Developers want single-window clearance before real estate law

Realty players have been demanding a fast track mechanism for all the required permissions to start a project.

Real estate developers are pressing for a single-window clearance system before the Real Estate (Regulation and Development) Bill, 2013, is enacted.

Also, authorities giving permissions should be brought under the ambit of the regulations, they contend. Currently, developers need to take at least 50 approvals before they can launch a project.

If the government creates single-window clearance, the prices of houses could come down by 15-20 per cent, says one.

“It will also prevent unnecessary delays in delivery, a major concern area for buyers.” R K Arora, chairman and managing director of Supertech, said: “The proposal to create regulators to safeguard the interests of buyers and investors is a positive step. However, the usefulness of setting up such bodies without addressing the long-pending issues such as single-window clearance and giving infrastructure status to the sector is unclear.”

Shishir Baijal, chairman of realty advisory agency Knight Frank India, said: “The Bill would have been more effective had all the approving authorities been brought under its purview. But, overall, it is expected to infuse a fresh lease of life in the sector.”

The Union Cabinet gave approval on Tuesday for some amendments in the Bill. It is to now go to Parliament.

The commercial real estate sector is also in the ambit.

The sector has no statutory regulator.

There have been multiple consumer complaints against developers for delaying projects by years, with no redress mechanism.

If a buyer defaults on payment, he has to pay high interest, while developers escape through loopholes in the sale agreement.

Recently, through fora such as the Competition Commission of India and high courts, more than one big developer has borne the brunt of buyer anger.

“The proposed legislation should not be enforced retrospectively, as it is impossible to comply with various rules and regulations for under-construction projects,” said Arora.

Baijal adds, “Over recent years, the sector has been passing through a credibility crisis. The Bill will help in greater accountability and bring back customers who have been sitting on the fence.

The expected transparency is likely to help developers borrow funds at competitive rates, which will help rationalise property prices.”

The Bill mandates developers to deposit half the money collected from buyers in a project within 15 days to a separate bank account, to be used only for construction of that project.

Developers are not too happy with this clause. “Those squeezed for credit will find it difficult to manage the business,” said Niranjan Hiranandani, managing director of Hiranandani Constructions.

Rajeev Talwar, executive director of DLF, said developers' dependence on the banking system would increase, as they'd build a project to a certain level and then seek funds to buy materials, hiring of professionals and so on. Talwar also argued it was not correct to bring commercial real estate in the Bill's ambit.

“People do not put their hard-earned money in commercial real estate. Commercial real estate is about making wise investments. So, government should allow developers to make that,” he said.

Also, the penalty of jail for developers was not correct, as the contentious issues were civil in nature, not criminal, he added. Developers are also unhappy about bringing those projects which have not received an occupation certificate (OC) under the Bill.

“Half the buildings in the country do not have an OC.

There is no concept of OC in many places,” said Hiranandani. Under the proposed law, 10 per cent of project cost will be imposed as penalty for non-registration and another 10 per cent of project cost or three-year imprisonment or both if still not complying with the rules and regulations. For wrong disclosure or non-compliance of information, five per cent of project cost will be imposed.

The regulators will have the power of cancelling registration in the case of persistent violations.

The Bill was introduced in the Rajya Sabha in August 2013 and referred to a standing committee.

Most of its recommendations have been incorporated in the Bill's amendments.

Developers will be required to register their projects with authorities to be set up and mandatorily disclose all information regarding the promoters, project, layout plan, schedule of development works, land status and that of statutory approvals.

Ongoing projects that have not received completion certificates have also been brought under the purview of the Bill and such projects will need to be registered within three months.

Developers will not be allowed to change plans or structural designs without the consent of two-third of buyers in a project.

Photograph: Reuters