Sudipto Dey looks at some key legal and regulatory challenges facing the proposed real estate regulator.
When does the regulatory authority come into effect?The central and the state governments must establish the authority within one year of the proposed Act coming into force. Each government could establish one or more authority within a state or Union territory.
If they deem fit, two or more states or Union territories could establish a common regulator. "Technically, we could have one regulator and an appellate tribunal in each district, if the state so decides," says Gulam Zia, executive director, Knight Frank India.
If they deem fit, two or more states or Union territories could establish a common regulator. "Technically, we could have one regulator and an appellate tribunal in each district, if the state so decides," says Gulam Zia, executive director, Knight Frank India.
How is the real estate regulator different from regulators in other sectors like insurance and telecom?
The real estate regulator will have no price determining powers. It also does not have any control over clearances and approvals developers need for starting a project.
"It does not address a long-standing demand of developers for a single-window clearance," says Kalpesh Maroo, partner, BMR & Associates.
However, the regulator could suggest to the government to create of a single-window system to ensure time-bound project approvals.
How are promoters granted registration of a project?
No promoter is allowed to advertise, market, book, sell or offer for sale, or invite persons to purchase any plot, apartment or building, in a project without registering with the authority.
The regulator, within a year of its establishment, must have an online system for submitting applications for registration of projects. The authority must grant registration to a project within 30 days of receipt of an application provided it meets the rules. In an ongoing project, the promoter has to apply for registration within three months of commencement.
What are the legal challenges to the 70-30 rule?
To prevent diversion of funds from a project, the proposed Act prescribes that 70 per cent of the amount a project developer receives from allottees be deposited in a separate bank account to cover the cost of construction and the land cost.
The promoter is allowed to withdraw the amount to cover the cost in proportion to the percentage of completion of the project. The account has to be audited every financial year by a chartered accountant. Any withdrawal from the account has to be certified by an engineer, an architect and a chartered accountant.
According to Anil Harish, partner, DH Harish & Co, the rules for valuation of land will play a key role in making the 70-30 provisions effective. Each state may come out with different rules on valuation of land, leading to ambiguity in the provision, he adds. Factoring in the historical cost of land, in cases where the promoter has a land bank build over years, is another issue that could become contentious, feel experts.
Can state governments change the 70-30 provisions?
The Real Estate Bill falls under the Concurrent List and state governments are entitled to legislate. However, any amendment to a central legislation by a state government will require presidential assent if the amendments are inconsistent with the provisions under the central law.
"In theory, state governments could change the 70-30
rule, however, we expect them to uphold the provisions of the bill," says Yogesh Singh, partner, Trilegal.div_arti_inline_advt">
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