Properties in India

The proposal comes even as the government has also talked about a watchdog.

“The lack of a regulatory authority is affecting the real estate sector,” Singh said. “We want self-regulation and not a government controlled regulatory body.”

As per the Council’s proposal, though the body will operate under the ministries of urban development and housing and urban poverty alleviation, it will be an autonomous body, which will set guidelines for developers and also prescribe punitive action.

“The authority should be set up under legislation. It will lay down rules for developers and if there are any violations, there should be punitive action,” Singh said.

Under the proposal, the Council suggested that a central real estate regulatory authority should be set up for the National Capital Region and this authority would, in turn, provide guidelines for state, district and urban real estate regulatory authorities.

Real estate in India is largely an unorganized sector. While there are reputed developers, the sector also has many fly-by-night operators whose practices range from unauthorized construction to building unsafe structures, or failing to complete projects on time.

“An independent regulator with a clear mandate to ensure fair competition and protection of the interest of consumer, investor and the developer is needed,” Singh said.

At the same time, the Centre is also working on setting up a watchdog for Delhi’s real-estate sector, which will make developers accountable to buyers. The urban development ministry is preparing a draft bill for Delhi. The Centre also wants all states to have their own real-estate regulators, as land is a state subject.

M. Ramachandran, secretary, ministry of urban development, says that self-regulation may not be effective in bringing transparency and accountability to the industry.

“The demand for a regulatory authority has come up because of certain practices in the industry,” he said. “If there was self-regulation in the industry, then there would have been no need for the government to set up a regulatory authority.”

Small developers, however, say they oppose a government-controlled regulatory body. In a government controlled regulatory authority, there is a danger of bureaucracy and red-tapism creeping in, said Raj Kaushik, chief financial officer, Vipul Ltd. “Dealing with bureaucracy is a headache,” he said.

“A self-regulatory body will be better as it will consist of my own people (developers) who can better understand the problems of developers.”

Recently, real estate agents across India came together to form a national association, the National Association of Realtors India, to self-regulate the unorganized sector of real estate agents. The association aims to protect consumers from rogue agents.

Large and established developers, who form 20% of the industry, have no issues with a government controlled body, said Kaushik Sengupta, vice president, sales and marketing, Eros Group. “But, the unorganized real estate sector is opposed to regulation, as most small developers do not follow international best practices.”

If a regulatory authority is set up, developers will have to comply with rules and regulations such as building earthquake resistant and environment-friendly buildings.

“Complying with rules will cost developers money. Small developers do not want to incur that additional expenditure,” Sengupta said.