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Finally, the Real Estate Bill gets passed

At long last, after more than a decade long wait, the Real Estate Bill has been passed by Parliament

For all our talk of regulations in mutual funds, banking, insurance and other financial products, the Real Estate Bill is more important than all of them, simply because a house is the most cherished dream as well as the most expensive purchase for most Indians. As far as direct impact on people's lives goes, this is the single biggest reform of the Narendra Modi government. Indeed, had it not been for the criminal obstruction of parliament's functioning by the opposition, this would have happened even earlier.

The Real Estate Bill has been a long time coming. How long? Read this, the beginning of an article I wrote three years ago in January 2013:

Last week, there were a number of news items in various media that celebrated the fact that regulatory reforms were at last coming to the real estate sector. Readers would have learnt from these stories that the government was planning to bring in the Real Estate Regulation Bill to parliament during the budget session. This is great news. It was also great news when the government had expressed its intention of bringing this bill to parliament during the winter session of 2011. And in the winter session of 2009. And that of 2008. And also of 2006. That was about six years ago, by the way. If I had more patience in my digging into Google search results, then it may actually turn out that this Bill would soon qualify to be stored in the National Archives.

While we'll bring you a detailed analysis a little later, but here are some of the highlights:

  • The law enables the establishment of a Real Estate Regulatory Authority in each state. All projects larger than 500 sq m or with more than 8 flats will have to register under rigidly prescribed guidelines that enforce a high degree of transparency.
  • It prohibits vague terms like super area, and carefully defines a standard for carpet area, which will be the only permitted measurement system.
  • It forces developers to keep at least 70 per cent of the money collected for a project in a designated bank account. This prevents diversion of funds to other projects.
  • It lays down strict penalties for delay, including the eventual takeover of a project from the developer.

It's still some time before the new machinery gets going, but at least the obstruction in the parliament has been overcome.