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jUNE 21, 2014 vol xlix no 25 EPW Economic & Political Weekly 54
Legislation for the Real Estate Sector
Arun K Misra, Nagendra Goel
The Real Estate (Regulation and Development) Bill,
2013, which was introduced by the United Progressive
Alliance government in the Rajya Sabha in August
2013 and has since lapsed, provided for institution of a
uniform regulatory environment, aimed at protecting
the interests of homebuyers and establishing an
adjudicatory mechanism for speedy adjudication
of disputes. It imposed clear responsibilities on the
promoter, buyer and the real estate agent and
introduced standardisation in business practices which
could ensure orderly growth of the real estate sector
across the country.
The authors would like to thank the reviewers for their comments that
helped improve the article.
Arun K Misra (misra.ar@gmail.com) is a former secretary to the
Ministry of Housing and Urban Poverty Alleviation, Government of
India. Nagendra Goel (goel.nagendra@gmail.com) works as a legal
counsel with the Policy and Programme Support Unit of the Ministry of
Housing and Urban Poverty Alleviation, Government of India.
1 Introduction
T
he real estate sector plays a catalytic role in fullling
the demand for housing and infrastructure in the
country. While the sector has grown signicantly in
recent years, it has largely been unregulated, along with lack
of professionalism and standardisation, and lack of adequate
consumer protection. Currently, the real estate and housing
sector is largely opaque, with consumers often unable to
procure complete information, or enforce accountability
against builders and developers in the absence of effective
regulation. The biggest fallout affecting the sector is delay in
project completion; diversion of funds collected from buyers;
one-sided contracts in the absence of adequate supply; reneg-
ing on contractual commitments by both the developers and
the buyers; and constraints in nancing and investment op-
tions available to the sector, thereby affecting its long-term
growth. The absence of a pan-India regulation has also added
to this.
Real estate development and housing construction were
largely the concern of state institutions till the 1980s, with
very few private promoters, and a nascent industry. With liber-
alisation, conscious encouragement was given to the growth
of the private sector in construction, with a great deal of
success, which constitutes about 11%
1
of the gross domestic
product (GDP). However, on the Regulatory Index,
2
India is
ranked quite low, hindering domestic and foreign investment in
the sector, which could have contributed to enhanced activity,
and increase in GDP growth whilst helping to address the huge
housing shortage problem. Concomitantly, the need for regu-
lating the sector has been emphasised in various platforms,
forums, and media reports. This view has also been strongly
reiterated by the Ministry of Consumer Affairs, the Competition
Commission and Tariff Commission, in recent times.
In the Belaire Owners Association vs DLF Ltd case, the
Competition Commission of India categorically stated that,
The absence of any single sectoral regulator to regulate the
real estate sector in totality, so as to ensure adoption of
transparent and ethical business practices and protect the
consumers, has only made the situation in the real estate
sector worse. It has also been brought out by various sector-
specic studies that the very establishment of a regulatory
mechanism is likely to infuse more investments in the sector,
the absence of which has kept investors at bay. Thus, it can be
perceived that there has been a crying need for a real estate
regulator on the lines of telecom, securities, insurance,
pension, electricity, airports, food safety, etc, to ensure trans-
parency and x accountability.
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Economic & Political Weekly EPW jUNE 21, 2014 vol xlix no 25 55
2 International Regulation
The real estate sector is regulated, globally, at numerous levels.
A brief description of laws across the globe is specied below:
United States: In the US there is no single regulatory body but
rather a series of bodies that regulate different ownership and
usage aspects. The US Department of Housing and Urban
Development has rules under the Real Estate Settlement
Procedures Act to protect consumer interests pertaining to
residential properties. Issues related to end users are not a
matter of federal regulation. These are dealt with in a legal
contract. If a purchaser enters into a contract with the devel-
oper and the developer does not deliver on the terms agreed
upon in the contract, the developer can be taken to court for
breach of contract.
United Kingdom: In the UK, The Property Mis-descriptions
Act 1991 prohibits the making of false or misleading state-
ments on property matters in the course of estate agency busi-
ness and the property development business, but does not pro-
vide for a full-edged regulatory framework.
Singapore: In Singapore, details such as the possession date
and specications are usually set out clearly in contracts; end
users are able to undertake legal means to claim compensation
in case of breach of contractual terms. However, a complete
regulatory structure does not exist here.
United Arab Emirates: In the UAE the government is consid-
ering the establishment of a federal real estate regulatory au-
thority through a real estate investor protection law locally
called Tanweer. The draft law is aimed at restoring condence
in the property market, giving investors grounds to cancel
their contracts if they fall victim to failing developers; detail
grounds upon which a property buyer may demand the cancel-
lation of a contract; refund or replacement property for buyers
where the developer delivers defective property; and nancial
penalties for late delivery. The draft law aims to improve the
clarity and fairness of the contractual relationship between
the developers and the buyers.
As far as international jurisdictions are concerned real estate
laws do not provide for a sector-specic regulatory structure.
Thus, the Real Estate (Regulation and Development) Bill,
2013,
3
which was introduced by the United Progressive Alli-
ance government in the Rajya Sabha in August 2013 and has
since lapsed, was a novel initiative by the Government of India
for regulating the contract of buying and selling in the residen-
tial real estate sector, and the rst of its kind globally.
3 Existing Regulatory Architecture in States
Although, land and colonisation is a state subject under the
Seventh Schedule of the Constitution, there has not been any
serious attempt by most states across the country to establish
a monitoring mechanism to ensure timely completion of
deve lopment works of real estate projects, especially housing
projects in metropolitan cities. A handful of states, namely,
Maharashtra, Punjab, Uttar Pradesh, West Bengal, Karnataka
and Andhra Pradesh have in the past set up accountability
mechanism, through various enactments, which govern the
relationship between the developer and the buyer, and also
provide for provisions through which timely completion of real
estate projects is to be ensured, but the requirements are in-
complete and stop short of full regulation resulting in little or
no respite to homebuyers.
The Karnataka Ownership Flat (Regulation of the Promo-
tion of Construction, Sale, Management and Transfer) Act,
1972, the Maharashtra Ownership Flats (Regulation of the
Promotion of Construction, Sale, Management and Transfer)
Act, 1963, the Punjab Apartment and Property Regulation Act,
1995, the Uttar Pradesh Apartment (Promotion of Construc-
tion, Ownership and Maintenance) Act, 2010, the West Bengal
Building (Regulation of Promotion of Construction and Transfer
by Promoters) Act, 1993, and the Andhra Pradesh Apartments
(Promotion of Construction and Ownership) Act, 1987, mod-
elled on similar lines, with minor differences, provide for reg-
ulation of promotion of construction, sale and management
and transfer of ats taken on ownership basis. These state
laws specify a host of responsibilities which the promoter
needs to comply with. The promoter is required to enter into
an agreement with the buyers before accepting advance
payment or deposit and the agreement has to be mandatorily
registered. They make it incumbent upon the promoter to
maintain separate account of sums taken as advance or depos-
it and to act as a trustee by disbursing them for purposes for
which given. The laws make the builder responsible for pay-
ment of outgoings till property is transferred and prohibit him
from altering the structure after plans and specications are
disclosed to the homebuyers without their previous consent.
Additionally, the promoter is bound to rectify defects within
specied period (from a minimum of one year to maximum of
ve years, differing from state to state) without any further
charge to the homebuyer.
In case the promoter fails to give possession of the apart-
ment/at within the specied time (or further time allowed)
he shall be liable to refund the amount paid with interest.
Certain important responsibilities found in these state laws
and reinforced in the central bill are promoters responsibi -
lity to take steps for formation of cooperative society or
company; promoters responsibility to convey title, etc, and
execute documents according to agreement; and promoters
responsibility not to cut off, withhold, curtail or reduce essen-
tial supply or service. Like other regulatory laws these state
laws also provide for punishment in the form of imprison-
ment for breach by the promoter and also provide for general
liabilities of a at buyer. However, these state laws neither
provide for the establishment of a full-time regulatory
authority to enforce its provisions nor an appellate tribunal
for fast-track resolution of disputes. In fact, disputes are to be
referred to the court for resolution or to an ofcer to be ap-
pointed by the state government in that regard. Furthermore,
these laws differentiate between projects developed by a
private developer and those developed by a government
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agency, making the law inapplicable to the state government,
housing board or the development authority.
To that extent, the existing regulatory architecture, as
pre valent in these states, is incomplete, and falls short of
the required regulatory framework needed. Thus, there is an
urgent need to strengthen these legislations and enact a
uniform law regulating the real estate sector throughout
the country.
4 Need for a Sector Regulator
Any new regulatory law needs to pass through the necessity
test and to ensure that the proposed law would not lead to
overregulation and create entry barriers. Simultaneously, it is
crucial that the proposed law be tested through the lens of
public good. Thus, keeping in mind the huge shortage of housing
in the country regulatory balance is of utmost importance. In
this regard, it is necessary to be satised that the existing legal
recourse available to a homebuyer is insufcient and that the
proposed law shall help ll the existing void. Accordingly, a
brief review of the existing laws, the legal recourse available
under it, and its inherent gaps would help reect on the need
for a sector-specic law, for the real estate sector, to protect
homebuyers.
Consumer Protection Act, 1986: The consumer protection
Act denes service which amongst other things includes
housing construction. However, the recourse available to an
aggrieved homebuyer under the consumer protection law is
only curative and not preventive, as the adjudication mecha-
nism does not provide for specic performance but provides
for pecuniary compensation only.
Indian Contract Act, 1872: Under the contract law the re-
course available to an aggrieved homebuyer, like the consu-
mer protection law, is only curative and not preventive. The
Act does not stipulate specic performance in case of breach of
contractual obligations but only provides for pecuniary com-
pensation for loss or damage caused. Though the Specic
Relief Act, 1963 stipulates specic performance as one of the
recourse available to an aggrieved, it is only limited to situa-
tions where there exists no standard for ascertaining actual
damage caused by the non-performance of the act agreed to be
done or when the act agreed to be done is such that compen-
sation in money for its non-performance would not afford ad-
equate relief. Yet, as compensation for breach of contract
terms in an agreement for sale of a housing unit is ascertai-
nable, the Specic Relief Act has been found wanting as far as
relief to homebuyers is concerned.
Indian Penal Code, 1860: Under criminal law, namely,
the Indian Penal Code (IPC) the recourse available to an
aggrieved homebuyer is to le a criminal complaint for crim-
inal breach, which if established, entails punishment but
does not provide for preventive provisions. Therefore, crimi-
nal law too does not mandate specic performance of con-
tractual obligations.
Competition Act, 2002: While the Competition Commission
has lately become an active forum for the aggrieved in the resi-
dential real estate sector, the mandate under competition law
is limited. The Competition Act provides for provisions to pre-
vent practices having an adverse effect on competition and to
promote and sustain competition in markets. It penalises spe-
cic offences such as abuse of dominant position, monopoly,
power, etc, but does not provide for making good any loss suf-
fered by individual homebuyers nor does it provide for preven-
tive provisions or specic performance by promoters in the
residential real estate sector.
Municipal Laws/Town Planning Laws/Urban Develop-
ment Laws: The states have municipal or town planning or
urban development laws, which relate to the tangible aspects
of real estate, mainly its development/construction. These
laws cover the relationship between the competent authority
and the developer/promoter but do not provide for consumer
protection per se. These laws regulate development of projects
and not the contract entered into between the promoter and
buyer, consequently leaving a vacuum.
Apartment Ownership Act: The Apartment Ownership Act
provides for ownership of individual apartment in a building
and to make such apartment heritable and transferable prop-
erty. It regulates the relationship between the allottees/apart-
ment owners, namely, in regard to common areas and facili-
ties, compliance with by-laws and covenants, common prots
and expenses, management of the society/association of allot-
tees, etc. Thus the ambit of the Apartment Ownership Act is to
regulate the relationship between the allottees themselves,
which comes into operation after possession of the apart-
ments, and is an ex-post law.
The Real Estate Bill is a sector-specic regulatory bill and is
intended to regulate the business of sale and purchase of real
estate properties, i e, the relation or contractual obligation
between the allottee and the promoter. The Real Estate Bill is
aimed at addressing the concerns of the buyers and the pro-
moter in the sector, and is both a preventive and curative legis-
lation, with powers to enforce specic performance based on
contractual obligations, and is an ex-ante law.
5 Contours of the Real Estate Bill
The Real Estate Bill seeks to ll the existing gap between the
development/municipal laws and the Apartment Ownership
Act, and is intended to regulate transactions (buying and
selling) and enforcement of contracts. It is important to ap-
preciate that the real estate market in India works differently
and is a unique model, where the time lag between the initial
payment to actual possession is long, rather than a ready-
made product available for outright sale, due to high shortages.
In the interim period, when the development is being carried
out and prior to handing over possession, there is extensive
activity being undertaken and the concerns of buyers and
promoters are left unaddressed. The bill comes into force at
the stage of sale and its scope comes to an end on the transfer
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of possession of the developed property by the promoter to
the buyer and the association of buyers. It also aims to address
the concerns of the buyers and the promoter in the sector and
de-clog the civil and criminal courts. It is both a preventive
and curative legislation, with powers to enforce specic per-
formance based on contractual obligations; and provides for
fast-track adjudication mechanism, including imposition of
penalty, interest and compensation for contravention on
all the parties (promoter, buyer and the real estate agent)
involved in the transaction.
The Real Estate Bill applies to residential real estate, i e,
housing and any other independent use ancillary to housing in
a planning area. However, it is important to know that the bill
only intends to regulate transactions, i e, buying and selling of
residential real estate and the contractual commitment, and
does not intend to regulate construction which is the domain
of states/urban local bodies.
The bill has been proposed as a central legislation under
Entries 6, 7 and 46 of the concurrent list of the Seventh Schedule
of the Constitution, which provides for transfer of property;
registration of deeds and documents; contracts including
partnership, agency, contracts of carriage, and other special
forms of contracts; and jurisdiction and powers of all
courts, except the Supreme Court. The Real Estate Bill is in
response to the dire need of Indian consumers and in dis-
charge of the sovereign functions towards public interest. It
upholds the spirit of federalism by allowing the states to set
up the regulatory authority and the appellate tribunal, and
the role of the central government is limited to union territo-
ries without legislature. It attempts to balance the interests of
the consumers and the developers by imposing clear respon-
sibilities on both. The bill seeks to establish symmetry of in-
formation between the promoter and the purchaser; trans-
parency of contractual conditions; set minimum standards of
accountability; and a fast-track dispute resolution mecha-
nism. The bill is aimed at consumer protection, by creating an
online system for information sharing so that there is mutual
trust between the developer and the buyers, and projects are
implemented in time.
6 Salient Features of the Bill
Important Denitions: In order to standardise the usage of
various terms used in the real estate sector, the bill denes
many terms for universal usage across the country, namely,
advertisement, allottee, apartment, carpet area, com-
mon areas, development works, planning area, promoter,
prospectus, real estate agent, real estate project, etc.
Applicability: It applies to residential real estate, i e, housing
and any other independent use ancillary to housing, in a
planning area above 1,000 sqm land or 12 apartments, as the
case may be. However, on the recommendation of the state or
union territory government, the central government can
reduce the threshold of 1,000 sqm or 12 apartments based on
local conditions.
Registration of Real Estate Projects: The bill makes it com-
pulsory for registration of all residential real estate projects,
above the specied threshold, with the Real Estate Regulatory
Authority, after it has received all requisite approvals for de-
velopment from the municipal/urban development and other
competent authorities, but prior to its sale. The authority is re-
quired to grant registration to the project within 15 days of ap-
plication. However, no scrutiny of documents is provided for
with registration proposed on a real time basis, without add-
ing another layer to the sanctioning process. The authority is
required to provide a registration number to the project in-
cluding a login ID and password for lling out of details by the
promoter, as are required under the bill or the rules and regu-
lations made thereunder. The authority can reject an applica-
tion only if the application does not conform to the provisions
of this Act or the rules or regulations made thereunder. How-
ever, no application can be rejected without recording reasons
in writing and unless the applicant has been given an opportu-
nity of being heard. The bill also provides for deemed regis-
tration if the regulatory authority takes no action on the
application within 15 days of its submission.
No Sale of Real Estate Project without Prior Registration
with the Authority: A promoter cannot sell a real estate
project or a part of it without rst registering the project with
the regulatory authority. The bar on sale includes soliciting cli-
ents for sale through any form of advertisement. This provision
has been inserted to ensure that no homebuyer is lured to make
purchases in the residential real estate sector, which has not re-
ceived requisite approvals from the competent authorities, mak-
ing his investment a risky proposition for want of approvals.
Mandatory Public Disclosure of All Project Details: The bill
provides for mandatory public disclosure for all registered
projects including details of the promoters, project, layout
plan, plan of development works, land status, carpet area and
number of the apartments booked, status of the statutory ap-
provals and disclosure of proforma agreements, names and
addresses of the real estate agents, contractors, architect,
structural engineer, etc. This upfront declaration at the time of
registration shall make the promoter accountable for any
wrong or false information.
Functions and Duties of Promoter: The bill mandates spe-
cic duties and function of the promoter, namely, disclosure of
all relevant information pertaining to the real estate project;
adherence to approved plans and project specications; obli-
gations regarding veracity of the advertisement or prospectus;
responsibility to enter into an agreement of sale; responsibility
to rectify structural defects; responsibility to execute convey-
ance and to hand over physical possession; and responsibility
to refund moneys in cases of default and to make good the loss
suffered by the homebuyers.
Compulsory Maintenance of a Separate Bank Account for
Every Project: One of the biggest challenges plaguing the real
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estate sector is the diversion of funds received from allottees,
which in turn leads to project delays and cost overruns. To
address this concern the initial drafts of the bill provided
for bank guarantee for every project being developed by the
promoter. However, during deliberations the view that
emerged was that any such prerequisite would lead to increase
in project cost, which would have to be borne by the home-
buyers hence the bank guarantee requirement was not
considered. Consequently, a provision was added in the bill
making it obligatory for the promoter to deposit 70% or such
lesser per cent as notied by the appropriate government, of
the amounts realised for the real estate project from the allot-
tees in a separate account within a period of 15 days of its
realisation, to cover the cost of construction. While similar
provisions exist under the Punjab Apartment and Property
Regulation Act, 1995; Maharashtra Ownership of Flats (Regu-
lation of the Promotion of Construction, Sale, Management
and Transfer) Act, 1963; and the Haryana Urban Areas Act,
1975, such requirements need standardisation and implemen-
tation throughout the country.
The spirit of the Real Estate Bill is transparency and self-
certication, thus withdrawals from this bank account have
been permitted to be on the basis of self-certication by the
promoter. The bill does not mandate procedures for operation
and maintenance of this separate bank account as these are
matters to be guided by the accounting standards and proce-
dures/guidelines issued in that regard by the competent bodies
like the Institute of Chartered Accountants of India, etc, and is
designed to allow operational exibility and avoid regulatory
overload. However, in case any deviation is brought to the
notice of the authority, it can investigate and pass appropriate
orders including imposition of penalty.
Registration of Real Estate Agents: It provides for manda-
tory registration of real estate agents who facilitate the sale of
any real estate project or a part of it registered under the bill,
with the real estate regulatory authority. Upon registration,
the real estate agent is required to be provided with a unique
registration number, which shall be quoted by him in every
sale facilitated.
Functions of Real Estate Agents: It mandates that the real
estate agents shall maintain and preserve books of accounts,
records and documents; obligation not to involve in any unfair
trade practices through misrepresentation; obligation to facili-
tate the possession of documents to allottees as entitled at the
time of booking; and to comply with such other functions as
specied by rules made in that regard.
Rights and Duties of Allottees: The bill gives homebuyers
certain rights, namely, right to obtain information relating to
the property booked; right to know stage-wise time schedule of
project completion including the provisions for water, sanita-
tion and electricity; right to claim possession of the apartment
as per promoter declaration; right to refund with interest in
case of default by the promoter; and right to receive necessary
documents and plans pursuant to possession. It also casts cer-
tain duties on the homebuyer, namely, duty to make necessary
payments and carry out other responsibilities as per the agree-
ment; duty to pay registration charges, municipal taxes, water
and electricity charges, maintenance charges, ground rent,
and other charges, etc; and duty to participate towards the for-
mation of an association or society or cooperative society of
the allottees, or a federation of the same.
Establishment of Real Estate Regulatory Authority: The bill
makes it obligatory for the appropriate government (state/union
territory government, as the case may be) to establish one or
more regulatory authority, with specied functions, powers
and responsibilities to exercise oversight of real estate transac-
tions; to appoint adjudicating ofcers to settle disputes be-
tween parties; and to impose penalty in case of contravention,
within one year of the law coming into force. The bill provides
exibility to two or more state governments to establish one
authority jointly.
To maintain the independence of the regulatory authority
and to rule out any possibility of regulatory capture the
bill provides enough safeguards such as appointment of the
chairperson and members by a selection committee; restriction
on employment of the chairperson and members after cessa-
tion of ofce; questions in meetings of authority to be decided
by a majority of votes and the chairperson to have a casting
vote in case of a tie. The authority is required to prepare a
budget, maintain proper accounts and other relevant records.
The bill mandates preparation of an annual statement of
accounts in the manner prescribed by appropriate government
in consultation with the Comptroller and Auditor General
(CAG) of India with description of all the activities for the
previous year and the programmes of work planned for the
coming year. It provides that a copy of the report so prepared
is to be laid before each House of Parliament or state legisla-
ture or the union territory legislature, as the case may be, to
ensure accountability.
Function of Regulatory Authority: Key functions of the
regulatory authority provided under the bill include render-
ing advice to the appropriate government on matters relating
to the development of real estate sector; to publish and main-
tain a website of records of all projects registered; to maintain
a database, on its website, and enter the names of promoters
as defaulters including project details, registration for which
has been revoked or have been penalised; to maintain a data-
base, on its website, and enter the names of real estate agents
registered, including those whose registration has been
rejected or revoked; to x through regulations for each area
under its jurisdiction the standard fees to be levied on the
allottees by the promoter or the association of allottees; to
ensure compliance of the obligations cast upon the promot-
ers, the allottees and the real estate agents under the Act,
rules and regulations; to ensure compliance of its regulations
or orders or directions made in exercise of its powers under
this law, etc.
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For promotion of a healthy, transparent, efcient and com-
petitive real estate sector the regulatory authority is required to
make recommendations to the appropriate government/com-
petent authority, towards protection of interest of the allottees
and promoter; measures to improve the processes and proce-
dures for clearance and sanction of plans and development of
projects; construction of environmentally sustainable and afford-
able housing, promote standardisation, including grading and
use of appropriate construction materials, xtures, ttings
and construction techniques; amicable conciliation of disputes
between the promoters and the allottees through dispute settle-
ment forums set up by the consumer or promoter associations.
Powers of Regulatory Authority: The bill provides certain
powers to the authority, namely, power to call for information,
conduct investigations; power to issue directions to promoters,
allottees and agents for discharging its functions; power to im-
pose penalty or interest; power to make reference to the Com-
petition Commission of India, cases having effect of competi-
tion in the sector, or effect of market monopoly.
Fast Track Dispute Settlement Mechanism: It provides for
establishment of fast-track dispute resolution mechanisms for
settlement of disputes, through adjudicating ofcers (an ofcer
not below the rank of joint secretary to the state government)
to be appointed by the authority, and establishment of an ap-
pellate tribunal to hear appeals from the orders of the authority
and the adjudicating ofcer. It is an enabling provision for fast-
track dispute redressal and is aimed towards long-term uni-
formity in jurisprudence in the sector.
The adjudicating ofcer has been given powers for the pur-
pose of adjudging compensation on matters pertaining to obli-
gations of promoter regarding veracity of advertisement or
prospectus; adherence to approved plans and project specica-
tions by promoter; possession of apartment to the homebuyer
as per agreement, etc.
The adjudicating ofcer is required to take certain factors
into account while adjudging the amount of compensation
namely, amount of disproportionate gain or unfair advantage,
wherever quantiable, made as a result of the default; the
amount of loss caused as a result of the default; the repetitive
nature of the default.
Establishment of Real Estate Appellate Tribunal: The bill
provides for the establishment of a real estate appellate tribu-
nal as a higher-level appellate forum to hear appeals from the
orders or decisions or directions of the authority and the adju-
dicating ofcer. The appellate tribunal is to be headed by a sit-
ting or retired judge of the high court (HC) with one judicial
and one administrative/technical member to be appointed on
recommendations of the selection committee to be constituted
by rules. Appeal against orders of the appellate tribunal may
be led with the HC.
Punitive Provisions: The bill outlines various penalties for
non-compliance with the provisions or the rules and regulations
made thereunder, including deregistration of the project and
penalties in case of contravention of the orders of the authority
or the tribunal. Registration of real estate projects with the
regulatory authority, prior to sale, is the heart of the bill, which
if not complied with by the promoter makes him liable to a
penalty to the extent of 10% of the estimated cost of the real
estate project. In case the promoter fails to comply with the
orders or directions of the regulatory authority, requiring reg-
istration of the project, he shall be punishable with imprison-
ment which may extend upto three years or with a ne which
may extend to a further 10% of the estimated cost of the real
estate project, or with both.
Imprisonment provisions for default, also exist under various
state laws currently being implemented in the sector, namely,
the Maharashtra Ownership of Flats (Regulation of the Pro-
motion of Construction, Sale, Management and Transfer) Act,
1963 minimum three months, maximum three years; Uttar
Pradesh Apartment (Promotion of Construction, Ownership
and Maintenance) Act, 2010 minimum three years maximum
six years; Punjab Apartment & Property Regulation Act, 1995
minimum six months, maximum ve years; West Bengal Build-
ing (Regulation or Promotion of Construction and Transfer by
Promoters) Act, 1993 minimum three months, maximum three
years. Therefore, the Real Estate Bill does not make an exception
by introducing imprisonment, as a deterrent, for compliance
of the provisions of the bill. Rather, it has moderated the extent
of imprisonment provided under the state laws. It also penal-
ises the homebuyer and the real estate agent for failure to
comply with its provisions and for contravention of the orders
of the authority or the appellate tribunal. Thus it aims to reg-
ulate all the three stakeholders, namely, the promoter, home-
buyer and the real estate agent through punitive provisions.
Real Estate Fund: The bill provides for the creation of a real
estate fund on the lines of similar funds under the Consumer
Protection Act, 1986; the Securities and Exchange Board of
India Act, 1992; Telecom Regulatory Authority of India Act,
1997; Electricity Act, 2003; and Competition Act, 2002. The
fund is required to be credited with all government grants
and fees received by the regulatory authority including inter-
est accrued thereon. But, all sums realised by way of penalties
in the union territories are to be credited to the Consolidated
Fund of India and all sums realised by way of penalties in a
state are to be credited to such account as the state govern-
ment may specify.
The fund can be applied for meeting the salaries and allow-
ances payable to the chairperson and other members of the
authority and appellate tribunal and the latters administra-
tive expenses to institute long-term regulatory independence
and self-sufciency.
Civil Court Jurisdiction Barred: It bars the jurisdiction of civil
courts to entertain any suit or proceeding in respect of any
matter which the authority or the adjudicating ofcer or the
appellate tribunal is empowered under it to determine, in order
to avoid forum shopping. However, the bill does not bar the
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jUNE 21, 2014 vol xlix no 25 EPW Economic & Political Weekly 60
jurisdiction of consumer forums but only provides an option
to the aggrieved to withdraw his complaint pending before a
consumer forum, with permission, and le the same with the
adjudicating ofcer appointed under the bill. Thus, it does not
preclude the aggrieved from approaching the consumer forums.
One cogent reason for not barring consumer forums is the
time lag from the enactment of the bill to its actual implemen-
tation, after the establishment and functioning of the regula-
tory authority and the appointment of the adjudicating ofcer.
This will ensure that there is no legal vacuum. Besides, it is
hoped that with the setting up of the sector-specic regulatory
authority and the appellate tribunal and the appointment of
an adjudicating ofcer for resolution of disputes, such matters
in the wisdom of the consumer forums would be referred to
the specialised bodies under the Real Estate Bill, for adjudica-
tion, with the passage of time.
Establishment of Central Advisory Council: The bill pro-
vides for the establishment of a central advisory council, to be
chaired by the head of the ministry dealing with housing, con-
sisting of members from other concerned central ministries,
state governments, and regulatory authorities, to advise the
central government on matters concerning implementation of
the law; to make recommendations on major questions of
policy; protection of consumer interest; and to foster growth
and development of the real estate sector.
Functions and Powers of the State/Union Territory Gov-
ernment: Keeping in mind the spirit of federalism wide pow-
ers have been given to the state/union territory government
for effective implementation of the provisions of the Act,
namely, power to establish the regulatory authority and appel-
late tribunal; power to supersede authority if authority fails to
discharge its functions or perform its duties or if circumstanc-
es exist in public interest to do so; power to issue directions to
authority on questions of policy or to obtain reports and returns;
power to make rules to carry out the purposes of the Act; and
the power to approve regulations made by the authority.
Act to Have Overriding Effect: Though the bill provides
for an overriding provision, one novel provision gives primacy
to the states. It gives them powers to draft their own real
estate regulatory law, if it is not inconsistent with the bill,
as the ambit of state powers to make laws extends to
land and colonisation and local authority, including those
in relation to Entries 6, 7 and 46 of the Concurrent List of
the Seventh Schedule of the Constitution.
7 Benefits and Advantages Likely on Enactment
The Real Estate Bill is expected to induct professionalism and
standardisation in the sector, thus paving the way for acceler-
ated growth and investments in the long run. The legislation is
expected to ensure consumer protection; transparency; and
fair and ethical business practices in matters relating to the
sale and purchase of properties in the real estate sector. The
legislation is aimed at protecting the interests of ordinary peo-
ple and homebuyers, across the country, against unscrupulous
practices in the real estate sector, and in ensuring the balance
of interests of all the stakeholders concerned, without adding
another stage in the procedure for sanctions. Specic benets
and advantages that are likely to ensue on the enactment and
implementation are as follows:
(a) It will bring about standardisation in the sector leading to
healthy and orderly growth of the industry through introduc-
tion of denitions such as advertisement; allottee; apart-
ment; carpet area; common areas; development works;
planning area; promoter; prospectus; real estate agent;
real estate project, etc. Introduction of the concept of using
only carpet area for sale, which has till now been ambigu-
ously sold as super area, super builtup area, etc, will curb
unfair trade practices.
(b) Like other sectors such as telecom; securities; insurance;
pension; electricity; airports; food safety, etc, provides for
specialised regulations and provisions for enforcement of
contractual commitment, which include both curative and
preventive measures, with powers to enforce specic per-
formance, not available under the consumer laws. The regu-
latory authority has powers to give directions for specic
performance; powers to impose penalty for non-registration
of projects including imprisonment for continuous violation
upto three years; and to impose penalty in case of other
contraventions.
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SPECIAL ARTICLE
Economic & Political Weekly EPW jUNE 21, 2014 vol xlix no 25 61
(c) It aims to ensure consumer protection, by making it man-
datory for promoters to register all projects, above a specied
threshold, after having received all approvals from develop-
ment/municipal authorities, prior to its sale, thereby protect-
ing homebuyers investments.
(d) It provides for registration of projects developed by both
public and private agencies, for sale. Registration of residen-
tial real estate being developed by development authorities,
housing boards, etc, will help promote competition, trust
and investment and facilitate overall planned development of
the sector.
(e) It will promote transparency and fair and ethical business
practices, relating to transactions, through disclosure of
project details and contractual obligations vis--vis the project
and the buyer, thereby promoting informed choice for the
buyers. This will substantially reduce the power asymmetry
prevalent in real estate transactions.
(f) It provides for a model agreement to be framed by rules,
which will help weed out one-sided agreements prevalent in
the sector placing homebuyers at a disadvantage. The agree-
ment would require to specify the particulars of development
of the project including the construction of building and apart-
ments; specications of development works, i e, internal devel-
opment works and the external development works; the dates
and the manner by which payments towards the cost of the
apartment are to be made by the allottees; the likely date on
which the possession of the apartment is to be handed over;
and such other particulars as may be prescribed in the model
agreement. The bill makes it binding on the promoter to specify
all the aforementioned particulars, in the agreement to be
signed with the homebuyer, to ensure its timely execution,
thus empowering homebuyers.
(g) It makes it incumbent on the promoter to make available to
the homebuyers services such as electricity; water supply; and
sanitation, etc. The promoter shall be responsible for providing
access to urban utilities, namely, external development
works, i e, roads and road systems; landscaping; water sup-
ply; sewerage and drainage systems; electricity supply trans-
former; sub-station or any other work which may have to be
executed in the periphery of, or outside, a colony for its bene-
t, in a real estate project, as these are charged by him as part
of the property cost from the homebuyer. Hence, the responsi-
bility of providing such urban utilities is the responsibility of
the promoter, and the homebuyer cannot be left in a lurch.
(h) It makes it mandatory upon the promoters to deposit at
least 70% of the funds or such per cent as decided by the regu-
latory authority in consultation with the appropriate govern-
ment, received from the allottees in a separate bank account,
to cover the construction cost of the project. This requirement
shall prevent fund diversion and ensure timely completion
of projects.
(i) The bill proposes registration of real estate agents, hitherto
unregulated under any central or state law, with clear respon-
sibilities and functions, thereby making them responsible to
homebuyers. Internationally, agents are regulated by law and
by professional bodies, with strict enforcement and penalty
provisions. Registration and accreditation of real estate agents
shall also lead to money trail and curb money laundering in
the real estate sector.
(j) The bill seeks to establish a regulatory oversight mecha-
nism, through real estate authorities and appellate tribunal in
the states and union territories, to enforce accountability
norms for the promoters; buyers; and the real estate agents.
(k) It will infuse professionalism and promote planned devel-
opment of the real estate sector through the promotional role
of the regulatory authority.
(l) The bill provides for a speedy and specialised adjudication
mechanism to settle disputes between the promoter; buyer;
and real estate agents thereby de-clogging the civil courts and
consumer forums from disputes in the real estate sector.
(m) Timely completion of projects; systematic dispute resolu-
tion; and standardisation of jurisprudence in the sector will
catalyse domestic and foreign investment into the sector,
thereby contributing to increase in GDP growth by instilling
condence in purchases and investments.
The enactment of the bill shall lead to enhanced activity in
the sector, leading to more housing units being supplied to the
market. It shall bring in the much-needed condence to infuse
more investment, and in turn to stabilise the prices of houses
being sold. It works for the benet of consumers and also for the
benet of promoters, and for the overall benet of the sector.
8 Conclusions
The Real Estate Bill 2013 aimed to introduce the principle of
symmetry of information on an industry-wide basis to facili-
tate the consumers informed choice and to dene common
standards across the country. India scores low on the regula-
tory index due to lack of proper enforcement mechanism in
the real estate sector. The conditions for the sale of a property
are spelled out in the sale purchase agreement, and in case of
any violation, the buyer can resort to legal action, which can
be a rather lengthy and time-consuming process. Thus, a fast-
track adjudicatory mechanism as proposed under the bill, to
resolve disputes between the promoter and the buyer or the
buyer and the real estate agent, is the need of the hour.
Nonetheless, any legislation for the real estate sector will
have to continuously evolve, like any other regulatory law,
with the changes in the economy. It is hoped that the states
will supplement the efforts made through the 2013 bill and
will strengthen the regulatory mechanism in the sector. The
real estate industry in India is in dire need of effective regula-
tion towards consumer protection, and the constitutional
limitations within which the Real Estate Bill 2013 was envis-
aged, is a good starting point towards change.
Notes
1 Government of India (2012), White Paper on Black Money, Department of
Revenue, Ministry of Finance, Government of India, New Delhi, available
at http://nmin.nic.in/reports/WhitePaper_BackMoney2012.pdf
2 FICCI Ernst and Young (2010), Realty Decoded Investing across Bor-
ders, available at http://emcacc.ey1.dedicated.nines.nl/wp-content/up-
loads/downloads/2011/10/Realty_decoded.pdf
3 Real Estate (Regulation and Development) Bill, 2013 available at http://
mhupa.gov.in/W_new/Real%20Estate%20Bill%20as%20introduced%20
in%20the%20Rajya%20Sabha%20on%2014.8.2013.pdf