Regulating real estate: the 2013 Bill and recent developments

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.



Well presented. I hope at least in the future Government fights to include the projects under 1000 Sq.m in this bill because it's in these projects where regulation is really needed.
bhavuk's picture

Sir/Madam, please update the summary of the bill(s) given on your website according to the latest amendments made by the government. as seen in this (Real Estate bill) case, a few important changes have been brought about by the ministry but the same have not been updated in the summary given by For example- the 70%clause has been changed to 50%. if such things are not updated, then it defeats the very purpose of posting the summary on your website.
Gurpinder Kaur's picture

Clearly and simply good one. Thanks to prs.
Sonalichauhan's picture

We hope after this bill some improvement in real estate sector..
phanichandra's picture

Clearly and simply good one. Thanks to prs.
Mohan's picture

Hi, I am trying to buy an apartment in chennai. i could see that the terms & conditions, specifications, configuration vs cost per sq ft., payment patterns, penalty clause etc vary from builder to builder. more greedy the builder, more stringent are the terms by the builder. While it is important that it is not neutral an biased in favour of the builder always. RERA should bring up a set of standard terms and conditions, standarised specifications, standarised configuration vs cost, variations measured by the authority ( like the gold rates variation by the day up or down ) etc as otherwise there is no use of this RERA etc.
Praneet Kumar's picture

Is this official site
admin_2's picture

Yes, this is the official site of PRS Legislative Research.
Naveen Vemunoori's picture

I have few questions on it: Question 1: Is it applicable to new\upcoming projects only or existing (In-progress/Completed) projects will also be included in it? Question 2: It was not called out anywhere that “if the promoter is not completing the project on agreed timelines, then buyer can withdraw and promoter has to pay the collected amount along with interest”. Correct me if it was also included in the bill. Please note, buyer can say that they are incurring loss due to the delay of the project and in that case buyer can get all his money with interest. But my question was bit different as promoter can keep on extending the timelines and say that still there is a time to complete the project.
Neel's picture

I think Real Estate Regulatory bill is a good move by government. But, it will create a lot of hurdles for real estate developers, as there will be one more permission required from government. It should not be another income source for government approval authority personnels. Otherwise, developers will suffer a lot and small builder won't be able to survive in the market.

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