Home buyers set to get regulator cover as Cabinet approves draft bill

The cabinet on Tuesday (June 4) approved a draft bill which aims at bringing discipline and transparency to the realty sector by setting up an industry regulator to oversee it, along the lines of the Telecom Regulatory Authority of India (Trai) for the telecom sector, or the Insurance Regulatory and Development Authority (Irda) for the insurance sector.

Once it becomes law, this much awaited Real Estate (Regulation and Development) Bill is expected to protect the interests of home buyers, particularly against some of the unethical practices resorted to by developers.

For instance, the legislation makes it mandatory for developers to launch projects only after getting all the necessary approvals. This provision is expected to restrict realty companies from pre-launching their projects without clearances.

Typically, developers make a soft-launch or pre-launch before getting all the approvals. Currently, they have to take approvals from around 50 different agencies at the local, state and central levels.

The draft bill also says developers will have to submit a detailed project report that will include the completion date, land title, and the names of architects and agents to get approval.

Further, the legislation makes it mandatory for developers to deposit the amount generated from project sales in a separate account in a scheduled bank. They have to ensure that the amount is not used for any other purpose.

The bill, which had been pending for five years, imposes strict penalties for non-adherence. It also deters promoters from releasing misleading advertisements.

"The real estate sector needs transparency. We welcome the changes in the status quo. The cabinet has approved the draft bill. We look forward to its implementation," said a Jones Lang LaSalle India spokesperson.

The legislation will only be applicable to residential projects.