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.
In the aftermath of the 2G scam, there has been a great deal of discussion on how Parliamentary Committees can be used for scrutinising the functioning of the government. Committee Reports are generally put in the public domain, but how transparent are the internal workings of the Committees themselves? As one measure of transparency, minutes of Parliamentary Committee meetings are included in Committee reports. The meetings themselves, however, are held behind closed doors. A number of other democracies allow in-person public viewing of some (if not all) Committee meetings. Several of these offer live webcasts of meetings as well. See options in Canada, New Zealand, Scotland, and the United Kingdom.
In recent public discourse over lobbying, two issues that have underscored the debate are:
- Greater transparency in the policymaking process, and
- Equality of access for all stakeholders in engaging with the process.
There is a need to build linkages between citizens and the policy making process, especially by strengthening scrutiny before a Bill is introduced in Parliament. Currently, there is no process established to ensure pre-legislative scrutiny by the citizenry. Other democracies incorporate several measures to enhance public engagement in the pre-legislative process. These include:
- Making all Bills available in the public domain for a stipulated period before introducing them in the legislature. This includes, publishing these Bills in forms (language, medium etc) that are accessible to the general public.
- Making a report or Green paper on the legislative priorities addressed by the Bill available for citizens.
- Forming adhoc committees to scrutinise the Bill before it is piloted in the House.
- Having Standing Committees examine the Bill before introducing it in the House.
- Providing a financial memorandum for each Bill, which specifies the budgetary allocation for the process/bodies created by the Bill.
- Creating online fora for discussion. For the sections of the stakeholders who have limited access to the internet, efforts are made to proactively consult them through other media.
- Expanding the purview of citizens’ right to petition their representatives with legislative proposals.
There are several instances, in the last few years itself, wherein civil society groups have played an active role in the development of pre-legislative scrutiny in India.
- Public consultation with cross-section of stakeholders when drafting a Bill: The Right to Information Act is seen as a landmark legislation when highlighting the role of civil society actors in the drafting of a Bill. It also serves as a prime example for how it the movement mobilised widespread public opinion for the Bill, bringing together different sections of the citizenry.
- Public feedback on draft Bills: In several cases, after a Bill has been drafted the concerned ministry or public body publishes the Bill, inviting public comments. The Right to Education Bill, the National Identification Authority Bill and the Draft Direct Taxes Code Bill 2009 are recent cases in point. These announcements are made through advertisements published in newspapers and other media. For instance, the government has recently proposed to amend the rules of the RTI and has invited public feedback on the rules by December 27.
- Engaging with legislators: It is important to expand engagement with lawmakers after the Bill has been introduced in Parliament, as they will determine what the law will finally contain. This is done by approaching individual legislators or members of the committee which is likely to examine the legislation. Standing Committees invite feedback on the Bill through newspaper advertisements. For instance, the Standing Committee examining the Civil Nuclear Liability Bill heard testimonies from journalists, civil society groups, thinktanks, public bodies and government departments.
The role of the media and channelising the potential of the internet are other key approaches that need to be explored. Other examples and channels of engagement with the legislative process are illustrated in the PRS Primer on Engaging with Policymakers
The Public Accounts Committee examines how the Government spends public money. It examines the amount granted by the Parliament and the amount actually spent. A Speaker in the past, has passed a direction which specifies clearly that a Minister cannot be summoned by the Financial Committees. This has been incorporated in a document titled "Directions by the Speaker" available here. The actual text of the direction reads - "99. (1) The Committee on Estimates or the Committee on Public Accounts or the Committee on Public Undertakings may call officials to give evidence in connection with the examination of the estimates and accounts, respectively, relating to a particular Ministry or Undertaking. But a Minister shall not be called before the Committee either to give evidence or for consultation in connection with the examination of estimates or accounts by the Committee." -Co-authored by Chakshu
One of the most politically contentious issues in recent times has been the government’s right to acquire land for ‘public purpose’. Increasingly, farmers are refusing to part with their land without adequate compensation, the most recent example being the agitation in Uttar Pradesh over the acquisition of land for the Yamuna Express Highway. Presently, land acquisition in India is governed by the Land Acquisition Act, an archaic law passed more than a century ago in 1894. According to the Act, the government has the right to acquire private land without the consent of the land owners if the land is acquired for a “public purpose” project (such as development of towns and village sites, building of schools, hospitals and housing and state run corporations). The land owners get only the current price value of the land as compensation. The key provision that has triggered most of the discontent is the one that allows the government to acquire land for private companies if it is for a “public purpose” project. This has led to conflict over issues of compensation, rehabilitation of displaced people and the type of land that is being acquired. The UPA government introduced the Land Acquisition (Amendment) Bill in conjunction with the Rehabilitation and Resettlement Bill on December 6, 2007 in the Lok Sabha and referred them to the Standing Committee on Rural Development for scrutiny. The Committee submitted its report on October 21, 2008 but the Bills lapsed at the end of the 14th Lok Sabha. The government is planning to introduce revised versions of the Bills. The following paragraphs discuss the lapsed Bills to give some idea of the government’s perspective on the issue while analysing the lacunae in the Bills. The Land Acquisition (Amendment) Bill, 2007 redefined “public purpose” to allow land acquisition only for defence purposes, infrastructure projects, or any project useful to the general public where 70% of the land had already been purchased from willing sellers through the free market. It prohibited land acquisition for companies unless they had already purchased 70% of the required land. The Bill also made it mandatory for the government to conduct a social impact assessment if land acquisition resulted in displacement of 400 families in the plains or 200 families in the hills or tribal areas. The compensation was to be extended to tribals and individuals with tenancy rights under state laws. The compensation was based on many factors such as market rates, the intended use of the land, and the value of standing crop. A Land Acquisition Compensation Disputes Settlement Authority was to be established to adjudicate disputes. The Rehabilitation and Resettlement Bill, 2007 sought to provide for benefits and compensation to people displaced by land acquisition or any other involuntary displacements. The Bill created project-specific authorities to formulate, implement and monitor the rehabilitation process. It also outlined minimum benefits for displaced families such as land, house, monetary compensation, skill training and preference for jobs. A grievance redressal system was also provided for. Although the Bills were a step in the right direction, many issues still remained unresolved. Since the Land Acquisition Bill barred the civil courts from entertaining any disputes related to land acquisition, it was unclear whether there was a mechanism by which a person could challenge the qualification of a project as “public purpose”. Unlike the Special Economic Zone Act, 2005, the Bill did not specify the type of land that could be acquired (such as waste and barren lands). The Bill made special provision for land taken in the case of ‘urgency’. However, it did not define the term urgency, which could lead to confusion and misuse of the term. The biggest loop-hole in the Rehabilitation and Resettlement Bill was the use of non-binding language. Take for example Clause 25, which stated that “The Government may, by notification, declare any area…as a resettlement area.” Furthermore, Clause 36(1) stated that land for land “shall be allotted…if Government land is available.” The government could effectively get away with not providing many of the benefits listed in the Bill. Also, most of the safeguards and benefits were limited to families affected by large-scale displacements (400 or more families in the plains and 200 or more families in the hills and tribal areas). The benefits for affected families in case of smaller scale displacements were not clearly spelt out. Lastly, the Bill stated that compensation to displaced families should be borne by the requiring body (body which needs the land for its projects). Who would bear the expenditure of rehabilitation in case of natural disasters remained ambiguous. If India is to attain economic prosperity, the government needs to strike a balance between the need for development and protecting the rights of people whose land is being acquired. Kaushiki Sanyal The article was published in Sahara Time (Issue dated September 4, 2010, page 36)
Given India’s anti-defection laws, the Educational Tribunals Bill, 2010 should have sailed through smoothly in the Rajya Sabha. The Bill was passed in the Lok Sabha on August 26 in spite of opposition from many MPs who raised a number of pertinent issues. However, in a surprising turn of events the Bill faced opposition from Congress Rajya Sabha MP K. Keshava Rao (along with other Opposition members). It forced the Minister of Human Resource Development Shri Kapil Sibal to defer the consideration and passing of the Bill to the Winter session of Parliament. Such an incidence raises the larger issue of whether an MP should follow the party line or be allowed to express his opinion which may be contrary to the party. Last year, Vice President Hamid Ansari had expressed the view that there was a need to expand the scope for individual MPs to express their opinion on policy matters. One of the ways this could be done, he felt, was by limiting the issuance of whips “to only those bills that could threaten the survival of a government, such as Money Bills or No-Confidence Motions.” There are others who feel that MPs should not oppose the party line in the House since they represent the party in the Parliament. (See PRS note on The Anti-Defection Law: Intent and Impact). The Educational Tribunals Bill, introduced in the Lok Sabha on May 3, 2010, seeks to set up tribunals at the state and national level to adjudicate disputes related to higher education. The disputes may be related to service matters of teachers; unfair practices of the higher educational institutions; affiliation of colleges; and statutory regulatory authorities. The tribunals shall include judicial, academic and administrative members. The Bill bars the jurisdiction of civil courts over any matters that the tribunals are empowered to hear. It also seeks to penalise any person who does not comply with the orders of the tribunals. (See the analysis of PRS on the Educational Tribunals Bill). The Bill was referred to the Standing Committee on Human Resource Development, which submitted its report on August 20, 2010. Although the report expressed dissatisfaction with the lack of inputs from states and universities and made a number of recommendations on various provisions, the HRD Ministry rejected those suggestions. Some of the key issues raised by the Standing Committee are as follows:
- The Committee observed that no specific assessment about quantum of litigation has been carried out. It recommended that before setting up tribunals, the magnitude of cases and costs incurred in litigation should be assessed. A minimum court fee should be fixed to ensure viability of the tribunals.
- The Committee pointed out that the status of existing tribunals is unclear. Also, since the number of educational institutions vary from state to state, the Committee felt that one educational tribunal per state cannot be made uniformly applicable.
- The Committee stated that there is no clear rationale for fixing a minimum age limit of 55 years for members of the tribunals. It recommended that competent people with adequate knowledge and experience, irrespective of age, should be considered.
- In case there is a vacancy in the chairperson’s post, other two members shall hear cases in the state educational tribunals. However, this leaves the possibility of cases being heard without a judicial member (since chairperson is the only judicial member). The Committee pointed out that a recent Supreme Court judgment states that every two-member bench of the tribunal should always have a judicial member. Also, whenever any larger or special benches are constituted, the number of technical members should not exceed the judicial member. The Committee were of the view that certain provisions of the Bill violate the Supreme Court judgment and should be re-thought.
- The Committee recommends that the term “unfair practice” should be defined in the Bill so that it is not open to interpretation by the courts.
- The Selection Committee to recommend panel for national tribunal includes the Chief Justice of India and Secretaries, Higher Education, Law and Justice, Medical Education and Personnel and Training as members. The Committee recommended that there should be adequate representation of the academia in the Selection Committee.
- The Committee proposed that the government needs to identify the lacunae of the existing tribunal systems and ensure that orders of the tribunals have some force.
During the recess, the Departmentally Related Standing Committees of Parliament examine the Demand for Grants submitted by various Ministries. The Demand for Grants are detailed explanations of that Ministry's annual budget which form part of the total budget of the government. These are examined in detail, and the committees can approve of the demands, or suggest changes. The Demand for Grants are finally discussed and voted on by the Parliament after the recess. (The post below lists the ministries whose Demand for Grants will be discussed in detail after the recess). The issue is - how effective is the institution of Parliament in examining the budget? Though India specific information on this subject is hard to find, K. Barraclough and B. Dorotinsky have cited the World Bank - OECD Budget procedures Database to formulate a table on the legislature approving the budget presented by the executive ("The Role of the Legislature in the Budget Process: A Comparative Review", Legislative Oversight and Budgeting). I reproduce the table below:
|In Practice, does the legislature generally approve the budget as presented by the Executive? (in percent)|
|Answer||All Countries||OECD Countries||Presidential democracies||Parliamentary democracies|
|It generally approves the budget with no changes||34||33||14||41|
|Minor changes are made (affecting less than 3% of total spending)||63||67||71||59|
|Major changes are made (affecting more than 3% but less than 20% of total spending)||2||0||7||0|
|The budget approved is significantly different (affecting more than 20% of total spending)||0||0||0||0|
|Sources: K. Barraclough and B. Dorotinsky; PRS.|