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Regulating real estate: the 2013 Bill and recent developments

April 8th, 2015 10 comments

Yesterday, Cabinet approved amendments to the Real Estate (Regulation and Development) Bill, 2013, which is currently pending in Parliament.

In this context, the blog post outlines key features and issues related to the Bill, and certain changes which were approved by Cabinet.

What is the current status of the Bill?

The Bill was introduced in Rajya Sabha in August 2013.  It was then referred to the Parliamentary Standing Committee on Urban Development, which submitted its report in February 2014.  The Bill has not been discussed in Parliament as yet, and is currently pending in Rajya Sabha.

As mentioned above, Cabinet approved certain changes to the Bill yesterday.  However, a comprehensive list of these changes is not available in the public domain yet.

What are the key features of the Bill?

The Bill regulates transactions between buyers and promoters (sellers) of residential real estate projects.  It establishes state level regulatory authorities called Real Estate Regulatory Authorities (RERAs) in order to do so.  Residential real estate projects, with some exceptions, need to be registered with RERAs, and their details must be uploaded on the website of the RERA.  This implies that promoters cannot book or offer these projects for sale without registering them with RERAs.  Real estate agents dealing in these projects also need to register with RERAs.  The Bill also establishes state level appellate tribunals called Real Estate Appellate Tribunals.  Decisions of RERAs can be challenged before these tribunals.

The Bill outlines the duties of promoters, buyers, and real estate agents.  For example, the Bill requires that promoters keep 70% of the amount collected from buyers for a project, in a separate bank account. This amount must only be used for construction of that project.  The state government can alter this amount to less than 70%.  The Bill also provides for penalties for the breach of certain provisions of the Bill.

What are some of the issues to consider?

A few key issues to consider in the Bill are related to the following: (i) certain states have already enacted laws to regulate real estate; (ii) commercial real estate has not been included within the ambit of the Bill; (iii) certain smaller sized projects have not been covered under the Bill; and (iv)  70% of the amount collected from buyers must be kept in an escrow account.

Firstly, at present, certain states, such as West Bengal and Maharashtra, have already enacted laws to regulate real estate.  So, any central law on real estate that is subsequently enacted will override provisions of state laws if they are inconsistent with the central law.  For example, while this Bill (introduced at the centre) requires that 70% of the amount collected from buyers be kept in a separate account and be used only for construction of that project, the Maharashtra law requires that the entire amount collected from buyers be used only for purposes collected.

Secondly, while the Bill seeks to regulate residential real estate, commercial real estate has been excluded from its ambit.  The Standing Committee has also pointed out that commercial and industrial real estate should be regulated by the Bill.

Thirdly, registration with RERAs is not required for projects that: (i) are less than 1000 square metres, or (ii) entail the construction of less than 12 apartments, or (iii) entail renovation/repair/re-development without re-allotment or marketing of the project.  The Standing Committee has pointed out that the exclusion of projects, smaller than 1,000 square meters or 12 apartments, from the purview of RERAs could lead to the exclusion of a number of small housing projects.  Instead, it has suggested that only projects that are smaller than 100 square meters or three apartments need not register with the RERA.

Finally, the Bill mandates that 70% of the amount collected from buyers of a project be used only for construction of that project.  Typically, the project cost of a real estate project includes the cost of land and the cost of construction.  In certain cases, the cost of construction could be less than 70% and the cost of land more than 30% of the total amount collected.  This implies that part of the funds collected could remain unutilised, necessitating some financing from other sources.  Consequently, this could raise the project cost.

The Standing Committee made certain other recommendations in relation to the Bill.  It suggested that all real estate agents be registered with RERAs; and that a new provision be inserted to allow RERAs to give directions to state governments to establish a single window system for providing clearances for projects.  Additionally, a time limit should be specified for state and local authorities to issue completion certificates for projects.

What were the changes to the Bill approved by Cabinet yesterday?

A comprehensive list of amendments is not in the public domain yet.  However, a press release of the government, published by the Press Information Bureau, indicates the following changes have been made: firstly, the application of the Bill has been extended to cover commercial real estate, in addition to residential real estate; and secondly, the amount to be kept in an escrow account has been reduced from 70% of the amount collected from buyers to 50%.

For more information, please see the PRS Legislative Brief on the Bill, available here.  You can also watch a PRS video on the Bill here.

Cabinet Reshuffles since 2009

June 18th, 2013 1 comment
Source: www.pib.nic.in

Source: www.pib.nic.in

Yesterday the Prime Minister reshuffled his Cabinet and inducted four cabinet ministers and four ministers of state.  Since the beginning of the UPA II government, there have been three major Cabinet reshuffles and a number of minor readjustments in the portfolios of ministers. Analysing changes in the portfolios of ministers gives an insight into the churn in the political leadership of the different ministries of the government of India.

Until recently there was no central online resource where information could be collated about cabinet reshuffles. The information was scattered between the websites of the President, the Prime Minister and the Press Information Bureau. Since 2012, the Cabinet Secretariat has started putting details about changes in the portfolio of the council of ministers in the public domain. However analysing this information becomes difficult as the information is split into different files and details about the Cabinet reshuffle do not go back till 2009.

We have tried to collate data about changes in Cabinet portfolios since May 2009, so that it becomes easily accessible and can be analysed by interested individuals.  The raw data file can be accessed here. This data could be analysed to see which Ministers have shifted across ministries or the average length of tenure of Ministers in different ministries.

If you spot interesting trends in the raw data above, please share them with us on twitter@prslegislative

We have done a preliminary analysis of the data to see which ministries have had the most changes in Cabinet Ministers since May 2009:

– Railway Ministry portfolio has been held by six different Cabinet Ministers [Mamata Banerjee, Dinesh Trivedi, Mukul Roy, C P Joshi (twice), Pawan Kumar Bansal and now Mallikarjun Kharge]

– Ministry of Law and Justice, Corporate Affairs and Science and Technology: Four Cabinet Ministers.

– Ministry of Petroleum and Natural Gas, Civil Aviation, Rural Development, Tourism and Youth and Sports:  Three Cabinet Ministers.

– Ministries like Finance, Home, External Affairs, Communications and Information Technology, Human Resource Development:  Two Cabinet Ministers.

– Ministries like Agriculture and Non Conventional Energy Sources have the same Ministers from May 2009.

This data also helped us put together a brief chronology of Cabinet reshuffles since the beginning of the term of the UPA II government:

23 & 28- May-09 Cabinet sworn in.
31-May-09 Meria Kumar resigns as Minister of Water Resources to become Speaker of Lok Sabha.
19-Apr-10 Shashi Tharoor resigns as Minister of State from the Ministry of External Affairs.
15-Nov-10 A Raja resigns as Minister of Communications and Information Technology. Kapil Sibal gets additional charge of the ministry.
19-Jan-11 First major cabinet reshuffle. Most ministries affected.
12-Jul-11 Second major Cabinet reshuffle. Dinesh Trivedi assumes charge of Railway Ministry after Mamata Banerjee, Salman Khursheed becomes Law Minister, Jairam Ramesh moves to Rural Development. New Ministers like Rajeev Shukla (Parliamentary Affairs) and Jayanthi Natarajan (Environment and Forest) get inducted.
18-Dec-11 RLD joins UPA. Ajit Singh inducted as Minister of Civil Aviation.
20-Mar-12 Dinesh Trivedi resigns and Mukul Roy becomes Railway Minister.
27-Jun-12 Pranab Mukherjee resigns as Finance Minister to fight the presidential election.
31-Jul-12 P Chidambaram moves from Home to Finance Ministry and Sushil Kumar Shinde moves from Power to Home Ministry.
22-Sep-12 Trinamool withdraws support to UPA. All TMC ministers resign. C P Joshi assumes additional charge of Railway Ministry.
28-Oct-12 Third major reshuffle. S M Krishna resigns from Ministry of External Affairs and Salman Khursheed takes over. Ashwani Kumar comes in place of Salman Khursheed in Law and Justice. Ambika Soni resigns and Manish Tiwari takes charge of Ministry of Information and Broadcasting. Ajay Maken moves from Ministry of Youth Affairs and Sports to Housing and Urban Poverty Alliviation.
21-Mar-13 DMK withdraws support. All DMK Ministers resign.
11-May-13 Ashwani Kumar and Pawan Kumar Bansal resign. Kapil Sibal takes charge of Ministry of Law and Justice and C P Joshi takes charge of Railways.
16-Jun-13 Ajay Maken and C P Joshi resign.

 

 

How is a law enacted in Parliament?

March 17th, 2010 No comments

Because of the interest in the Women’s Reservation Bill and the Civil Liability for Nuclear Damage Bill, we’ve received a number of queries about the process by which a bill becomes an Act.

We have a more comprehensive primer on the subject, but here’s the process in brief:

• The ministry drafts a text of the proposed law, which is called a ‘Bill’, after calling comments from other ministries, and even from the public.  The draft is revised to incorporate such inputs and is then vetted by the Law Ministry. It is then presented to the Cabinet for approval.

• After the Cabinet approves the Bill, it is introduced in Parliament. In Parliament, it goes through three Readings in both Houses.

• During the First Reading the Bill is introduced. The introduction of a Bill may be opposed and the matter may be put to a vote in the House.

• After a Bill has been introduced, the Bill may be referred to the concerned Departmentally Related Standing Committee for examination.

• The Standing Committee considers the broad objectives and the specific clauses of the Bill referred to it and may invite public comments on a Bill. It then submits its recommendations in the form of a report to Parliament.

• In the Second Reading (Consideration), the Bill is scrutinized thoroughly. Each clause of the Bill is discussed and may be accepted, amended or rejected. The government, or any MP, may introduce amendments to the Bill.  However, the government is not bound to accept the Committee’s recommendations.

• During the Third Reading (Passing), the House votes on the redrafted Bill.

• If the Bill is passed in one House, it is then sent to the other House, where it goes through the second and third readings.

• After both Houses of Parliament pass a Bill, it is presented to the President for assent.   He/She has the right to seek information and clarification about the Bill, and may return it to Parliament for reconsideration. (If both Houses pass the Bill again, the President has to assent)

• After the President gives assent, the Bill is notified as an Act.