Wednesday, April 8, 2015

The Real Estate Regulatory Bill - Some early thoughts

Finally we will be getting a Real Estate Regulator. And not just one. At least one per state. There is an enabling provision which permits a state to have one or more.
A quick read of the framework, leaves me wondering as to whether there is going to be real protection.
First, the good thing is that the act talks about mentioning all measurements only in 'carpet' area. Unless there is some final devil in the print, this should enable us to compare prices across builders.
The govt wants the builders to deposit fifty percent of the amount received from buyers in to a separate bank account within 15 days. This is messy. For what period of time should the money be there, I do not know. I am sure that the bankers will work out a way to let the builders access liquidity and earn some interest and fees in doing so. I am not sure this is a workable provision. Fifty percent is a large amount and it presumes that the builder can manage to complete the project without accessing half his money. Anyway, let us wait for the final print. My feeling is the builder lobby (which includes most of the law makers in both houses) will not let this happen.
The penalty is just ten percent for non compliance. This is peanuts and the builder will simply add this to the cost of the project. If he is fined, it comes out of your pocket and if he is not, it is extra profits.
There is nothing about compulsory publication of per square foot sales price to be mentioned. When we have a one rupee match box carrying the MRP, it is strange that we will not see a MRP in a real estate asset. Thus, the biggest window to black money is kept open.
Let us see the final shape the bill will take. And since the fountainhead of corruption in India are the state governments, do not expect any great protection. Most of these regulators are like condoms- Supposedly to protect, but ultimate objective is to help in getting the consumer screwed.

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