The year 2013 is expected to be a landmark year as far as reforms in the real estate sector are concerned. Some of the major reforms initiated in the previous years are likely to be implemented this year. One can expect all or majority of the following in the year 2013.
1) Real Estate Regulation Bill
The much waited ‘Real Estate (Regulation and Development) Bill is likely to be tabled in the forthcoming budget session of the parliament. The bill aims at establishing a regulatory authority for enforcing fair practice and accountability norms and fast track dispute resolution mechanism in real estate transactions.
Some of the key features of the bill are :
- Setting up a real estate regulator in each state
- Launch of new project only after registration with the state regulator
- Developers to stick to approved plans
- Developers to deposit 70% of the amount from sale of project is a separate bank account which shall be used only for the development of that project
- Adjudicating disputes between property buyers and developers
- In case of default, the developer will have to refund the money to buyers
- Developer to pay interest at prescribed rate for delays in completion of project
- Prescribes penalties and punishments (including imprisonment) for developers in case of default
Naturally, the developers are not very happy with the bill and majority of them have been opposing it. Their stand has been that the real estate sector is already over regulated. The developers have to comply with numerous regulations and obtain a number of approvals from various government authorities (Local, State and Central) before the project can see the light of the day. Adding one more regulator will further burden them and make it difficult for them to operate.
Nonetheless, the real estate regulator is required for the protection of the interest of the property buyers at large and the government (state as well as central) now seems determined to introduce the same.
2) Single Window Clearance and online approvals
The developers have been screaming their lungs out as to how complying with numerous regulations and obtaining approvals from multiple authorities is causing hardship to them and leading to delays in execution of projects. It takes anywhere between 1 to 3 years or even more, after the identification/acquisition of land to obtain various approvals before the project can be launched. Even after the launch of project, there is possibility of further delays on account of change of some regulation or introduction of some new regulation. This not only discourages investment in the real estate sector but also leads to increase in the cost of the project which is ultimately passed on to the property buyers. The entire real estate sector in India is plagued with problem of delays and it’s the property buyers who ultimately suffer the most on this account. The developers have been demanding a single window clearance mechanism for projects for quite some time.
Considering that approvals are required from Local, State and Central authorities, it may not be practical to have a single window clearance mechanism in its true sense.
Nevertheless, the Central Government has finally yielded to the developers demand and has appointed a committee to streamline the approval procedure, fast track the approvals and put up the status of approvals online.
Faster approval will help developers to bring down the cost escalations due to delays which go up to 40%. It remains to be seen how much of this will be passed to the home buyer.
Uploading the approval status of the project on the internet will be a great relief to the home buyers who currently rely on the developers word that all the approvals are obtained only to see, after substantial payment has been made, that the project is stuck up for want of some approval or the other.
3) Land Acquisition Bill
The much talked about ‘Land Acquisition, Rehabilitation and Resettlement Bill’ is likely to see the day of light in 2013. The bill seeks to provide fair compensation to land owners in rural as well as urban areas and fair rehabilitation of landowners and those directly affected from loss of livelihood due land acquisition.
Key Highlights of the bill are:
- The process of land acquisition will involve a Social Impact Assessment Survey, a preliminary notification stating the intent of acquisition, declaration of acquisition, timeframe for payment of compensation etc.
- Specific provisions for rehabilitation and resettlement of people affected by acquisition
- Compensation for the owners of acquired land shall be 4 times the market value in case of rural areas and 2 times the market value for urban areas
- Government will not acquire land for private companies for private purpose
- Consent required of 80% of land owners for any private project of public purpose and of 70% for public private partnership
- No consent of landowners required for any acquisition for government projects
4) Industry Status for Real Estate Sector
The real estate sector is the 2nd largest employment generator after agriculture and contributes over 5% to GDP growth. But surprisingly it is still not been regarded as an industry.
This year, the government is likely to given in to the long pending demand of the developers of according industry status to the real estate sector.
The biggest benefit of this will be that it will enable developers to raise finance from banks and other financial institutions more easily and also at lower rate.
In will also bring in more transparency and remove many procedural hurdles thereby attracting more investment in this sector.