Real Estate Bill Takes Final Shape – The Indian Express – 20-Dec-2014
December 26, 2014 - Uncategorized
In an important development towards the regulation of realty sector within the country, the Real Estate (Regulation & Development) Bill, drafted by the UPA government, which is awaiting the new government’s approval has undergone a few changes and is expected to be soon taken up by the Cabinet for approval.
The two important changes proposed by the ministry of housing are — bringing down the percentage of receivables from home buyers that has to be kept in the escrow account for the purpose of construction, from 70 per cent earlier to 50 per cent now.
The other is to bring the commercial segment of the real estate sector within the ambit of the Bill, which earlier was limited to regulating only the residential segment.
While the changes have been largely welcomed by industry players, the expectation of it becoming a law soon comes as a relief to the home buyers who have been suffering from delays in delivery of projects by developers and inconsistency in fulfilment of promises made to them at the time of booking.
Experts say that the development is positive and takes a step closer towards setting up of a real estate regulator in the country. “If the Real Estate Regulatory Bill comes in 2015, it will be the biggest thing for the sector as it will provide protection to home buyers and it will also result into some non-credible players exiting the sector because of the checks and balances that will come in place,” said Om Ahuja, CEO, residential services, JLL India.
However, some raised concerns on the Bill not addressing on accountability of development authorities.
Industry insiders close to the development confirmed that the government has proposed to reduce the component of receivables from home buyers to be kept in escrow account for the purpose of construction from 70 per cent to 50 per cent. What it means is that developers will now have access to 50 per cent of the receivables from allottees for purposes other than construction.
Experts say that since the construction cost as a percentage of total development is getting smaller with rising land cost, it made sense to reduce the same. “In cities like Mumbai, the construction cost comes to only around 20-30 per cent of the project cost and the land cost goes up to 60-70 per cent. So if the 70 per cent of receivable from the home buyer is kept in the escrow account for construction, then it amounts to blockage of funds, which is undesirable,” said Rohit Raj Modi, president, Credai-NCR. He, however, pointed that it is not appropriate to have a uniform percentage for all cities across the country. “While it could havecontinued…