The Cabinet has cleared a law to set up a real estate regulator to protect home buyers. This is welcome, though long overdue. Unfair practices include issuing advertisements to launch projects without securing prior approval of competent authorities and building in hidden costs over and above the fixed price. Most often, builders also don't specify the date of delivery. Nor do they have a transparent way to deal with price escalation. The Real Estate Regulation and Development Bill will curb such practices. However, commercial real estate projects should also come under the purview of the legislation.

Builders of residential projects will have to get their projects registered with the regulator – to be set up in every state – before sale and only after obtaining all the approvals. But why place the onus entirely on the builder, given that projects are delayed due to rent-seeking in the issuance of permits and clearances? State agencies, responsible for clearances, must be held to account for undue delays. They must be brought under the proposed law. Developers would have to make a public disclosure of all project details – credentials of promoters, layout plan, status of statutory approvals, land status – and also clearly define carpet area. Such transparency is in order. Making developers deposit 70% of funds received for a particular project in its own bank account will check fund diversion. Compulsory registration of real estate agents and stringent penalties will reduce fraud. And an appellate tribunal will ensure faster resolution of disputes.

India needs to build more cities to house people migrating from rural areas. For housing stock to increase, state governments must rewrite land use rules to facilitate release of farm land and bring down prices. The floor space index, or FSI – the ratio between built-up area and plot size – in cities should be scrapped, and replaced with norms as to the width of adjoining road and provision of amenities including parking to increase urban built-up space. Height should be guided by flight safety. Acquiring a home must become easier.

Source - Economics Times June 06th 2013 issue