We would all love to have a beautiful experience while buying a home in India. Is it possible today? Not exactly. Personally, I have had a bitter experience in a real estate transaction in India, although that was many years ago. Even then I felt that if there were proper rules and regulations covering real estate transactions, I would not have suffered losses. I was also acutely aware of how far we lagged in this area compared to the US (where I live), where the real estate laws ensure consistency and fairness in transactions and serve as a model in many countries.
What strong regulations accomplish
1. Consistency and fairness in real estate transactions.
2. Ensure the competency of real estate professionals and protect individuals, as well as real estate and related financial markets, from unlawful, dishonest and abusive practices.
3. Promote healthy competition amongst the various parties involved in the transactions.
4. Provide foreign institutions a comfort factor for direct investment in that country or region where a regulator ecosystem exists.
Real estate regulations in India
The Real Estate (Regulation and Development) Bill, 2013, is currently pending in Parliament. It is aimed at achieving the following objectives:
1. Regulating transactions between buyers and promoters of residential real estate projects.
2. Establish state-level Real Estate Regulatory Authorities (RERAs).
3. Promoters are expected to register the projects with site & layout plan & schedule for completion. The decisions of the RERA can be appealed in the state level tribunals.
4. Promoters have to register each and every residential project with the Real Estate Regulatory Authority (RERA).
5. Promoters have to display project details, including completion date, on RERA's website.
6. Although the Bill stipulates that 70% of the amount collected from buyers for a particular project should be deposited in a separate bank account and be used for construction of that project only, there is a loophole for the state governments to reduce the percentage to below 70.
What we need to learn from the US
The current Bill is limited in its scope, in that it covers only transactions between developers and buyers, other than the establishment of state-level RERAs.
Since I am a licensed real estate agent from California, I am in a position to compare the above with the scenario in my state.
The public interest in regard to real estate in California is handled by the Bureau of Real Estate (BRE), which performs the following roles:
1. Protects the public interest.
2. Increases consumer awareness.
3. Helps the real estate industry in expanding its standards.
4. Increases the level of professional ethics and responsibility.
5. Establishes standards of knowledge, measured by a written examination, for licensing real estate agents.
6. Arranges for the advancement of real estate education and research.
7. Monitors mortgage brokers' loan activities to ensure broker compliance with the law.
8. Maintains a website with useful information and issues quarterly bulletins.
The Real Estate Commissioner (who is appointed by the Governor) is the CEO of BRE and in charge of the administration and enforcement of real estate law. The Commissioner is empowered by law to issue regulations. Known as the Regulations of the Real Estate Commissioner, these have the force and effect of law.
This framework serves as a model in many countries of the world, since California was the first state in the USA to enact Real Estate Law in 1917.
I can only hope that the Government of India will take a decision to take pointers from this model and broaden the scope of real estate regulations in India.
Readers are welcome to ask me questions or make comments and recommendations.