Demonetization of high currency notes on 8th November 2016 night has left all issues in a shadow. The common people of this country have welcomed it accepting the inconveniences which will be there for a few days. There are some who have tried to point out the likely loopholes making it not as effective as it is made out to be. We know the caste of these people. What stands out is that demonetization is one of the peaks standing out among the many ground level widespread actions by the government. In this hullaballoo, two key measure made into law on 1st November 2016 have not even been noticed. They are the restrictions on Benami Transactions and the Real Estate Regulation Act the RERA. Both are linked to each other.
The Real Estate Business is the last bastion of black money. It was necessary to close loopholes in the war against black money. RERA has been in the offing and under due discussions for over at least 8 months which included the builder community prominently. As an aside we should see that from the day 1 this government has relied on discussions and consensus. Such behavior does not get you an equally and correspondingly courteous response but that is another aside. Let us go in the details of both these notifications.
The important provision under the Benami in real estate is that if I buy a property someone else whose identity has not been disclosed could pay for me earlier. Now this will not be possible. Today one’s identity is one’s PAN Card and Income Tax returns. In the digitization process, it has become not just tractable but there will be automatic or quick pop out ones the limits of search in a domain determined. Even if one’s brother or spouse or friend puts the money for me the source of it and its legitimacy has to be established. The obvious implications of this need not be detailed except to say that a seven-year imprisonment is also been provided in the matter. The shoe will pinch where it should.
The new provisions are essentially simple and testify my lifelong thesis that the problems are always gigantic but the solutions are always simple. If a builder delays handing over the property or if the buyer delays payments, both are liable to pay a 12% interest to each other. This has been fixed 2% above the marginal costs of the SBI bonds. In the digitization idea builders beyond a particular size must register on the website, describe the state of approvals - how many have been applied for and how many have been given from civic authorities which are imperative. Every quarter they have to update these details. No one knows generally knows about these approvals. If a builder has announced certain features in an advertisement he has to make them available in the structure. Since the real estate has come to be considered on large an investment, the gullible often pay the initial by looking at the advertisements or even the brand ambassadors. Often they may not even go to the site and check whether anything exists or not while booking or paying.
Once a property is for sale all its features especially the built up area and the carpet area must be clearly mentioned. Earlier a lot of it was loaded on common area leading the super-built-up era which has now gone. Once money collection over a property begins 70% of the money has to be put into a separate bank account for that property and spent only for it. By taking money from one set of buyers and putting it in another project and interminably delay delivery was a common practice which hopefully will stop.
Litigations over disputed properties have been a cause of misery. The lesser delays were in the consumer courts averaging 3 to 4 years. Now all these digital registrations et el mentioned above will come under the eye of a regulator which the states have to nominate before April 2017. This is a model law and is applicable to the central government and the Union territories. The states, therefore, can simply adapt it or adopt it and make it functional. If a buyer lodges a complaint the Regulator will have to take action in 60 days.
Both the residential as well as the commercial constructions have come under these regulations. Importantly, the regulations have retrospective effect in the sense that any construction before 1st November 2016, if is still unfinished will become liable to face all these provisions.
Earlier, the real estate enterprise as Ms. Jayashree, on the channel Economy Today, described was like the Wild West in the middle of 19th century. It was characterized by the Gold Prospectors and those who occupied lands and governed them by their might. It was a lawless country. In real estate possibly by a tacit understanding between them and the then governments lacked regulations. Builders could cheat, delay, not deliver what they promised and so on. The greed of the investors / buyers also compounded the scenario. A few simple regulations have reigned in much of the wildness of this area.
With these regulations kicking in it will lead to transparency. No industry can move well and equitably unless it is transparent. It is not difficult to imagine how much resistance the builder lobby must have provided and with what power. It must, however, be acknowledged that the government through the dialogue process has carried the builder community with it to apply these regulations.
Aside the regulations per se, what stands out is the stepwise approach. Each step adds to the process of not just curbing irregularities but leads to a cumulative effect. Each process is set up having the common man at the centre of the measures taken.
No one can deny that. All this has now culminated in the small big bang of demonetization. The simultaneity of the Income Tax Department raids leaves no doubt that this government means what it has said.
The New Delhi air pollution may have remained unsolved but the demonetization and RERA like actions give a sensation of breathing much fresher air.