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Archive for the ‘Infrastructure’ Category


The Real Estate (Regulation and Development) Act, 2016, is an effort to improve customers’ confidence in the real estate sector. It is an initiative to protect customers’ interests, promote fair play in real estate transactions, and ensure timely execution of projects. Real estate transactions are often complex and involve legal formalities that buyers may not understand until too late. Most of the buyers do not know what a transparent agreement should contain and how to safeguard their interests as buyers.

But,The real estate Act will lead to transparency in the sector, because :

  1. Developers as well as real estate brokers will have to register themselves (The real estate Act states that projects of above 500 sq. meter be compulsorily registered with the real estate regulator once it is set up. This will bring a large proportion of projects under the purview of the regulation. But each state will have the flexibility to reduce the threshold as per regional requirements. So, a state can also bring in even smaller projects or those that have less than eight units, under the Act.),
  2. To register a project, a builder will have to disclose names of promoters, project layouts, plans of development works, land status, statutory approvals’ status, draft of builder buyer agreements, and names and addresses of real estate agents, contractors, architects and structural engineers, to the authority. Once a project gets registered, all this information will be readily available on the authority’s website, which should help buyers take more informed decisions. Plus, the information has to be regularly updated by the developer. A clear picture of number of units sold and construction status has to be available on the website. ,
  3. Will not be able to launch projects without proper approvals,
  4. Moreover, they will not be able to change plans without the consent of at least two-thirds of buyers,
  5. Builders will also have to deposit at least 70% of the sale proceeds in a separate account to meet construction cost of the particular project, compared with the earlier proposal for 50% or less.

The agreement with customers will also have to be more transparent than what it has been. It will have to include clauses such as:

  1. Advance money of not over 10% before entering into a sale agreement.
  2. Possession date, specifications of the property, construction schedule will be there in the agreement and compensation to be paid to buyers for default or delay, which should be the same as that charged to buyers for delayed payment from their side.
  3. Liability of builders for structural defects for five years (instead of the earlier two years) and clearly defined carpet area, which means customers must know precisely how much space they are going to get for the price paid.

The real estate sector is facing issues related to liquidity, huge debts, and delays in project completion. But ultimately, it is the customers that bear the brunt due to increased pricing.

It is hoped that the situation will change once the Act is implemented, and more investors are attracted to the sector, which will, in turn, improve customer confidence, and give the sector a much-needed growth impetus. It will also bring in more confidence among global investors, providing better access to structured capital, which is in short supply now.

The Act will have positive consequences for the sector in terms of transparency, accountability, and avenues for grievance redressal, which will mean lower litigation cost for buyers. It will also ensure that only serious players will remain in the sector leading to greater transparency in the sector.

There are multiple reasons for such delaysfunds being diverted by developers, lack of funding options, and slow sales. Implementation of the Act will bring project delays under control as funds will not be diverted, more funding avenues will be available for builders at a lesser cost, customer confidence will improve in the sector and home buying process will be easier to follow.

Challanges: 

  1. Many departments and processes have to be streamlined to make this part of the Act successful. Land records need to be updated. Parity between circle rate and market rate needs to be established. In some localities, there is a gap between these rates. Some consumer activists share the view.
  2. We cannot overlook the fact that a completion certificate that is issued by a government agency should necessarily be issued in a time-bound manner. So, a time frame should be fixed for government agencies to provide services. Otherwise, this can be used by the promoter as a plea for unnecessary delay.
  3. The Act has provisions for penalising developers in case of delays. But many developers say that the main cause of delay is slow approvals from government agencies. A single-window clearance is needed now, without which there may be cases where bona fide delays by developers may still result in an unfavourable penalty.
  4. Under the Act, if the registration is revoked by the regulatory authority, who will complete the construction? How will that be managed looking at such a vast number of projects?

Ultimately, it will be a win-win situation for developers as well as customers in the long term, which will restore much-needed trust, transparency, and growth. This will have a positive effect on the country’s economy as well.

The Act has been formulated. Now it has to be seen how soon states start implementing it.

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Security of land and property title through a guaranteed system of title certification has been one of India’s long-pending reforms, the absence of which has impeded economic growth, development, social justice and judicial efficiency.

What we have in India today is a system of “presumed ownership”. The notion that a “sale deed” is proof of ownership is misplaced. The registration of property at the stamps and registration department merely acknowledges that a transaction has taken place between two parties. It does not verify or guarantee that the seller is indeed the indisputable owner, nor that the buyer is now indisputably the new owner. It does not guarantee the existing nature of rights to the property, or that the property has no existing restrictions on rights, or that it has no existing mortgage or lien on it, no disputes or litigations in court. All that the current process of deed registration does is acknowledge that a transaction has taken place between two parties, and collect a fee for such acknowledgement. In similar fashion, khatha and “tax paid” documents are not indisputable verification of ownership.

Around the world, governments have developed different approaches to provide systems of guaranteed title to land and immovable property, many enshrining right to property with constitutional protection. Guaranteed title forms the bedrock upon which are built all land-related policies—acquisition, pooling, taxation, sub-division, inheritance, contracts, etc. Without guaranteed title, it is akin to constructing buildings with no foundation.

A central aspect of growth in any market-based economy is land economics, with three pillars of an efficient land management system:

  1. The formal recognition and record of ownership rights and extent of property;
  2. An efficient facilitation of guaranteed transactions on property; and
  3. A transparent, reliable land market valuation.

In India while all three pillars exist, they are individually weak and collectively dysfunctional.

Fallouts of Presumed ownership:

                                                            The negative consequences of India’s system of “presumed ownership” versus a system of “guaranteed title” are far-reaching, not only for owners of property but also for the country’s economic growth and development. In presumed ownership risk of fraud is entirely the buyer’s and there are no guarantees provided by the state. The rampant spiraling of unresolved disputes clogging the courts is a direct result of the lack of guaranteed title to property.The urban poor, with no access to expensive lawyers and no formal recognition of rights provided by the state, are in a state of constant vulnerability of eviction, with no ability to use their property to access capital, or civic services.

Development of any public infrastructure in the country is invariably delayed due to disputed ownership and boundaries, resulting in high project costs and failure in delivery of project objectives. Most municipal governments, whose primary source of revenue for the city is property taxes, are unable to undertake more than 50% collection on property taxes or development charges, predominantly due to poor records of property ownership.

Efforts towards title certification:

                                                            The ministry of urban development (MoUD) included title certification as a mandatory reform under the Congress-led Jawaharlal Nehru National Urban Renewal Mission, and undertook serious efforts to develop guidelines to help states with the reform. PLATINUM Guidelines (Partnership for Land Title Implementation in Urban Management), were released by MoUD in 2012—a comprehensive “how-to” manual to help states transition from a system of presumptive ownership, to a system of guaranteed title.

Three states embarked upon title in various forms: Maharashtra, Andhra Pradesh and Rajasthan. Of these, Rajasthan is the only one with a specific focus on title to urban land, recognizing the urgency of rapid urbanization. The government successfully passed an ordinance for guaranteed title in 2008. However, after Vasundhara Raje lost elections in 2008, Ashok Gehlot’s government allowed the ordinance to lapse.

Post her victory in the 2013 elections, Raje has stayed the course in pursuing guaranteed land title reform. 4 April marks one major milestone in the long journey of this complex reform.

With the successful passage of the Rajasthan Urban Land Certification of Titles, the state will identify select cities to pilot and streamline the system of ULCT before rolling it out across the state.

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  1. Committee highlighted the need to resolve the “legacy issues” in various sectors and recommended independent regulators in sectors that are going in for PPPs.
  2. Further, it has suggested a review committee (IPRC) for such projects to evaluate and send recommendations in a time-bound manner upon a reference being made of ‘actionable stress’ for a project beyond a notified threshold value.
  3. An Infrastructure PPP Adjudication Tribunal (IPAT) chaired by a Judicial Member (former Judge SC/chief justice HC) with a technical and financial member, where benches will be constituted by the chairperson as per needs of the matter in question.”
  4. The committee also favoured disallowing statutory audit into the books of special purpose vehicle formed under the companies act and recommended that public sector units be discouraged from participating in the PPP projects unless strategically essential as they negate the idea of involving the private sector in such projects
  5. Suggested the revival of a defunct proposal to establish 3P India to support PPP projects, which can function as a centre of excellence, enable research, and review and roll out activities to build capacity.
  6. Called for a rational allocation of risks among various stakeholders in a project, and moving away from the one-size-fits-all approach to PPP model concession agreements (MCAs).
  7. Recommended setting up independent regulators for PPP projects in various sectors and pushed for amendment to the Prevention of Corruption Act to clarify the difference between cases of graft and genuine errors in decision-making.
  8. Government should encourage development of airports, ports and railways through PPP, by ensuring easier funding for projects with long gestation periods.
  9. Recommended several measures for easy financing of these, including issuance of zero coupon bonds by banks to developers, equity divestment by the government from completed projects and removing bars on monetisation of viable projects after the engineering, procurement and construction (EPC) work is finished.

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