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 (Edited Image Courtesy: CPWD)
Aam Aadmi’s quest for a job and a house would remain a nightmare for millions if the lame-duck Real Estate (Regulation and Development) Bill, 2013 (RERDB) is enacted into a law. 
RERDB suffers from enormous reforms and regulatory deficit due to be certain factors explained later in this column. It would thus not help the country realize fully the amazing potential of the real estate sector for inclusive growth.
The Bill neither provides a fair deal to the consumer nor to the seller as it has left out Government, whose actions directly or indirectly impact the real estate in humungous manner. Exclusion of Government would only create new conflicts between the buyers and developers as the issue of delays due to Government would enjoy deemed immunity under the proposed law. 
Moreover, the Government has also not brought under RERDB’s ambit certain other stakeholders such as NGOs whose unaccountable actions have wrecked havoc on both the buyers and developers of properties.
Take the hypothetical but common instance of an NGO filing complaint against the project to environmental appraisal committee (EAC), resulting in postponement of decision by several months. Later, EAC finds no substance in the complaint and clears the project, which has now suffered time and cost overrun. Should RERDB not have a mechanism for developer and buyers to file a joint complaint against the dubious NGO to seek exemplary penalties?    
Yet another cause for worry is the prospect of conflict between the Central and State RERDB laws as certain States have lately enacted or drafted their own realty bills. 
These are a few grave issues one would arrive at after looking at the official release dated 7th April 2015, announcing the amendments to the Real Estate (Regulation and Development) Bill, 2013 approved by the Union Cabinet.
As the Government has not yet unveiled the amended Bill, one has to rely on the release, the original bill, report of Parliamentary Standing Committee on RERDB and other relevant information available in the public domain. 
Listing salient features of the Bill, the release claims: “The recommendations of the Standing Committee of Parliament (SCP) on Urban Development and suggestions of various stakeholders (consumer organizations, industry associations, academia, experts etc.) have also been included after extensive consultations.”
The release does not disclose as to why the Government has not acted on SCP’s most crucial recommendation to legally bind the Central, State and local governments into streamlining their approvals process for real estate projects.
As put by SCP in its report presented to Parliament on 17th February 2014, “The Committee fail to understand as to why the delays occurring on account of Government action should not be dealt with by the Bill. Thus, the Committee strongly recommend that the delays on account of Government/local authorities action should be explicitly included in the provisions of the Bill.”
SCP also pitched for incorporation of time limit for urban local bodies to provide building completion certificate to the property developer, instead of leaving this matter at the discretion of the State Governments. 
SCP report on RERDB, which was introduced in Rajya Sabha in August 2013, says: “it should be the responsibility of the promoter to obtain completion certificate from the relevant competent authority and make it available to the allottees or to the associations of allottees, but if no time frame is fixed for the competent authorities to issue such completion certificate, it can be used by the promoter as a plea for unnecessarily delaying the furnishing of documents to the allottees.”
The Union Government has refrained from drafting a comprehensive real estate law as it does not to encroach into the States’ legislative domain under the Constitution. It has thus overlooked the need to cast statutory obligation on the States & ULBs in granting diverse approvals within specified timeframe. 
There is, however, no justification for the Centre’s decision to not commit its ministries and other entities such as Airport Authority of India into accepting to statutory timelines for issue of clearances. 
The Ministry of Urban Development (MUD) has admitted to SCP the limited scope of the Bill. The former stated: “The proposed Bill is limited in applicability, i.e. transaction entered into between the buyer and the promoter, under Entries 6 and 7 of the Concurrent List of the 7th Schedule of the Constitution. Local Authorities are within the State List of the 7th Schedule, for which the Central Government does not have the powers to make laws.”
The narrow and weak foundation of RERDB can be gauged by reading the Entry 6 of the Concurrent List under the Constitution. It deals with “Transfer of property other than agricultural land; registration of deeds and documents.” Similarly The Entry 7 reads as: “Contracts, including partnership, agency, contracts of carriage, and other special forms of contracts, but not including contracts relating to agricultural land.”
RERDB’s core foundations lie in the States legislative domain. Entry 5 of the State List reads as “Local government, that is to say, the constitution and powers of municipal corporations, improvement trusts, districts boards, mining settlement authorities and other local authorities for the purpose of local self government or village administration.”
Entry 18th of the State List reads as “Land, that is to say, rights in or over land, land tenures including the relation of landlord and tenant, and the collection of rents; transfer and alienation of agricultural land; land improvement and agricultural loans; colonization.”
Faced with this Constitutional constraint, the Centre has tried to make up for RERDB’s deficiencies by issuing advisories to the States and ULBs to streamline the regulations for the real estate sector. 
One such advisory dated 3rd March 2015 from MUD to its counterparts in the States urges them to direct ULBs to “ensure that all clearances for the construction project are given within one month.”
Drawing States’ attention to World Bank’s Report on ‘Doing Business 2014’ that ranks India 183rd out of 189th countries on the parameter of construction permits,
MUD letter advocates single-window clearance of construction projects by ULBs. 
It adds: “This has to be ensured in tune with the Hon’ble Prime Minister’s Vision of ‘Make in India’ to ease the doing business, where fast-track approval and transparency for construction projects are to be ensured so that the global rank of India in ‘ease of doing business’ is brought within the top 50.”
PM Narendra Modi’s vision for good governance in the realty sector can be appreciated by acknowledging the fact real estate is the second largest employer after agriculture. It acts as prime mover for 250 industries through a web of forward and backward linkages.
As put by the 10th Five Year Plan (2002-07) that strongly pitched for real estate reforms, “The term ‘real estate’ is defined as land, including the air above it and the ground below it, and any buildings or structures on it. It is also referred to as realty. It covers residential housing, commercial offices, trading spaces such as theatres, hotels and restaurants, retail outlets, industrial buildings such as factories and government buildings.”
One can stretch the definition a bit by including urban infrastructure such as metro lines, roads, bridges, water works and drainage system to visualize the sector’s potential for wholesome growth.
With such perspective, the Government should come out with an all-inclusive reforms package for the real estate sector. It should even consider issuing a consultative paper on amending the Constitution to provide for a uniform and simple statutory framework for real estate across the country. 
At present, there is a risk of conflict of central and state laws in the real estate regulatory domain. Even as RERDB moots setting up of Real Estate Regulatory Authority and allied tribunal in each State, Maharashtra has already enacted such a similar law  titled ‘Maharashtra Housing (Regulation and Development) Act, 2012’ In September 2014, the State Government notified draft Maharashtra Housing (Regulation and Development) (General) Rules, 2014. 
Similarly, Haryana had drafted Haryana Real Estate (Regulation and Development) Bill, 2013. It is not clear whether new State Government would enact this bill into a law. 
Earlier, Goa Law Commission had unveiled Goa Real Estate (Control and Development) Act, 2010 for seeking public comments. A few more States are planning their own realty laws or considering amending their existing ones to provide for an improved regulatory framework for realty. 
What would happen if some States do not set up regulatory authority and tribunal as envisaged under RERDB? 
As put by Mr. Ashish Sarin, CEO, Alpha G:Corp Development Private Limited, “It is not mandatory for state governments to adopt the provisions of the bill. This makes the success of the bill very doubtful. The effectiveness of this bill and its positive impact on the stakeholders will be dependent on the central government’s ability to have a majority of states to introduce and effectively implement this bill in their respective territories.”
Another issue to ponder is the risk of positive impact of RERDB getting overshadowed by the negative impact of certain provisions of about 100 laws on realty. 
The Central laws governing real estate include Indian Contract Act, 1872, 
Transfer of Property Act, 1882, Registration Act, 1908, Special Relief Act, 1963
Urban Land (Ceiling and Regulation) Act (ULCRA), 1976, Environment (Protection) Act, 1986, Forest Conservation Act 1980 and The Indian Evidence Act, 1872. 
RERDB’s laudable objective to balance the interests of consumers and promoters by imposing certain responsibilities on both cannot be realized by keeping other stakeholders out of legal obligations. The conflict between the buyers and promoters is influenced by the sequential and time-consuming procedures followed by the Central, State and local authorities in granting approvals. The number of mandatory approvals range from 34 to 45 depending on the project’s location in the country. The different approvals are applicable to pre-construction, construction and post-construction stages of a project. 
As many as 59 causes categorized into nine groups have been identified by a research paper captioned ‘A Methodology for Ranking of Causes of Delay for Residential Construction Projects in Indian Context’ published in International Journal of Emerging Technology and Advanced Engineering March 2013.
Several studies have highlight the adverse impact of the complex and non-transparent (read corrupt) system of approvals on real estate projects. The studies carry various recommendations. And yet neither the Centre nor the States have enacted laws to make the authorities and other elusive stakeholders accountable for the delays. 
Without addressing the core problems bedeviling the real estate sector, the Centre is banking on dissemination of reforms ideas to the States. This approach would not deliver satisfactory results.  
Through another letter dated 11th March 2015, MUD has listed a few more reforms including a suggestion for ULBs to merge ‘completion certificate’ with ‘occupancy certificate.’  This suggestion has been mooted earlier too.
MUD’s latest letters would meet the same fate as faced by the earlier advisories given by the Centre to the States over the years. It is here pertinent to recall Model Municipal Law and Model Building Bye-laws for ULBs that MUD issued several years back. 
How many ULBs have adopted these governance models in toto? How many have embraced them partly? How many have shunned reforms? Information on this count is unavailable in public domain. 
In 2013, Central Public Works Department (CPWD) compiled the list of no-objection certificate that should be secured from different government entities as a prelude to obtaining mandatory approval from ULBs in only four metropolitan cities. It would prepare such list for other cities in future. CPWD also thus does not have a complete picture of regulatory mess across the length and breadth of the country.
Leave aside limited availability of ULBs’ approvals data, the Centre and States are sometimes not able to coordinate in grant of fresh or extension approvals.
A case in point is DLF’s plea for extension of the validity of environmental clearance dated 18th June 2008 for incomplete Cyber city IT SEZ at Hyderabad by another five year.  While the company has completed and commissioned the Information Technology Complex, it has not developed retailing shopping and service apartment block. 
DLF Commercial Developers Limited says it applied to State Environment Assessment Committee (SEAC) for extension before expiry of EC. SEAC, however, considered the application on 28th June 2013, i.e., a few days after expiry of EC.
SEAC advised DLF to approach Union Ministry of Environment and Forest (MOEF) for extension. The Company accordingly submitted its plea to MOEF on 8th January 2014. The Ministry rejected the application on 29th October 2014 as EC’s validity had already expired. 
Like DLF, certain other developers in other States last year approached MOEF for extension of terms of reference or EC for their respective projects as SEAC had not been constituted. 
RERDB does not provide for any mechanism to avoid or manage such procedural hassles. 
Similarly, the Bill has also not specified any code of conduct for NGOs who inflict enormous time and cost overruns on projects through complaints and through the instrument of public interest litigation. 
A notable case in point is the uncertain future of 30,000 newly built flats in Noida due to NGO-judicial activism. About two years have passed since the judicial restraint on construction within 10 kilotmetre radius of Okhla bird sanctuary was imposed. The restrain was subject to pending clarity on notification of eco-sensitive zone (ESZ) around the sanctuary and wildlife clearance to the apartments. 
The Centre and the States have worked at leisurely pace to end this legal logjam by drafting regulations for declaration of smaller ESZ. The gazette notification on ESZ around the sanctuary has not yet been issued. 
RERDB should provide for mechanism for sharing cost overruns between different stakeholders including banks in such cases. The Bill should in fact specify mechanism for handling all policy and judicial factors that impact realty projects in varied ways.
The Centre, States and ULBs should take a joint call on all-inclusive real estate reforms to provide houses, jobs and smart habitats for all. 
Published by taxindiaonline.com on 19th April 2015
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