (left to the individual State) in case of non-registration of the project.

However, some builders have pointed out that the registration process is like another licence and will make the entire process more time-consuming. They said that registration should be valid for promoters instead of projects. Moreover, the industry feels that the registration period should be for an initial five and not three years.

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