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Proposed Real Estate Bill may tighten screws on developers

Shishir Sinha & Moumita Bakshi Chatterjee, New Delhi, The Hindu Business Line

November 02, 2011


Selling a project without registering it with the proposed Real Estate Authority can soon land a developer behind bars, if it involves “criminal intent”. Also, the erring builder may be asked to cough up a heavy penalty.

These provisions are part of the draft Real Estate (Regulation and Development) Bill 2011. The Ministry of Housing and Urban Poverty Alleviation plans to seek public comments on the draft in 8-10 days. The new version has been prepared after extensive consultation with stakeholders and incorporates many changes since the first draft in mid-2009.

“Our effort is to table this Bill during the Winter Session of Parliament and get it passed by the Monsoon Session,” a senior Government official said.

So, one can expect enactment of the law from the second half of next year. The proposed Bill aims to cover only property transactions, and all the States are expected to adhere to its provisions.


The official said there were plans to set up a Real Estate Authority in each State. Also, there will be a dispute settlement mechanism to amicably resolve differences between buyers and builders.

This was not part of the original draft, which had only talked about suo motu action by the proposed regulator, a source said. The original provisions pertaining to submission of bank guarantee (by builders) have also been changed, the source added.

The Bill proposes that a builder or developer will first have to register with the authority. This will allow the developer to upload information on the authority's Web site. One condition could be that a developer may have to make certain documents available to intending purchasers for inspection.

These could include the title deed and approval certificate from the competent authorities. But, to collect any advance payment (over and above the basic application fee), developers will need to first enter into registered sales deed, after which they may have to produce more documents, such as information about architects and engineers.


The authority's decision can be challenged in the Appellate Tribunal, which is proposed to be set up at the central level. The Tribunal's order can be challenged in the Supreme Court.

For contravention of rules, developers may be asked to pay up to 5 per cent of the total project cost. But, if the Tribunal's order is not followed, the penalty could go up to 10 per cent of the project cost.

When contacted, Mr Pradeep Jain, Chairman, Confederation of Real Estate Developers' Association of India, said the Bill's focus was mainly on regulating developers.

“It does not talk of regulating other stakeholders, such as consumers, financial institutions and local sanction authorities. If, as a builder, I develop a project but the local authority delays the occupancy certificate, why should I be held liable for the delay?” he said.