At last, the Real Estate Regulatory Bill, 2013, has been introduced in the Rajya Sabha. Evidently, the reason for the delay was strong lobbying by builders which resulted in diluting the Bill from its earlier 2011 version.
The need for a realty regulator has been felt for a long time. The market is one-sided and it is usually the consumer who is taken for a ride. For instance, one of India’s biggest real estate groups, DLF, was penalised around Rs 650 crore by the Competition Commission of India (CCI) for abuse of dominance.
While the matter is still pending final disposal, the Competition Appellate Tribunal (COMPAT) has asked builders to revise their contracts and make them even-handed.
In fact, all building contracts in the country are one-sided; this practice pervades other services and goods sectors, too. An old recommendation of the Law Commission to enact an ‘unfair terms of contract act’ has been pending for a while. The first attempt to draft a realty regulator law was made in 2011 when the Bill was widely debated, but the participatory approach has led to its dilution. The people were not consulted on the 2013 draft.
Plus, minus
What are the pluses and minuses of the new Bill? The minuses outweigh the pluses. The 2011 version was more consumer-friendly, while the 2013 one is more builder-friendly.
Most importantly, the Bill proposes to establish an exclusive real estate regulator in every State to protect the interests of consumers. It’s not unusual to have an exclusive real estate regulator. South Africa, New Zealand, Dubai, Ireland, and USA, for example, have such exclusive bodies. Even Maharashtra has a housing regulatory law since 1963 which is currently under reform.
Under the 2011 Bill, the appeals against the regulator’s decision were to be placed before an exclusive appellate authority, but the 2013 Bill proposes an adjudicating authority in the Government set-up, an officer not below the rank of joint secretary, to dispose of the appeals and award compensation.
This is confusing and may end up being a bottleneck and source of delay. Under the Small Industries Development Act, an aggrieved party can also approach the adjudicating officer in Government, but in practice this system has been a non-starter in many states because the nominated officer has his/her own agenda.
Rationalise expenditure
One can accept the doing away of appellate tribunals because of the shortage of retired judges, but can the appeal not lie before the State consumer disputes redressal commission under the Consumer Protection Act (COPRA)? Every State has these commissions, each headed by a retired high court judge. After all, we are running a huge financial deficit and need to rationalise our expenditure.
Another drawback of the 2013 Bill is excluding disputes on commercial space. If a consumer has purchased space in a residential-cum-commercial complex, he/she may not be protected under the new law. In any event, under COPRA, if a self-employed person buys space for a small shop or showroom, he/she has the rights of a consumer. Further, the proposed law also seeks to exempt small projects where the area of the land is below 1,000 sq. m. or where a building does not have more than 12 flats. A large number of housing projects will thus escape the purview of the law.
In the 2011 version, the builder/developer did not have the exclusive right to cancel an allocation without due notice and valid reasons. The 2103 version has diluted this provision; the earlier mentioned DLF case is an excellent example of how builders draft one-sided agreements which only they or a lawyer understands.
Besides, the Bill does provide for refunds to be made along with interest at prescribed rates.
The 2011 Bill had proposed that such refunds be claimed as a charge on the land and structures built on it and recoverable as arrears of land revenue, which is much more potent. Otherwise the consumer will have to undergo painful delays in our overloaded judicial maze. That provision has been done away with and needs to be reinstated.
Liability issues
Another important provision relates to the defects liability period which has been limited to two years, while the Maharashtra Housing (Regulation and Development) Bill, 2012, has provided for five years; their existing law has set down a three-year period.
We have seen that the quality of Government agency built spaces is very poor and unless we have a strong defects liability provision, it will never improve.
The 2013 Bill has dropped many definitions that existed in the earlier Bill and which could lead to legal adventurism. For instance, a provision for conveyance within a fixed time period does not appear in the 2013 Bill.
Many consumers own properties without possessing proper titles and these have their attendant problems.
A better debate is required before the Bill is adopted as law. The idea of regulating the realty sector is welcome, but the law should be balanced so as not to raise the cost of real estate.
In fact, there are a large number of service areas such as amusement parks, beauty parlours, health and fitness joints and so one that are not governed by a technical regulator.
Perhaps the Government may think of expanding the scope of the law or adopt a standalone coherent law to deal with other areas and have a composite regulator to deal with them.
Turf issues and incoherence will not allow such a cost effective system to be put in place easily, but withpolitical will and leadership, we could have State-level services regulatory authorities rather than just a realty regulator.
(The author is Secretary-General, CUTS International.)