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Indian regulatory authority seen as hope to boost investor confidence

July 29, 2015

[Indian developer] The Indian real estate market has been experiencing a slowdown and a growing stockpile of inventory with some experts predicting a further correction in prices to enable inventory liquidation. Property prices have fallen by as much as 25% in the past year in prime locations, such as New Delhi, while other markets have seen decreases ranging from 5% to 20%. Small cities and large, a common concern is the lack of buyers. 
One reason identified is the lack of confidence in developers to deliver on their promises and subsequent long delays and change of building specifications. The creation of the Real Estate Regulatory Authority, which should be in place in a few years, is among the reforms supported by the Modi government to address the problem. It will provide a forum for buyers to register grievances against developers. It will also address the issue of black money in the sector. 
In April, the Cabinet approved the Real Estate Development and Regulation Bill along with certain key amendments that will make way for setting up of a regulator for the sector. The Bill and a uniform regulatory mechanism across the country is aimed at protecting property buyers' interests by bringing much-needed transparency and accountability to the sector.
In the making since 2009, the revised Bill mandates developers deposit 50% of the money collected from the buyers in a project within 15 days into a separate bank account for use for construction of that project. In addition, developers will be prohibited from changing structural designs without the consent of two-third of the buyers in the project. Violation of the rules will result in penalties, which could include imprisonment.
Both residential and commercial developers will be required to register their projects with the regulatory authority and disclose all related information, including the promoters, project, layout plan, schedule of development, land status, statutory approvals, etc. According to experts, developers will not be able to launch new projects without prior permissions. In addition, they will be unable to divert funds from one project to another, the main reason for delays in the projects.
Industry professionals hope the Bill will bring buyers back into the market who have been hesitant to buy. "The proposed Real Estate Regulatory Bill will increase transparency, best trade practices and consumer protection," says Farook Mahmmod, immediate past chair of ICREA and chairman of the NAR-India 2015 Convention to be held in Bengaluru next month. "We at NAR-India look forward to its implementation."