The Real Estate (Regulation and Development) Bill approved by the Rajya Sabha yesterday is being considered as a landmark initiative in regularizing real estate sector. It is a ground-breaking scheme to protect the interest of consumers, promote fair play in real estate transactions and to ensure timely execution of projects.
Till the 80’s real estate development and housing projects were largely the responsibility of the State with very few private players and an embryonic industry. It was during the liberalization of economy with a deliberate push from the Govt. that the industry picked up and is now a sizable contributor to the country’s GDP; however it is also true that the industry is largely unregulated and unorganized.
The bill is being considered the need of the hour as it strives to provide transparency and accountability in all real estate transactions thereby benefiting both the buyers and sellers.
The number of disputes between real estate developers and home buyers due to delays in the completion of projects are expected to reduce as 70% of the money received from the buyers is to be deposited in an Escrow account with a scheduled bank that is to be used solely for the project and cannot be diverted. This move is going to bring the sought after transparency in the realty sector.
Also, apart from the consumers the sellers are expected to benefit in the long term due to increased consumer confidence which will result in increased flow of funds into the business with more foreign institutional investors taking interest. However, the flip side of the coin is on aspect of liquidity, as interest rates are expected to rise and the developers might have to arrange funds from other modes for the short term.
With strict regulations in place like registering of all real estate projects and agents, mandatory public disclosure of all project related documentation, adherence to the declared plans, a regulatory body to monitor adherence and penalty for failure to do so the bill strives to achieve the accountability that was previously missing in the sector. However, the only way to assure the intended result is to make sure that the regulatory body is not another obstacle giving rise to more red tape and corruption.
All in all it is fair to say that the Bill has come at the right time where Real estate sector is on a rise due to continuously raising demand, however only time will tell if the Bill achieves the results.