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The promoter regulation acts of various States
attempted to deal with what could be considered as excesses by the real estate sector i.e., (i) collecting huge amounts even prior to the approval of
construction proposals, (ii) creating a mortgage on the property before or after
entering into an agreement of sale with third parties, without letting them know
of the mortgage, (iii) not delivering apartments in time, (iv) changing
approved plans midway, (v) not transferring apartments to individual flat purchasers or to
housing societies, with the fond hope that the FAR / FSI in the area would
increase and they could benefit, (vi) collecting huge maintenance fees and
siphoning it off through inflated charges, (vii) issuing misleading
advertisements, etc. All these and other issues ought to be taken care of by
the Law,and cannot be left to market forces, since the hard- earned lifetime
savings of citizens are involved. Despite some States bringing laws, there is
no denying that the Real Estate sector is still one of the
most unregulated, in so far as relations between the developer/promoter/builder and the purchaser are concerned. As such, there is an imperative need
for a model Real Estate (Regulation and Development ) Act.
The Central Government had announced a Model
Real Estate (Regulation and Development) Act,which was put up for discussion
before it was brought before Parliament.It envisages regulatory and appellate
authorities to regulate, control and promote development by construction, sale,
transfer and management of residential apartments.Though the model
legislation is a welcome move to bring discipline to the sector, the proposed
legislation is not binding on States, which have to enact separate
legislations.
The regulatory authority proposed is in
addition to existing authorities under different local, planning, revenue and tax establishments. There are dozens of licenses and approvals to be obtained
prior to starting development and, taking into consideration the way our
systems work, the new proposed authorities would only delay approvals, add to
the cost and create additional structures that would only set the clock back.
This is the era of liberalization.The
proposed legislation will only take the real estate industry back to the
license raj era. Creation of additional authorities has always led to more
corruption.Exorbitant demands by authorities invariably lead to delays and
cost escalation, ultimately borne by the purchaser. Power to such authorities
has traditionally led to its misuse, and no system to deal with this menace has
yet been discovered. Especially in the Real Estate sector, promoters ought to
be made responsible and liable, so that the excesses complained of by the
citizens and investors are taken care of by Law administered through Courts.
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