NEED FOR A REAL ESTATE ACT FOR REGULATION AND DEVELOPMENT

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The promoter regulation acts of various States attempted to deal with what could be considered as excesses by the real estate sector i.e., (i) collecting huge amounts even prior to the approval of construction proposals, (ii) creating a mortgage on the property before or after entering into an agreement of sale with third parties, without letting them know of the mortgage, (iii) not delivering apartments in time, (iv) changing approved plans midway, (v) not transferring apartments to individual flat purchasers or to housing societies, with the fond hope that the FAR / FSI in the area would increase and they could benefit, (vi) collecting huge maintenance fees and siphoning it off through inflated charges, (vii) issuing misleading advertisements, etc. All these and other issues ought to be taken care of by the Law,and cannot be left to market forces, since the hard- earned lifetime savings of citizens are involved. Despite some States bringing laws, there is no denying that the Real Estate sector is still one of the most unregulated, in so far as relations between the developer / promoter / builder and the purchaser are concerned. As such, there is an imperative need for a model Real Estate (Regulation and Development ) Act.

The Central Government had announced a Model Real Estate (Regulation and Development) Act, which was put up for discussion before it was brought before Parliament. It envisages regulatory and appellate authorities to regulate, control and promote development by construction, sale, transfer and management of residential apartments. Though the model legislation is a welcome move to bring discipline to the sector, the proposed legislation is not binding on States, which have to enact separate legislations. 

The regulatory authority proposed is in addition to existing authorities under different local, planning, revenue and tax establishments. There are dozens of licenses and approvals to be obtained prior to starting development and, taking into consideration the way our systems work, the new proposed authorities would only delay approvals, add to the cost and create additional structures that would only set the clock back.

This is the era of liberalization.The proposed legislation will only take the real estate industry back to the license raj era. Creation of additional authorities has always led to more corruption.Exorbitant demands by authorities invariably lead to delays and cost escalation,ultimately borne by the purchaser.Power to such authorities has traditionally led to its misuse, and no system to deal with this menace has yet been discovered. Especially in the Real Estate sector, promoters ought to be made responsible and liable, so that the excesses complained of by the citizens and investors are taken care of by Law administered through Courts.

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