Sluggish economic growth and delays in getting approvals have stalled several projects (file photo: BBC News)
The government has amended the real estate bill to create a regulator for the industry, to protect homebuyers and curb undeclared ‘black money’ in property transactions. This will boost investor confidence in real estate as well as recover crores of rupees in lost taxable income that goes unreported.
The original bill was submitted by the previous UPA administration in 2013 but not passed by the Rajya Sabha. The new rules, applicable to both residential and commercial developments, will make it mandatory for all projects and brokers to be registered with the real estate regulator who will oversee transactions and settle disputes.
"The bill seeks to ensure accountability and transparency, which will in turn enable the real estate sector to access capital and financial markets essential for its long-term growth," the government said in a statement on Tuesday.
During recent years sluggish economic growth and delays in getting approvals stalled several real estate projects, leaving buyers waiting for their homes and developers holding high debt.
"This will be a game-changer for the sector," Rajeev Talwar, executive director at DLF Ltd, India's top real estate developer, told Reuters.
"It will lead to more transparency and mature industry, and investor confidence will go up," he said on Wednesday, adding that it will make developers more accountable and investors more aggressive.
According to Reuters, the amended bill is expected to benefit developers such as DLF, Oberoi Realty and Puravankara Projects, as well as help Prime Minister Narendra Modi achieve his election promise of providing homes for all families by 2022.
Vendors in the real estate market often demand part payment in illicit cash, making many ordinary people party to corruption and excluding some of the emerging middle class from the market.
A key provision of the amended bill makes it mandatory for developers to put aside 50 percent of the money collected from buyers during pre-sale of homes and use that only for funding construction of the project.
Several projects in India have been delayed in recent years after some developers diverted funds raised for one project to another, leaving them unable to complete construction and resulting in buyers still waiting for their homes.
The bill seeks to divert this flow of funds, and impose penalties, including de-registration of the project and other fines in case of a breach.
But the government has deleted a clause that provided power to the appellate tribunal to punish the officials of a real estate company for contempt of not complying with the orders of the regulator.