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Home March 14, 2016

Real Estate Bill could encourage FDI inflows

through more transparency as well as accountability and could encourage flow of FDI funds into the market, a Nomura report says.

The Upper House on March 10 passed the Real Estate (Regulation and Development) Bill, 2016, aimed at protecting the interests of home buyers, bringing in more transparency and accountability into the real-estate sector.

According to the global financial services firm, the Bill could go a long way towards protecting the interests of home buyers by facilitating more timely completion of projects and ensuring greater transparency.

This bill was touted as a major reform measure to regulate the vast real estate sector and bring order in it.

“Mandatory disclosures and registration may reduce black money transactions in this sector; and greater credibility of the real-estate sector (through greater transparency and accountability) could encourage flow of FDI funds into the sector,” Nomura said in a research note.

“The Bill is yet to be passed in the Lower House, though that should be easier, as the government has an absolute majority in the Lower House,” Nomura added.

The key features of the bill include, timely execution, accountability and transparency.

The Bill proposes setting up state-level real-estate regulatory authorities, where builders will be mandated to register all projects above 500 sq mts (earlier 4000). This would apply to both residential and commercial real estate projects, including those currently under construction.

State-level appellate tribunals will be set up for addressing complaints. A timeline of a maximum 60 days has been set for resolution of disputes.

Failure to register a project could result in imprisonment of up to three years for developers or 10 per cent of the project cost or both.

Home buyers and real-estate agents could also face up to one year of imprisonment, if found in any violation of the tribunals or regulatory authority.


Here are the salient features of the Real Estate Bill




1. The Bill ensures the timely completion and delivery of flats to the consumer by ensuring that strict regulations will be imposed on developers to ensure timely construction and delivery. It further provides that consumers are entitled to a full refund with interest, if there has been a long delay in the delivery of a flat.

2. The Bill has put in place a robust mechanism for the publication of accurate project details and disclosures. The Bill mandates that developers need to share final project plans as part of their disclosure terms, with no room for iterations. The Bill also imposes a 10% project cost penalty and upto 3 years in jail. These add a much needed degree of accountability and also protects consumers from this highly prevalent malpractice.

3. The developers need to deposit 70% of the collections from buyers in a separate accounts towards the cost of construction including that of land as against a minimum of 50% suggested by the Select Committee.

4. Norms for registration of projects has been brought down to plot area of 500 sq.mts or 8 apartments as against 4,000 sq.mts proposed in the draft Bill in 2013 and 1,000 sq.mts or 12 apartments suggested by the Standing Committee.

5. Bill ensures that all clearances are completed before the launch of a project. Sections of the Bill mandate that developers have to receive all clearances before issuing their properties for sale. Most builders offer flats at huge discounts at the pre-launch stage to attract buyers – but without informing consumers about the status of clearances and potential delays in delivery.

6. Bill mandates that developers are bound to provide after sales service for properties found to have structural defects, at no extra cost to the consumer. Under the Bill, buyers are simply required to inform the developers of the deficiency within one year of purchase.

7. Liability of developers for structural defects have been increased from 2 to 5 years and they can’t change plans without the consent of two thirds of allottees.

8. Commercial real estate also brought under the ambit of the Bill and projects under construction are also required to be registered with the Regulatory Authority.

9. Capret area has been clearly defined which forms the basis for purchase of houses, eliminating any scope for any malpractices in transactions.

10. Ending the earlier asymmetry which was in favour of developers, both consumers and developers will now have to pay same interest rate for any delays on their part.

11. The Bill provides for arranging Insurance of Land title, currently not available in the market which benefits both the consumers and developers if land titles are later found to be defective.

12. Specific and reduced time frames have been prescribed for disposal of complaints by the Appellate Tribunals and Regulatory Authorities.


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