Today, cabinet approved watered down version of Real Estate regulatory bill, which was tabled by a panel two years back. The bill would now be tabled in the budget session. Square Yards view has been in favor of a strong Real Estate regulator, in line with global standards, and it is a question of when rather than if India would comply with global best practices. For example, in Singapore, every new project needs to go through multiple level of due diligence checks before it can be launched. To add, the real estate regulatory authority also purviews and keeps in check the marketing and communication of the developers to shield potential buyers from any miscommunication. In Dubai, Developers can not withdraw funds from project escrow account unless pre stipulated construction targets are met. Similar strong regulators exist in most of the global markets such as USA, Canada, Australia etc.
Thus, we believe any small step is a step in the right direction. Though the cabinet, after a long wait, offered its views and cleared the bill to be tabled in the budget session; however, cabinet did taper down lot of strong recommendations such as not checking antecedents of promoters, limited diligence on track record, and most importantly, no blacklisting in case of 2 prior defaults. Nonetheless, provisions such as registration of new projects, necessity to keep 50% of amount collected from consumers in escrow account, 2/3rd majority needed to change plan, right to obtain stage wise time schedule of project, bringing commercial projects along with residential projects under the umbrella, and fast track tribunals.
We also anticipate (and hope) bill to include significant provisions for regulation of Real Estate Agents (again, in line with global markets). Globally, real estate agents are supposed to deploy resources for due diligence on projects they wish to market, necessary certifications and training programs, and fiduciary responsibility towards protecting interests of consumer. Although cabinet for now has kept secondary market transactions and agents out of scope of the bill, inclusion of primary projects should help consolidate the agent market in India. The bigger players should be able to better train, monitor, and regulate their agents from misselling on new launches.
