Will dual regulation add to delays?
A real estate act at two levels, Centre and state, could lead to confusion and possibly conflicting guidelines, more red tape and further delays in project clearances when it comes to residential property in Mumbai
Year 2011 witnessed more discussions on the need for regulation than any other year. So it was only natural that before the year concluded, regulatory norms lined up neatly one after the other like the residential towers in a planned township project.
First the developers association MCHI came up with its own code of conduct. Then the central government put up the real estate regulatory bill for comments and at the end of December, the Maharashtra state government also 'got into the act', coming up with its own version.
The only question that arises in such a situation is whether having a real estate act at two levels, centre and state, necessary?
Would it not lead to confusion, more red tape and further delays in project clearances when it comes to residential property in Mumbai?
Initial confusion
Bikram Sen, CEO, ArthVeda Fund Management, opines that with multiple acts to regulate the same industry, there is bound to be some confusion in the initial period.
"This can be avoided if the central level act clarifies which parts of the act are mandatory and which aspects are at the discretion of the states. Also when the state level acts are proposed, if they are cognizant of what is already contained in the central level act and clearly define things which are not addressed by the central level act, then confusion can be reduced. Possibilities of delays in project clearances exist. However, most likely the benefits in terms of increased transparency and remedies for consumers will outweigh the costs in terms of delays."
Conflicting definitions
He points out that if there are conflicting definition of what is a transgression or conflicts in the remedies then this will impact the flat buyer since the some of the less customer-friendly developers might try to play regulatory arbitrage by adhering to the less stringent of the two acts. It will be best if the central act clearly defines a model act and clearly delineates the aspects which are mandatory across states and which are at the discretion of the states.
Duplication dilemma
Shrinivas Rao, CEO-Asia Pacific,Vestian Global, opines that "There will be some duplication of work and a little higher cost in terms of registration of each project. However, the benefits will out-weigh the costs and slightly longer timelines. This Act will help in increasing transparency as details of each project are available on the Authority's website. It will also help in risk mitigation for the end-users and discourage corruption in the local government as the regulatory authorities will cross-check approvals."
Increased costs
Lalit Kumar Jain, CMD, KUL & national president, CREDAI, declares "CREDAI is completely opposed to draconian licensing of projects in the regulatory bill. It will only open an additional window of corruption. Further in the present form regulatory bill will not only kill the enthusiasm of the builders but also prevent creative and visionary people from coming in to this business. It will substantially increase the cost of project whereby consumers will pay more."
Transparency required
According to him, what we need is regulation and planned development in the sector to ensure sale of immovable properties in an efficient and transparent manner.
"The Regulator should support fair practices in real estate business and should have control over all stakeholders including approval authorities, the government and financial Institution thereby achieving time bound delivery. At the first sight it will offer advantage to the consumers. However, it will also end up being a breeding ground for corruption."
Dispute redressal
Manoj Asrani, brand & marketing manager, Soham World, feels that the proposed Act will lead to better information sharing and decision making, between builders and the consumers.
Further, by seeking to establish the Regulatory Authority and Appellate Tribunal, the Model Act provides for a forum where disputes could be heard by a specialized expert body, which would result in speedy dispensation of justice. The Model Real Estate Bill seeks to bring clarity and consistency in the fast growing Indian real estate sector, he says.
Multiple legislation
Devang Varma, director, Omkar Realtors & Developers, points out that most states have existing legislation that governs the promotion of construction and the sale of real estate; as well as ownership holding structures such as condominiums, cooperative societies and other entities.
For example in Maharashtra we have Maharashtra Ownership of Flat Act (MOFA), which has been effectively safeguarding the interest of the purchasers. Instead of promulgating the new law, the Central legislators should try to adopt a mechanism to effectively implement existing laws.
Resultant problems
"There are number of problems faced by developers which have been overlooked by the legislators while drafting the proposed real estate bill. They have merely concentrated on imposing obligations and penalties on the builders. However, no mechanism has been provided for checking the delays and defaults committed by the various authorities in granting sanctions and permissions. We have to approach multiple authorities to get number of sanctions for a project.
Further more often even after getting the initial sanction, the final approval gets delayed due to change in policy by the authorities, their Chief Officers, government etc. The regulator should look into such delays which are not in the hands of developers. The government has conveniently ignored and overlooked constant demand from the developers to provide for single window clearance system which would not only expedite the process of obtaining sanctions and approvals but also reduce the cost involved in process considerably," he says.
Discussion essential
According to Varma, there are too many stringent conditions which will accentuate red tape. "The provisions of the bill will have far reaching consequences which will negatively impact the common man for whose benefit this bill has been drafted in the first place. The bill needs to be widely discussed, debated and rationalized before it goes through the legislative process.
While there are certain positive measures which should rightly put a check on the unorganized players from staking false project claims; it should not become a hindrance in terms of delay for honest and organized players. Considering that the banks and private equity funds as part of their investment process perform in-depth due diligence; the move to seek any additional legal clearances can result in project delay impacting the already wary customer."
Double impact
Jitendra Jain, MD & CEO, Neev Group, emphasises that the Real Estate Regulation Act is beneficial as it can boost transparency in the Indian real estate sector by standardizing practices & streamlining government procedure systems. However, before the implementation of the aforesaid Bill, it should be further discussed and debated amongst all stakeholders including the policy makers both at the central and state level, that will bringing a consensus keeping in mind the interests of all stakeholders. The proposed legislation, it is hoped, will lead to better information-sharing and decision making, between builders/ developers and the public/ consumers."
A real estate act at two levels, Centre and state, could lead to confusion and possibly conflicting guidelines, more red tape and further delays in project clearances when it comes to residential property in Mumbai
Year 2011 witnessed more discussions on the need for regulation than any other year. So it was only natural that before the year concluded, regulatory norms lined up neatly one after the other like the residential towers in a planned township project.
First the developers association MCHI came up with its own code of conduct. Then the central government put up the real estate regulatory bill for comments and at the end of December, the Maharashtra state government also 'got into the act', coming up with its own version.
The only question that arises in such a situation is whether having a real estate act at two levels, centre and state, necessary?
Would it not lead to confusion, more red tape and further delays in project clearances when it comes to residential property in Mumbai?
Initial confusion
Bikram Sen, CEO, ArthVeda Fund Management, opines that with multiple acts to regulate the same industry, there is bound to be some confusion in the initial period.
"This can be avoided if the central level act clarifies which parts of the act are mandatory and which aspects are at the discretion of the states. Also when the state level acts are proposed, if they are cognizant of what is already contained in the central level act and clearly define things which are not addressed by the central level act, then confusion can be reduced. Possibilities of delays in project clearances exist. However, most likely the benefits in terms of increased transparency and remedies for consumers will outweigh the costs in terms of delays."
Conflicting definitions
He points out that if there are conflicting definition of what is a transgression or conflicts in the remedies then this will impact the flat buyer since the some of the less customer-friendly developers might try to play regulatory arbitrage by adhering to the less stringent of the two acts. It will be best if the central act clearly defines a model act and clearly delineates the aspects which are mandatory across states and which are at the discretion of the states.
Duplication dilemma
Shrinivas Rao, CEO-Asia Pacific,Vestian Global, opines that "There will be some duplication of work and a little higher cost in terms of registration of each project. However, the benefits will out-weigh the costs and slightly longer timelines. This Act will help in increasing transparency as details of each project are available on the Authority's website. It will also help in risk mitigation for the end-users and discourage corruption in the local government as the regulatory authorities will cross-check approvals."
Increased costs
Lalit Kumar Jain, CMD, KUL & national president, CREDAI, declares "CREDAI is completely opposed to draconian licensing of projects in the regulatory bill. It will only open an additional window of corruption. Further in the present form regulatory bill will not only kill the enthusiasm of the builders but also prevent creative and visionary people from coming in to this business. It will substantially increase the cost of project whereby consumers will pay more."
Transparency required
According to him, what we need is regulation and planned development in the sector to ensure sale of immovable properties in an efficient and transparent manner.
"The Regulator should support fair practices in real estate business and should have control over all stakeholders including approval authorities, the government and financial Institution thereby achieving time bound delivery. At the first sight it will offer advantage to the consumers. However, it will also end up being a breeding ground for corruption."
Dispute redressal
Manoj Asrani, brand & marketing manager, Soham World, feels that the proposed Act will lead to better information sharing and decision making, between builders and the consumers.
Further, by seeking to establish the Regulatory Authority and Appellate Tribunal, the Model Act provides for a forum where disputes could be heard by a specialized expert body, which would result in speedy dispensation of justice. The Model Real Estate Bill seeks to bring clarity and consistency in the fast growing Indian real estate sector, he says.
Multiple legislation
Devang Varma, director, Omkar Realtors & Developers, points out that most states have existing legislation that governs the promotion of construction and the sale of real estate; as well as ownership holding structures such as condominiums, cooperative societies and other entities.
For example in Maharashtra we have Maharashtra Ownership of Flat Act (MOFA), which has been effectively safeguarding the interest of the purchasers. Instead of promulgating the new law, the Central legislators should try to adopt a mechanism to effectively implement existing laws.
Resultant problems
"There are number of problems faced by developers which have been overlooked by the legislators while drafting the proposed real estate bill. They have merely concentrated on imposing obligations and penalties on the builders. However, no mechanism has been provided for checking the delays and defaults committed by the various authorities in granting sanctions and permissions. We have to approach multiple authorities to get number of sanctions for a project.
Further more often even after getting the initial sanction, the final approval gets delayed due to change in policy by the authorities, their Chief Officers, government etc. The regulator should look into such delays which are not in the hands of developers. The government has conveniently ignored and overlooked constant demand from the developers to provide for single window clearance system which would not only expedite the process of obtaining sanctions and approvals but also reduce the cost involved in process considerably," he says.
Discussion essential
According to Varma, there are too many stringent conditions which will accentuate red tape. "The provisions of the bill will have far reaching consequences which will negatively impact the common man for whose benefit this bill has been drafted in the first place. The bill needs to be widely discussed, debated and rationalized before it goes through the legislative process.
While there are certain positive measures which should rightly put a check on the unorganized players from staking false project claims; it should not become a hindrance in terms of delay for honest and organized players. Considering that the banks and private equity funds as part of their investment process perform in-depth due diligence; the move to seek any additional legal clearances can result in project delay impacting the already wary customer."
Double impact
Jitendra Jain, MD & CEO, Neev Group, emphasises that the Real Estate Regulation Act is beneficial as it can boost transparency in the Indian real estate sector by standardizing practices & streamlining government procedure systems. However, before the implementation of the aforesaid Bill, it should be further discussed and debated amongst all stakeholders including the policy makers both at the central and state level, that will bringing a consensus keeping in mind the interests of all stakeholders. The proposed legislation, it is hoped, will lead to better information-sharing and decision making, between builders/ developers and the public/ consumers."
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