Draft bill framed to regulate real estate sector

The government has finally come out with a draft bill to curb malpractices in the hitherto under-regulated real estate sector. The Real Estate (Regulation and Development) Bill 2011, scheduled to be introduced in the upcoming winter session of Parliament, aims to bring "accountability and transparency" to the sector.

Under its proposals, builders will have to register themselves before launching housing projects, stick to the approved plans and refund money to homebuyers in case they default on the original terms. They cannot advertise, invite bookings or receive advances or deposits from customers for a project without registering it with the regulator. Deposits or advances can be taken only after entering into an agreement of sale with the customer.

Unveiled by union minister for housing and urban poverty alleviation Kumari Selja on Friday, the bill proposes setting up a real estate regulatory authority, which will keep an eye out for land sharks and fly-by-night operators.

The draft has also recommended that builders set up a separate escrow account in which they must deposit 70 per cent of the funds received from buyers, to ensure that these funds are used for the particular real estate project and not diverted elsewhere.

It also says that the promoters must stick to the approved plans and project specifications and provide all information to buyers who have booked housing, which includes site plans along with structural design.

Builders who intend to sell any immovable property will have to register with the new authority for accreditation, except for when the area of land being developed does not exceed 4,000 sq m. The developer will have to make an application to the authority disclosing details about the project, including land status, approvals and contractual obligations for the registration process.