Fly-by-night builders of housing projects could be see tough times ahead.
Builders issuing misleading advertisement for sale of flats or unnecessarily delaying projects will also come under scrutiny if the proposals in the draft real estate Bill are accepted.
The Bill proposes up to three years imprisonment or a fine up to 10 per cent of the project cost, if any builder “wilfully” develops or constructs projects without first registering it and obtaining a certificate from the proposed Real Estate Regulatory Authority.
Also, promoters who “wilfully” violate any other provision of the Bill will have to cough up penalty of up to five per cent of the project cost.
“There have been unfair practices in the sector and even the real estate bodies have talked about the need for a regulation…Why did the need arise…because of unscrupulous fly-by-night operators,” the Minister of Housing, Ms Kumari Selja, said.
The draft Bill – after consultation with States, Central Ministries and the industry – will be sent to the Cabinet for approval before the Winter Session of Parliament.
Asked if she anticipated major opposition to the Bill from developers or States who ultimately have to implement it, the Minister said, “The Bill will protect consumers' interest and we will not compromise on that. At the same time, we do not wish to put any impediments to the growth of real estate sector.”
The real estate industry has labelled certain provision of the Bill as “impractical” and have also criticised the imprisonment clauses with regard to the promoter.
“We are legitimate, respectful businesses…The Bill should not have imprisonment clauses, because the Indian Penal Code anyway deals with that aspect,” said Mr Getamber Anand, Vice-President of real estate association CREDAI.
The Bill states that each phase of project will have to be registered separately. The only exception for registration is where the land under consideration is less than 4000 square metres, or where all approvals for project have come a year before the Act comes into effect.
While registering a project with the proposed regulator – incidentally each State will have such a body – the builder will have to submit details such as size of plots, layout plan, and facilities proposed in the project.
Developers will also have to commit a timeframe for completion of the project. Further 70 per cent of the amount taken from allottees from time to time will have to be deposited in a separate account and can be utilized only for that particular project.