The Real Estate Regulation and Development Bill

On 4th of June this year the Union Cabinet approved a much awaited draft of the bill regulating the real estate and building industry. The bill is projected to be in favor of the “aam adami”. Indeed, if the bill goes through on the same lines on which the draft is settled by the Union Cabinet, it certainly has a few provisions to aid the common man provided it is implemented in the same spirit in which this pre-election legislation is drafted.

Significant provisions

The bill, at the outset, meets a long standing demand of establishing Real Estate Tribunals giving an alternate judicial mechanism to resolve the disputes between builder/developers and flat purchasers. The tribunal is expected to have a much wider jurisdiction on the issues than those which can be agitated in the consumer forums presently. If the Tribunals are appointed in time and are armed with necessary infrastructure (unlike the District consumer Forums which are in sorry state of affairs) it would certainly lessen the woes of the flat purchasers and the Co-operative Housing Societies who have been at the receiving end for a long time.

The second significant provision which has upset the entire builder lobby is the condition that no builder shall sell or open booking of the flats/premises in any project unless he has all the permissions necessary to complete the project in hand. This provision has seen much uproar in the builders’ lobby as it attacks the revenue model of the most builders in this country. The revenue model of most of the builder/developers involves only paying a small percentage of the price for the land. After which, the project is announced and marketed. Consequently, the entire project is funded by the flat purchasers and/or the investors. If anything goes wrong in getting the statutory permissions or if the project is stuck in the litigation, the risk devolves on the flats purchasers who suffer the most. This provision shall certainly bring much relief to common man in this area. Besides this, the bill also has provisions to restrict builders from diverting money collected for one project to another etc.

The bill still has a long way to go till it becomes a law but the Congress government in a bid to project a distance itself from the builder’s lobby is likely to succeed.

What the bill omits

Lamentably, the bill does not touch a very important aspect of the real-estate/building industry viz. “The Title”. Title of the land is most commonly spoken about but is equally misunderstood. It is a common belief that 7/12 extract which is maintained by the Collector’s office indicates title of the land. In practice, it does not. 7/12 extract merely specifies the possession and responsibility to pay land revenue. The title of the land can only be pronounced by the District Judge in whose jurisdiction the land is situated. The decision of the District judge is appealable in the High Court and right to appeal to the Supreme Court is a constitutional right which cannot be taken away. Therefore, pronouncement of title is one of the most complex, tedious and expensive process which affects the builders and purchasers very badly and has been the bane of the industry.  In the complex web of land laws and procedures, the title though most important, has been the worst ignored concept. This has been so since the British who laid the foundation of these laws were, as colonial masters, never concerned about the title but were only preoccupied in collecting land revenue from their subjects. In last 66 years of independence there has been no serious application of legislative mind to this aspect.

The introduction of a “Title Certifying Authority”  is overdue, with co-ordinate jurisdiction with the High Court which can conclusively and finally certify “The Title” of the piece and parcel of the land. The authority must be on same footing as the Registrar of Companies whose decision to incorporate a company cannot be brought under judicial review. This would go a long way in helping the builders, investors and the common man. This would also pave the way to professionally managed development companies and multinationals in this sphere of industry and the competition shall put a much superior product in the hands of the final consumer.

The bill if it goes through both houses of the parliament may see a lot of opposition from the builders’ lobby to whom it seeks to put on leash. However, at the end of the day it shall separate the boys from the men and if implemented rightly shall bring a much-awaited relief to the common flat purchasers whose numbers are swelling by the day. 

Surin Usgaonkar