Real Estate act

Why in news?

The Centre is soon expected to notify the Real Estate Act passed by both the houses of the Parliament in March.

Summary of the bill

• The Bill regulates transactions between buyers and promoters of residential real estate projects.
• Regulator – It establishes state-level regulatory authorities called Real Estate Regulatory Authorities (RERAs).
• Mandatory Registration – All residential real estate projects, with some exceptions, need to be registered with RERAs. Promoters cannot book or offer these projects for sale without registering them. Real estate agents dealing in these projects also need to register.
• 70% of the amount collected from buyers for a project must be maintained in a separate bank account and must only be used for the construction of that project. The state government can alter this amount to less than 70%.
• Disclosure – On registration, the promoter must upload details of the project on the website of the RERA. These include the site and layout plan, and schedule for completion of the real estate project. This is to protect buyers from being cheated with fancy designs on paper and model apartments.
• Deadline – If a developer fails to hand over the property within the deadline, he would be liable to pay the buyer a certain amount as interest. This is to compensate the interest money the buyer will be paying against his housing loan.
• The Act also provides for imprisonment of up to three years for builders and one year for real estate agents and buyers for violation of any provisions, a stringent penalty according to experts.
• Appellate body – The Bill establishes state-level tribunals called Real Estate Appellate Tribunals. Decisions of RERAs can be appealed in these tribunals.

Issues related to the bill

• Parliament’s jurisdiction to make laws related to real estate can be questioned, as “land” is in the State List of the Constitution. However, it is to be noted that the primary aim of this Bill is to regulate contracts and transfer of property, both of which are in the Concurrent List.
• In certain cases, the cost of construction could be less than 70% and the cost of land more than 30% of the total amount collected. This implies that part of the funds collected could remain underutilized, necessitating some financing from other sources, raising the project cost.
• Commercial real estate and smaller projects are not covered under the act. Lack of clear land titles and prevalence of black money are some of the main reasons for the lengthy process of project approval. Some of these fall under the State List.