New Real Estate Regulation Act Comes Into Force

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Regulation of real estate sector involving over 76,000 companies across the county becomes a reality from May 1, 2017 with the Real Estate (Regulation & Development) Act,2016 coming into force.

With all the 92 Sections of the Act coming into effect from tomorrow, developers shall get all the ongoing projects that have not received Completion Certificate and the new projects registered with Regulatory Authorities within three months i.e by July end.

What was the need for a regulatory law for the real estate sector?

The real estate sector has grown in the recent years but has largely been unregulated from the perspective of consumer protection. Though, consumer protection laws are available, the recourse available therein are only curative, but not preventive. This has affected the overall potential growth of the sector due to absence of professionalism and standardization.

The Real Estate Act is intended to achieve the following objectives:

a) ensure accountability towards allottees and protect their interest;

b) infuse transparency, ensure fair-play and reduce frauds & delays;

c) introduce professionalism and pan India standardization;

d) establish symmetry of information between the promoter and allottee;

e) imposing certain responsibilities on both promoter and allottees;

f) establish regulatory oversight mechanism to enforce contracts;
g) establish fast- track dispute resolution mechanism;

h) promote good governance in the sector which in turn would create investor confidence.

This enables the buyers to enforce their rights and seek redressal of grievances after such registration.

The Act ushers in the much desired accountability, transparency and efficiency in the sector with the Act defining the rights and obligations of both the buyers and developers.

Ministry of Housing & Urban Poverty Alleviation has formulated and circulated Model Real Estate Regulations for adoption by the Regulatory Authorities in the States/UTs. Under these Regulations, developers are required to display sanctioned plans and layout plans of at least 3 feet X 2 feet size at all marketing offices, other offices where properties are sold, all branch offices and head office of the promoters in addition to the site of project.

Real Estate Regulatory Authorities may take decisions on all issues preferably through consensus failing which through voting with Chairman using Casting Vote in case of a tie.

There shall be quorum for the meetings of the Regulatory Authorities and if a meeting is adjourned due to lack of such quorum, such meeting can take place without quorum.

Members of Regulatory Authorities shall declare interest if any in the matters coming up for discussion and shall not participate there in.

Some of the major provisions of the Act, besides mandatory registration of projects and Real Estate Agents include:

1.Depositing 70% of the funds collected from buyers in a separate bank account in case of new projects and 70% of unused funds in case of ongoing projects;

2. Projects with plot size of minimum 500 sq.mt or 8 apartments shall be registered with Regulatory Authorities;

3.Both developers and buyers to pay the same penal interest of SBI’s Marginal Cost of Lending Rate plus 2% in case of delays;

4.Liability of developers for structural defects for five years; and

5. Imprisonment of up to three years for developers and up to one year in case of agents and buyers for violation of orders of Appellate Tribunals and Regulatory Authorities.

Clear Your Doubts about Real Estate Act: Click Here to Read

Chronology:

March 10, 2016: The Real Estate (Regulation & Development) Bill, 2016 passed by Rajya Sabha;

March 15, 2016: Lok Sabha passed the Bill as passed by Rajya Sabha;

March 25, 2016: President gives assent to the Bill;

April 26, 2016: 59 Sections of the Act were notified making them effective from May 1, 2016 enabling preparation of Real Estate Rules, setting up of Regulatory Authorities and other infrastructure;

April 19, 2017: Remaining 32 Sections of the Act notified making them effective from May 1st 2017 requiring registration of projects within three months from May 1, 2017.

May 1, 2017: New era begins for development of real estate sector in an atmosphere of investor confidence.

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