Errant developers, real estate agents face jail term, fines

Developers in India who fail to abide by the orders of the quasi-judicial appellate tribunal face jail sentence, according to the approved the Real Estate (Regulation and Development) Bill, 2015.

The new bill states that such developers will be faced with a three-year imprisonment or a fine equal to 10 per cent of project cost or both.

Post representations from developer associations, the new bill also provides for imprisonment of real estate agents and buyers who don’t follow the orders of the appellate tribunal. They may face jail term of one year or five per cent of the apartment cost or both.

The bill was approved by the Indian Union Cabinet on Wednesday, thus opening the way to set up a regulator for the real estate sector. In fact, Dubai has already established a real estate regulatory, the Real Estate Regulatory Agency, in 2007. Other Gulf Cooperation Council countries are understood to be weighing the idea of setting up such an agency.

Furthermore, the bill provides for compulsory disclosure of all real estate project details by developers, mandates registration of projects and real estate agents with the state level Rera and a second tier for adjudication of disputes, moistly the state Appellate Tribunal.

The revised draft now covers under its ambit all residential and commercial projects over 500 square metres area or with a minimum of eight apartments as against the earlier project size of 1,000 square metres land area or 12 apartments or more.

Developers will have to keep 70 per cent of the project cost, which includes the land cost, in a dedicated account. They will have to pay interest to home buyers for any default or delays at the same rate they charge them and will be liable for structural defects for five years, instead of two years earlier.

=Project guarantee in Dubai

In Dubai, it is mandatory for all developers to deposit all the monies in escrow account, pay 100 per cent of the land cost and give a 20 per cent of the value of the project as bank guarantee. All this is to ensure the project can be completed on time.

The regulatory authorities will promote a single-window system of clearances for real estate projects. This will likely speed up construction work that now lags because of delays in getting permissions.

The Indian Express quoted a  Ministry of Urban Development official saying industry figures show that the residential realty market alone sees an annual investment of Rs3.50 lakh crore and about one million new home buyers every year.

“There are 17,000 real estate projects that are in progress in 26 major urban agglomerations in the country. These will all come under the ambit of the proposed Bill,” the newspaper said.