The final details for a new law to regulate the real estate industry in India and establish a new regulator are being drawn up with a bill expected before parliament in November.
The ambitious real estate regulation bill, aimed at facilitating growth and promoting a transparent, efficient and competitive real estate market in the country, is expected to introduce a system of rating for builders and developers.
A government spokesman said it is hoped it will help the beleaguered sector regain the confidence of financial institutions and potential customers. ‘A rating system will bring customer focus and help in building a brand image. The rating of a project or developer builds confidence by ensuring that a reasonable quality product is delivered in a specified time and within the specified price range,’ said Kumari Selja, housing and urban poverty alleviation minister.
It is likely that the ratings will be based on a developer’s financial strength in terms of turnover, liquidity and profitability, scale of operations, intellectual expertise based on the qualification and experience of the management team, and past performance. The final ratings arrived at then would be updated on the website of the regulator.
Once the real estate watchdog is in operation a developer would need to provide the title to the land on which the project is constructed and take necessary measures prior to the start of construction or marketing of the project to ensure that sums of moneys collected are utilised correctly.
Developers will be obliged to register. If ratings fall below a specified benchmark, the developer will be issued a notice and if the response is found to be unsatisfactory, the registration can be revoked.
Real estate brokers will be required to obtain a licence and it is hoped that this may help curb speculative buying that was one of the major causes of the downturn in the Indian property market.
Selja said the law could be passed by late November or December. The housing ministry is also looking to set up a high powered committee to examine the possibilities of creating micro-finance institutions to provide loans to developers and end buyers.