The government has proposed to bring the real estate industry, property dealers and builders under the scanner of a Real Estate Regulator through a Real Estate Management Bill that is likely to be brought into the Parliament in the next winter session Apts in McDonough.
Concerned with increasing complaints against real estate agents, the Ministry of Urban Development is planning to create a statuary regulator for the real estate sector. A real estate commission will be set up to frame guidelines and a code of conduct for property dealers.
Although officials in the ministry are still silent on the issue, but sources said that property dealers and architects would also have to get themselves registered before doing business The commission is likely to be formed as part of the proposed real estate Bill, which would institute a series of strict regulations for dealers and agents as well as developers.
However, keeping in view the strong opposition of a section of lobby of builders and property agents, it remains to be seen whether the government would be able to push forward the proposed Bill.
The Finance Ministry has expressed concerns about the exponential growth in the highly unorganised sector, which is also supposed to be one of the most corrupt sectors of the economy.
“Although property dealers are charging between 2 and 4 per cent commission of the total value of property deal from the clients, yet they are neither legally accountable to the customers nor pay income tax or service tax on this commission, leading to tax evasion of hundreds of crores,” an official said.
Admitting black sheeps in the industry, Mr Amol Arora, Executive Director, Emgreen Projects Ltd. said: “Unscrupulous brokers promise too much, hide or misrepresent the details, forcing buyers to sign executive contract while charging hefty guarantee fees. They would bad mouth property in which they are not getting any commission and hype up properties on which they are promised more commission.”
All this affects investors’ and consumers’ confidence and to add on, is also not good for the image of the industry.
In fact, a section of builders have also supported the government’s move, as it would bring transparency in the industry and an assurance to the customers. Once confidence level improves, the quantum of foreign investment coming into the sector could rise substantially leading to growth in the sector.
As per an estimate, the real estate sector is expected to get an investment of over $50 billion in next 5 years. Some are still proposing self-regulation by the industry.
Mr Arora said: “The industry should set up a self-regulatory watchdog on the basis of the dealer performance and give ratings based on these facts. This will put some pressure on unscrupulous agents to stop unethical practices, and good agents will thrive as people would easily be able to foresee their track records.”
However, under the proposed Bill, neighbourhood property dealers will have to compulsorily seek licence from the proposed commission for practising in specific catchment areas.
To further protect the interest of consumers, the commission will also entertain complaints against dealers and will be empowered to take punitive action.
There are also plans for setting up an assistance window at the proposed commission, where prospective buyers will be able to thoroughly check the antecedents and other details of the property.
In fact, in case of any fraud by the property dealer or builders, consumers can approach the courts or consumer courts, where they could spend months and years without getting justice.
The proposed commission is expected to fill this gap, while helping the government to collect more revenue as well.
Insiders told that a strong lobby of builders and property dealers is opposing the move to enact an act to regulate the sector, claiming that this sector was under the purview of state governments.
Keeping in view that a large number of builders are diverting the funds to other projects, the government has proposed that builders should provide bank guarantees for both construction and utilities in a project. The ministry has also proposed to renew licences of the agents every five years.
If the developer’s work is not up to the promised standard, the authority can cancel his licence. The authority can also take over the project, encash the bank guarantee, and complete the work itself.