Wednesday, August 12, 2015

Need For a Real Estate Regulatory Authority in India

[The following guest post is contributed by Ranjit Mahishi, who is an Associate at Kochhar & Co., Bangalore. He can be reached at]

Real estate in India has experienced a tremendous growth in the recent years. The demand for commercial and residential spaces in major cities has seen a steady rise. Generally, a real estate transaction involves complex issues such as financing, transfer of ownership or right and interest, applicability of various property laws and tax laws etc., which are beyond the understanding of a common man. For the general public, buying residential property would be one of the most important decisions of their lives. Even buying or leasing commercial space to a great extent involves complex transactions and third party agents who facilitate the transactions. This enormous sector has for the most part been unregulated and disorderly with consumers being subject to harassment and unsympathetic practices of the builders.        

The Real Estate (Regulation and Development) Bill (“Bill”), which is currently pending before the Rajya Sabha (Upper House of the Parliament of India), seeks to regulate the real estate sector in India in the coming years. Due to a lack of standardization and professionalism in the real estate sector in India, a regulator is necessary to promote and implement consistency, fairness and competence along with protecting the people’s investments and thwarting dishonest and abusive practices with a firm hand. The preamble of the said Bill clearly enlists that the establishment of a regulatory authority is to ensure efficiency, transparency, fairness and to protect the consumers.

The regulations under the Bill apply to all builders (promoters) and real estate agents, regardless of their size and influence, and also apply to consumers. The goal of the Bill is to protect the public and promote healthy competition.  

Mandates registration of the project and real estate agents

One of the most important components of the Bill is the establishment of competency of promoters and uniform standards within the industry. The Bill makes it compulsory for a promoter to register the real estate project with the regulatory authority. Only upon its registration can the promoter advertise on the regulatory authority’s website and invite persons to purchase the property. The registration granted is for the period declared by the promoter for completion of project. If the promoter fails to complete the project as per schedule, the regulatory authority can revoke the registration.

Real estate agents are also required to be registered with the regulatory authority. A real estate agent who is not registered will not be able to facilitate the sale or purchase of a property in a project. The registration provided by the regulatory authority would be valid for a prescribed period and is renewable by the authority from time to time. The regulatory authority has the power to revoke or suspend the registration of a real estate agent, thereby deterring the real estate agent from misrepresenting to or causing fraud on the general public.

The regulatory authority creates a means by which incompetent promoters do not have the opportunity to profit from the faith invested in them by the unwary public. As the regulatory authority’s power of scrutiny is ongoing throughout the construction process, it ensures constant proficiency of the promoters to complete the project within stipulated timelines and in accordance with the approvals granted by the competent government authorities. 

However, the Bill falls short on requiring the promoters to be registered with the regulatory authority. If the regulatory authority was to be empowered to license the promoters, it would have opened the doors to insist on minimum standards with respect to basic skills and competencies that one would expect from a developer. Further, it could have warranted the need for continuing education to ensure that the promoter is aware of the recent changes in the real estate laws, techniques etc., especially when the promoter would have to get its license renewed periodically. 

Imposes Responsibilities

The Bill defines the responsibilities of the promoters, real estate agents and consumers.  There will be a clear understanding of duties and responsibilities of what a promoter and real estate agent is expected to perform. The standards set by the regulatory authority will be uniformly applicable to all registrations. This will ensure provision of protection through ongoing enforcement, which is the principle goal of the Bill. The regulatory authority has been empowered to register, revoke registrations for violations and even terminate them in certain cases. 

It will compel the promoter, upon entering into an agreement of sale, to obtain and provide to the consumer/allottee essential documents such as the completion certificate and also perform essential duties such formation of the owner’s association or society. More importantly, a promoter can receive any payment including advance from the consumer only after executing the agreement of sale and is entitled to cancel allotment only in terms of the agreement to sell, which would curtail the existing practice where a promoter demands advance payment before executing the agreement of sale and, thereafter, cancels allotment if there is an expansion in the project that leads to consequent increase in sale consideration or simply because the another person is willing to pay more. 

The Bill also puts onus on the promoter to rectify structural defects in the project upon receiving a complaint by the consumer and transfer the title of the property only by executing a registered conveyance deed. This will put an end to the prevalent malicious practice of fraudulently transferring property to unsuspecting consumers through a power of attorney or by any other means to avoid payment of stamp duty and registration fees.

The promoter must on a quarterly basis update the list of number and types of property that are booked and the status of the project in the regulatory authority’s website. Further, all advertisements and prospectus of the promoter must mention the website of the regulatory authority and the fact that all details of the project are available therein. This will prevent the promoters from falsely advertising in order to deceptively induce the public.   

The Bill will provide the regulatory authority with disciplinary powers to investigate, provide a fair hearing and impose punishment. A promoter could be debarred from accessing the regulatory authority’s website with respect to the project if found to be in violation of the law or contractual terms, have its registration cancelled and be listed in the ‘list of defaulters’, which would be accessible by all and the list would be shared with all the real estate regulatory authorities in other states thereby acting as an effective deterrent to the promoter. The regulatory authority is also empowered to impose penalty or interest on the promoter or real estate agent if found guilty. Further, the regulatory authority can make suo moto reference to the Competition Commission of India if a promoter is found to be preventing, restricting or distorting competition or affecting the interest of consumers/allotees by abusing market dominance.

The Bill also imposes duties on the consumers/allotees. The allottee is expected to make payments on time for the property and utilities in accordance with the terms of the agreement of sale and that the allottees must equally participate in the formation of association or society. 

The disciplinary powers of the regulatory authority cover recovery of penalty, interest and/or compensation from the promoter, real estate agent or consumers/allotees. All the parties associated with the works under the Bill are equally expected to perform their respective duties and would be adjudged without prejudice.  

Provides transparency and fairness

Private promoters’ associations such as Confederation of Real Estate Developers’ Association of India (CREDAI) establish their own standards, ethical practices, self governance etc., which need not necessarily assist the general public or bind the promoter especially since they are voluntarily adopted. A government authorized real estate regulatory authority guarantees, at least to a greater extent, fair and open administration. There will be an assumption that when the regulatory authority acts, everyone is treated equally and impartially and, more importantly, the public interest is protected.

The Bill provides that the regulatory authority must be guided by the principles of natural justice.  The punitive clauses of the Bill clearly emphasize that no person must be punished without having been provided with an opportunity of being heard and to show cause. Thus, any promoter or real estate agent or consumer/allottee accused of violation is entitled to right of fair trial, procedural protection and right of legal representation. The regulatory authority is vested with the same powers as that of a civil court under the Civil Procedure Code. Thus, a regulatory authority has the power of discovery and production of documents, summoning and enforcing attendance of persons including witnesses and examining them.    

The manner in which the regulatory authority administers and adjudicates the matters before it is subject to review by higher authorities. The Bill provides for establishing a ‘Real Estate Appellate Tribunal’. Any person that is aggrieved by the decision of the regulatory authority may prefer an appeal before the appellate tribunal within 60 days from the date of receipt of the copy of the order. The said appellate tribunal is also vested with the powers of a civil court. The order of an appellate tribunal is executable as a decree of the civil court. A further appeal mechanism is provided to the high court against the order of the appellate tribunal within 90 days from the date of communication of the decision.      

The Bill also provides for a greater degree of transparency. The fact that the regulatory authority and the appellate authority consists of public servants provides an assurance to the general public that their interest would not be compromised. Further, the appellate tribunal consists of a chairperson and two members, one among whom must be a judicial member and another, a technical member or administrative member. The Bill, in constituting the regulatory authority and appellate tribunal, tries to balance efficacy and practicability by providing representation from all possible areas affecting the interests of persons involved. The chairperson and the members are prohibited from associating with any person or organization that has been associated with any work under the Bill after ceasing to hold office or share information that they were privy to while in the capacity of a chairperson or member. The conduct of the chairperson and members, subsequent to them ceasing to hold office, is subject to the scrutiny and review of the appropriate government, the judiciary and even the public at large.   

All the records deposited with the regulatory authority are open to the public. One can simply access the website of the regulatory authority before deciding to purchase a property, inspect the records online and then make an informed decision.


The Bill will introduce a much needed concept in India through which the real estate sector can possibly be streamlined, standardized and regulated. The Bill subtly tries to bring in efficiency, fairness and transparency in real estate transactions in India. This could be a huge leap forward not only in promoting a healthy real estate market, but to also to reduce tax evasion and free flow of black money in the market. The Bill has many grey areas and has been subject to criticism.  However, in its present form, it appears to promote the real estate industry at large with a greater emphasis on protection of the public. With the Central Government having ambitious plans of unveiling ‘Smart City Project’, ‘Atal Mission’ and ‘Housing for all by 2020’, the real estate sector is going to experience a lot of activity in the near future and the need for a real estate regulatory authority is indeed very timely.        

- Ranjit Mahishi


vswami said...

"....and the need for a real estate regulatory authority is indeed very timely."

Undoubtedly , of course, the need for an authority, with adequate, effective and substantial powers to regulate, so also the often-wanting 'will' to implement and bring about the decades -long- pending orderliness in the thus-far- remaining most neglected realty sector cannot be impudently over-sighted or under-emphasized /- meekly- played any longer. Nonetheless, the most common concern still prevailing, but left wide open, - which is centered on the very crucial and fundamental point, -as to how far and to what extent the bill as presently framed and structured could be expected to fulfill the objective behind, especially from the customers'/ consumers' viewpoint, - has been disappointingly omitted to be touched upon, unwittingly or otherwise.

For knowing why to say so emphatically, anyone may care and go through the plethora of attempted analytical study, shared in public domain; and consider independently, in-depth, the not-so-apparent or -consciously noted deficiencies in the legislation in offing, after equipping self the intricacies of the issues/problems involved.

To make a good start and fast-track, the host of material /thoughts shared in inter alia the personal blog , - swamilook 2005, aimed at serving the ‘public good’, should help the purpose of /make for a ready reckoner.


(< May have more to share/highlight).

landlinkindia said...

The problem is nowhere its show where n how to register the agency