By Vibishnavi P., Tamil Nadu Dr. Ambedkar Law University.
The word “real” has been derived from the old French word “reel”, which means actual. The term ‘estate’ has been derived from the Middle English word ‘estat’, which means property. Altogether, it means actual property or real property. The term real property has been in use since 1666. The term can be defined in a narrow sense as property, including land building, any natural resources etc,. However, in a wider sense, it might be tedious to define it. The term ‘regulation’ has been derived from the Latin word ‘regulare’, which means control by rule.
As Mitnick stated, there is no certain definition of the term ‘regulation’. Some scholars define it as an agency which was administered and established by the government to implement policy for public welfare, by imposing penalty or sanction. There are three main theories of regulation. They are: public interest theory which was first developed by Arthur Cecil and focuses on regulation for the public welfare; private interest theory, otherwise called as regulatory capture theory, which mainly focuses on how the established agency corrupts by private interest; and the institutional theory which elaborates on the deeper and more resilient aspects of social structures.
REAL ESTATE SECTOR LACKS REGULATION
Issues within the real estate sector can be traced back to the period of British rule in India. However, some recent ones may be worth mentioning here. In August 14, 2015, Indian Express had reported that ‘Brahmin only township Developer’ had been arrested for fraud. In this case, the developer had sold the same plot to more than one buyer. He received around Rs. 12 lakh as EMI for every month, which he used for buying buses, trucks and land . He was then arrested by the police for committing fraud by cheating his customers.
In ‘Just The Lord (JTL) Project Private Limited’, people who invested during the period of 2006-08 did not get their apartments as assured by JTL. Later, the investors were informed that they had been cheated on. Another real estate fraud was committed by Kochi based company, ‘Apple-a-day’ which swallowed 100 crores from the buyers.There are several other such frauds that can be added to the list, such as emaar properties scam, cooperative group housing scam, Karnataka Wakf board land scam, Noida land scam, Adarsh Housing Society Scam.
Recently, due to heavy rains in Chennai, the common folks faced many problems. The reasons for the ensuing inconvenience even in this case can be traced to encroachment and the main reason behind this was increased unregulated real estate. This incidence functioned as a wake up call for the stakeholders to the necessity of regulation of the real estate sector in India, which is vital in the present scenario, otherwise folks will be subject to exploitation, especially in the economic perspective.
Regulatory Law will intend to instill a sense of obligation of adherence in the minds of the people, by way of compulsory licenses and establishment of a regulatory agency for each and every activity of the sector. Further, they intend to minimize the rate of offences committed by sectors against public welfare, and lay down certain principles for the sectors to function in an orderly manner. In order to overcome all such issues, a regulatory agency is the need of the hour.
ROLE OF REGULATORY AGENCY TO ROOT OUT FRAUDS
The main motive of the regulatory agency is to work for public welfare and to ensure transparency as well as to create accountability on the part of agents and sectors. India lacks a regulatory law in this sector. The Real estate ( regulation and development) bill 2013 was proposed under 7th schedule entry 6,7,46. However, it has not been materialised into a law yet.The bill aims to regulate the real estate sector and to protect the customers by bringing in transparency. It brings under its purview the entire sector , imposes punishment, compels registration, escrow fund etc. Highlights of the Bill include:
- Establishment of real estate regulatory agency,appellate tribunal and central advisory council.
- Speedy resolutions.
- Elaborate definitions to important terms such as apartments, advertisement, prospectus etc.., in order to prevent ambiguity.
- Stringent punishments for the violators, imprisonment for the term which extends to three years or with fine or with both for non-compliance of order.
- Compulsory registration with a view to root out money laundering, failure to make registration leads to penalty which may extend to 10% of the estimated cost fixed by the authority for the project.
- Power to cancel the registration vests with the authority if they failed to comply with the rules and regulations.
- 70% of the amount collected for the purpose of real estate project from the buyers should be deposited and maintained in a separate account
- If the builders failed to hand over to the buyers within a time frame, they would have to return the money with interest as prescribed to the customers.
- It provides mandatory disclosure such as details of promoters, architect, agent, layout plan etc.
As aforementioned, it is high time that the regulatory law is enacted. Apart from this, the Government should take initiatives such as creating awareness among the folks and conducting classes for both the intermediaries and investors, to get rid of any problem. It is imperative that customers should know their rights, since food, clothing and shelter are the basic needs of a man. A few crooked ones use this as an advantage to cheat them by way of false real estate offers. NGOs can also step forward to create awareness among the people who really need it. The author believes that most of the instances of fraud could be eliminated at the time of registration itself. This can be done if the government makes it mandatory to show the real governmental value of the land to the persons who are going to buy it, because people may be misguided by the real estate agent about the price.
A Czech proverb says, “when you go to buy use your eyes, not your ears”. Thomas Fuller also said, “buyer want a hundred eyes, sellers none.” Another legal maxim says, “let the buyer beware” (caveat emptor). All these maxims and proverbs stress on vigilance on the part of buyers, as they alone should be aware. The author believes, it is the duty of the government to ensure the interest of buyers and protect the buyers by quoting James B.Ramsey, “Government should see that the Economic game is played vigorously and according to the rules. But the referee cannot also play, for who will then referee the referee?” It is hence the duty of the government to educate the buyers in this respect and protect them from all ill-activities played on the basis of lack of such Regulations.