Real estate regulatory bill hits snag in India's legislative mill

On the face of it, there cannot be a better time for Indian expatriates here to consider property-related investments back home. The rupee has been plunging — and staying at these levels - in recent weeks, while Indian real estate has shed the hyper-inflated prices of three years ago. But all that is on the face of it. India's much touted legislation — the draft Real Estate (Regulation and Development) Bill 2011 — that would have protected the rights of investors in property has yet to materialise. The proposed legislation was expected to be taken up for discussion in recent sessions of parliament. But other issues, including that related to allowing foreign direct investment in India's retail sector, has distracted the attention from real estate issues. This year there have been instances when non-resident Indian (NRI) investors in property back home were duped by dishonest developers. When deliveries were made — some years after the promised deadline — the owners found they were getting homes that looked nothing like what they were shown in brochures. This is what the legislation was expected to correct — a chance for property investors to get their dues. Article continues below Oversight mechanism It would have established a regulatory oversight mechanism to enforce disclosure, fair practice and accountability norms and provide an adjudication machinery for "speedy" dispute resolution. The emphasis was very much on fast-tracking the cases. And when developers failed to deliver, there would be adequate compensation. The only thing that seems likely now is for prospective investors to continue to commit their funds on a hope and a prayer. Does it mean that the proposed bill is null and void as many sceptics have pointed out? Kapil Goyal, general manager for Mumbai-based Nirmal Lifestyle, would have none of that. His company is one of the key participants in the upcoming Indian Property Show scheduled for mid-December in Dubai. "It has not gone into limbo — in a democracy all legislative bills come to parliament for enactment for an appropriate consultative process. This is normally a time-consuming process. "The real estate bill also is no exception as it has gone various rounds in the consultative process with various segments including us. It is expected to become legislation in 2012." Then again, some of the problems that NRI investors have had could be self-generated. More often than not, as an investor class they are more likely to be in a hurry to commit payments to the developers for the purchase without even conducting proper due diligence on the developer. There is no separate legal platform available for NRIs when it comes to seeking recompense on real estate investments that have turned sour because of the actions of developers. But nascent moves are being made to set up a "separate authority" at the state level to offer special protection measures to investors, according to Ajit Jakhadi, an advocate practicing in the Mumbai High Court. "A developer should be obliged to provide bank guarantees at least to NRIs and people of Indian origin who intend to invest in property in India, considering that they are residents of another country and find it difficult to take on legal proceedings, if any, against the defaulting developers," Jakhadi added. While it is debatable whether this would ever come to pass, the Real Estate Bill 2011 would certainly have provided the assurances or at least the vestige of a safety net for investors. Checks and balances India's draft Real Estate Bill 2011 would look to create a regulatory authority to put in checks and balances in the sale, transfer and management of residential buildings, apartments and other properties. It would work to ensure compliance of the obligations imposed upon both developers and property buyers.