India set to revamp housing rules

India Dispatch: Plans to set up a new regulatory framework for India's housing market would benefit Indian expats looking to buy property at home, as transparency improves and "fly-by-night" developers are weeded out of the market

Indian expatriates peruse property brochures. India's implementation of new regulations should protect homebuyers' interests. Ravindranath K / The National

Plans to set up a new regulatory framework for India's housing market would benefit Indian expatriates looking to buy property at home, as transparency improves and "fly by night" developers are weeded out of the market, according to industry experts.

The cabinet approved the Real Estate (Regulation and Development) Bill 2013 last week, paving the way for regulators to set up across the states as well as in a central authority, protecting homebuyers' interests through measures including rules to prevent misleading adverts and providing a platform for dispute resolution.

"This will boost more confidence within Indian expats," said Sunil Jaiswal, the chief executive of Sumansa Exhibitions, the organisers of the Indian Property Show.

"It's good news for property buyers. They can look forward to more transparent regulation, understand the status of the projects, check documents to be as per the guideline of the regulator, see availability while they consider the property."

The bill, which only applies to residential property, still has to be approved by parliament, and supporters hope this will go through at the monsoon session this year. India's property market is largely unregulated, so people often find the information they are provided with limited, inconsistent and misleading.

The bill seeks to eliminate this by seeking compulsory registration of projects, making developers keep a percentage of customer funds in escrow accounts, enforcing strict guidelines on how properties are measured and issuing fines to developers for project delays. Repeated offenders could also receive jail time. "As and when the bill gets enacted, it will look to provide considerable relief to the ordinary buyer and investor who goes through innumerable obstacles when buying a property and at times is duped by even small developers, builders and brokers," said Anuj Puri, the country head and chairman of Jones Lang LaSalle India.

Mr Jaiswal said: "At the moment the country has no regulator and all projects are approved at state level except for pollution and environment, which is approved at central government. With the new regulation. developers are required to meet all requirements, put up all approvals, furnish information to the regulator on sales proceeds and available inventory. More transparency will be available to the buyer from the regulator's website."

VK Sharma, the managing director and chief executive of LIC Housing Finance, an Indian home loans company, which provides up to 500 loans in Dubai each year, said the regulations would help clean up the market.

"These fly-by-night operators, it will difficult for them," said Mr Sharma. "Those who enter in this industry will have to be serious and they will have to invest their money. It will benefit the buyers.

"One of the biggest constraints in this sector has been the lack of standardisation, an absence of a pan-India regulator."

The move to introduce the regulatory framework comes at a time when Indian expats in the UAE are looking to take advantage of the weak rupee, which fell to a record low against the US dollar yesterday. Mr Sharma said the company experienced growth of 20 per cent in Dubai in the first quarter of this year.

"There is an improvement in the economy there and it's attracting more and more workers," he said. "Because of the differential rate, the value of the money in the hands of expatriate workers in Indian rupee terms is more, so they have more disposable income."

Developers have expressed some concerns about facing new hurdles and more complex, time-consuming processes because of the policy. But analysts point out that developers will eventually benefit too.

The "bill will improve buyer confidence and boost demand for residential real estate", according to analysts at Crisil Research.

"The bill will incorporate mandatory disclosure clauses, which would provide greater clarity on the project standards and timelines for completion.

"For developers, while this bill implies stricter regulatory control, it will also translate into better demand, as buyer confidence improves."