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The Indian Real Estate sector is considered to be the most corrupt sector. This sector was largely unregulated and opaque, with consumers often unable to procure complete information or enforce accountability against Developers in absence of effective regulation. This sector has also emerged as a source of black money and corruption over the past years. 

The Union Cabinet on Tuesday, 4th June, 2013 cleared the much awaited Real Estate (Regulation and Development) Bill which aims at organising and monitoring the Realty Sector in India. Once enacted, it is claimed to protect the buyers from scheming developers and shepherd transparency in the Realty Sector which had been unregulated till now.

The Government will bring the Real Estate (Regulation and Development) Bill in the next session of Parliament. The Municipalities and the Development Authorities shall have to pass the map on the basis of carpet area and this would be a mandatory requirement and any other criteria apart from that like the super built-up area or the built-up area and others would not be recognized.

In other words, it provides for a clear definition of 'carpet area' and would prohibit private developers from selling houses or flats on the basis of the ambiguous 'super area' which are deceptively and dishonestly loaded to any extent.

It also has provisions under which all relevant clearances for Real Estate Projects would have to be submitted to the Regulator and also displayed on a website before starting the construction.

Many in the Realty Sector have opposed the Bill in its current form. It has proposed stringent penalties and even a jail term for a maximum of three years for Developers convicted of malpractice. In the making for about five years, the Bill seeks to make it mandatory for Developers to launch projects only after acquiring all the statutory clearances from the relevant authorities.

Within a year of the Act coming into place, Real Estate Regulatory Authorities will have to be constituted by the Government of each State and Union Territory. More than one authority in a state is permissible. At the central level, a Real Estate Appellate Tribunal has been proposed.

There are provisions to deter the Developers from issuing misleading advertisements on projects to cheat the gullible and innocent buyers. A first-time breach would attract a penalty which could be up to 10 per cent of the Project Cost. A repeat offence could land the Developer in jail for up to three years.

It also aims to make it mandatory for a Developer to set aside half the money collected from buyers to a separate Bank Account for every project and to ensure money raised for a particular task is not diverted.

Developers think that in its zeal to put curbs on a small section of Developers, the Government is punishing the whole Real Estate Industry. If Real Estate Industry does not prosper, how can customers benefit. If construction stops, it will make housing further costly and how will it be made affordable.

The bill incorporates “Punitive Measures” which include de-registration of the project and penalties in case of contravention or breach of the provisions of the bill. The proposed Real Estate Regulator, or a Real Estate Appellate Tribunal, will be empowered to impose such punitive measures in case a Developer defaults on any of the deliverables promised by them while selling a residential unit or a project.

The Developer shall be made more accountable for default to disclose project details such as layout, plan of development works, carpet area, the number of apartments booked and the status of the statutory approvals received by them. The Developer will have to disclose names and addresses of Real Estate Agents, Contractors, Architects, and Structural Engineers to bring greater transparency to all realty projects and maintain absolute clarity in buyers’ interests.

A major constituent of the Real Estate (Regulation and Development) Bill is to create a mechanism that will ensure speedy ruling of disputes through adjudicating officers who will be appointed by the Real Estate Authority. This will ensure that property buyers can quickly seek justice in case Developers try to cheat them or deny those services they had promised earlier while selling a real estate project.

The Real Estate (Regulation and Development) Bill also mandates that 70% of the sales from a project be committed only to the completion of that project and the money is not diverted to other projects as many Developers do. The sell proceeds will be deposited in a separate account to be maintained in a Scheduled Bank within a period of 15 days of its realisation.

The said Bill shall ensure that Real Estate Agents are banned from selling housing projects that are not registered with the Real Estate Authority. They will now be obligated to maintain and preserve Books of Accounts, Records and Documents and will also have to give an undertaking that they will not be involved in any unfair practice. They will also have an obligation to facilitate the possession of documents to allottees as entitled at the time of booking and to comply with such other functions as specified.


1. Developers can launch projects only after getting all relevant clearances.

2. Developers cannot offer any pre-launch sales without the regulatory approvals.

3. Authorities have 15 days to approve or reject a project.

4. Construction to begin only after the Developer's website has displayed all details of the project including receipt of clearances.

5. The buyers are entitled to full refund with interest in case of delay in projects.

6. Realty Developers will have to maintain a separate bank account for every project to ensure funds raised for one project is not diverted.

7. It will be mandatory to keep 70% of the buyers’ funds in a separate Bank Account to ensure timely completion of relevant projects.

8. Developers cannot take more than 10% of the advance from buyers without a written agreement.

9. Developers will have to use photographs of actual site for advertisements purpose. Failure to do so will attract a penalty which may be up to 10 percent of the project cost.

10. Repeated felony from wrongdoers may land in jail.

11. To repeal MOFA 1963, from the appointed day (Sec.56).


1. The said Bill makes it mandatory to declare the time frame of the project. However, it does not insist to declare a particular time frame; the freedom rests with the Developer who has to adhere to it throughout the construction process till it is completed.

2. The said Bill does not insist that the conveyance must be done within a stipulated period once the Society is formed but like many other rules, this time-frame is mostly neglected and then misused. The proposed Bill should reaffirm or establish a new time-frame within which the conveyance must be done by the developer.

3. The said Bill does not ensure that only one agreement is made for the entire transaction along with amenities etc.

4. The said Bill expects every Developer to declare the carpet area of the flat but does not specifically restrict them from adding up other areas into it. The developer has already charged a high rate for those extra amenities and common facilities. Therefore, charging for them in the form of additional area should be stopped on an all India level.  

5. The said Bill is only focusing on the housing aspect. They are ignoring the fact that many people are buying commercial properties. There is no reference to commercial segment in the said bill.

6. The said Bill is silent over the mode of payment. While making payments, the buyer pays part of the payment in cash and part of the payment in cheque. It is advantageous to both the parties in the sense that the seller shows less income while filing for Income Tax and the buyer pays a lesser amount as Stamp Duty which entails a loss to the Government. This practice is responsible for the generation of black money in the economy.

7. Developers often escape through loopholes in the Sale Agreements. There is no provision of any specific Draft of Sale Agreement in the said Bill unlike MOFA, 1963 in which, a Draft of Sale Agreement was given with a precise provision of initiating a criminal proceeding under Indian Penal Code for cheating, breach of trust and unfair trade practice.