Only three weeks after his two-month sabbatical ended, the newly invigorated Rahul Gandhi seems to have hit upon another issue with great political resonance: the woes of the middle-class urban home buyer. Rahul Gandhi is agitating to oppose changes to the real estate bill which, he says, favour the builder over the buyer.
“I learned something new today,” Gandhi told home buyers in Delhi on Saturday, accusing the ruling Bharatiya Janata Party of amending the real estate bill to benefit builders. "I thought only farmers and tribal people are suffering due to land issues. But the same issue extends to the middle class as well, which is equally being exploited by removing a transparency clause" from the real estate bill.
Indeed, the issue seems ripe to be taken up given the incredible mess that India’s real-estate sector is in, dominated by big money and political interference. Here’s a short guide to help the controversy.
Which bill is Rahul Gandhi talking about?
It’s called the Real Estate (Regulation and Development) Bill and was introduced by the United Progressive Alliance in the Rajya Sabha on August 14, 2013. The bill is yet to be voted on.
What does it do?
The bill aims to monitor real-estate projects by creating regulatory bodies in each state. These bodies will then aim to ensure that builders stick to certain standardised rules when dealing with customers. Some of the rules in the original bill were:
* Real estate projects need to be registered with the regulator without which builders can’t put their property on sale.
* Builders must disclose essential details about the projects to the regulator: layout plan, schedule for completion and area. Greater transparency would help the buyer, given that misleading ads and conditions are a growing problem in an industry.
* A certain proportion of the amount collected from buyers must be set aside in a separate bank account and only be used for construction costs. The United Progressive Alliance bill had set the proportion to 70%, with a clause that allowed state governments to reduce it should they so want. This prevents builders from taking money for one project and using it to finance another project.
Why was this bill needed?
Real estate is a major channel for people to invest their money in. In fact, it is easily the biggest sink for black money in the country. Since this is unaccounted for cash, obviously official figures are hard to come by but there are other proxy indicators whch point to fishy happenings. For example, India has an unusually low property tax to GDP ratio: 0.5% as compared to 1.2% for the BRICS and 1.9% for the G20.
Maybe, as a result of this factor, the real-estate market was completely unregulated. Much smaller investment channels, such as stocks or insurance were more controlled by the government than high value property. In fact, as writer Vivek Kaul points out, opening a savings accounts requires more paper work and documentation than buying real estate worth crores, which can be purchased without almost any oversight, as long as it’s a cash transaction.
This is ideal, if you’ve got some black money lying around the house, of course, but hurts the middle-class salaried individual, who has to deal with an unregulated industry, out to trip him up.
If this bill is so great, why is Rahul protesting?
The Bharatiya Janata Party made some amendments to the bill once it come to power in the Centre. These changes, the Congress claims, favour the builder at the expense of the buyer.
The Congress is looking to make this into a political issue by agitating to have those amendments removed and the bill returned back to its original form.
What do these amendments include?
Congress leader Ajay Maken laid out some of the problematic amendments to the bill on his blog:
* The threshold of 70% of buyer money, which was to have been set aside in a separate bank account and only be used for construction costs, has been reduced to 50%.
* The earlier bill had a clear definition of “carpet area” contained within it. The new BJP bill refers the definition of “carpet area” to the definition of “rentable area” as used by the National Building Code. This Code, however, can be amended by the government without running it though parliament, thus allowing for quick changes later on which, presumably, would be anti-buyer.
* Earlier, builders couldn’t change the plan once it was approved by the regulator. Now they can make “minor altercations”.
* The new bill provides an escape clause for delayed projects which will not penalise delays due to “issues with completion certificate, approvals etc”. “This can be easily misused by the builder to delay and litigate,” says Ajay Maken.
Why did the Bharatiya Janata Party make these changes?
Other than boilerplate answers ("protects everyone’s interests"), the BJP is yet to put out a proper justification for these changes.
It was clear that the real-estate industry did not like this bill and the regulation it sought to provide. By disallowing ambitious terms like “super area” (the bill has a pre-defined “carpet area” instead”), making it mandatory for sales to proceed only after all clearances have been obtained and mandating penalties and punishments if builders fails to comply with certain stipulations, the bill sought to readdress, to some extent, the lopsided balance of power in the builder-buyer relationship.
These amendments would give the real-estate industry some reason to cheer.
India’s real estate industry, more than any other, is seen to be working hand in glove with politicians. This politician-builder nexus means that governments almost always end up favouring the developer. And even though the Congress seems to be creating a fair bit of noise now, it must be remembered that it didn’t actually do anything in its 10 years in power other than introducing a bill right towards the fag end of its tenure, an obvious election sop.
What next?
The legal status of this bill is up for grabs in the near future and it remains to be seen what the fate of those amendments will be. As a political topic of agitation, however, this will strike a chord with many middle-class urban Indians for whom buying a house is the biggest and toughest thing they’ll ever do. This Khosla ka Ghosla segment is the one Rahul Gandhi has his eyes on with this political play.
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“I learned something new today,” Gandhi told home buyers in Delhi on Saturday, accusing the ruling Bharatiya Janata Party of amending the real estate bill to benefit builders. "I thought only farmers and tribal people are suffering due to land issues. But the same issue extends to the middle class as well, which is equally being exploited by removing a transparency clause" from the real estate bill.
Indeed, the issue seems ripe to be taken up given the incredible mess that India’s real-estate sector is in, dominated by big money and political interference. Here’s a short guide to help the controversy.
Which bill is Rahul Gandhi talking about?
It’s called the Real Estate (Regulation and Development) Bill and was introduced by the United Progressive Alliance in the Rajya Sabha on August 14, 2013. The bill is yet to be voted on.
What does it do?
The bill aims to monitor real-estate projects by creating regulatory bodies in each state. These bodies will then aim to ensure that builders stick to certain standardised rules when dealing with customers. Some of the rules in the original bill were:
* Real estate projects need to be registered with the regulator without which builders can’t put their property on sale.
* Builders must disclose essential details about the projects to the regulator: layout plan, schedule for completion and area. Greater transparency would help the buyer, given that misleading ads and conditions are a growing problem in an industry.
* A certain proportion of the amount collected from buyers must be set aside in a separate bank account and only be used for construction costs. The United Progressive Alliance bill had set the proportion to 70%, with a clause that allowed state governments to reduce it should they so want. This prevents builders from taking money for one project and using it to finance another project.
Why was this bill needed?
Real estate is a major channel for people to invest their money in. In fact, it is easily the biggest sink for black money in the country. Since this is unaccounted for cash, obviously official figures are hard to come by but there are other proxy indicators whch point to fishy happenings. For example, India has an unusually low property tax to GDP ratio: 0.5% as compared to 1.2% for the BRICS and 1.9% for the G20.
Maybe, as a result of this factor, the real-estate market was completely unregulated. Much smaller investment channels, such as stocks or insurance were more controlled by the government than high value property. In fact, as writer Vivek Kaul points out, opening a savings accounts requires more paper work and documentation than buying real estate worth crores, which can be purchased without almost any oversight, as long as it’s a cash transaction.
This is ideal, if you’ve got some black money lying around the house, of course, but hurts the middle-class salaried individual, who has to deal with an unregulated industry, out to trip him up.
If this bill is so great, why is Rahul protesting?
The Bharatiya Janata Party made some amendments to the bill once it come to power in the Centre. These changes, the Congress claims, favour the builder at the expense of the buyer.
The Congress is looking to make this into a political issue by agitating to have those amendments removed and the bill returned back to its original form.
What do these amendments include?
Congress leader Ajay Maken laid out some of the problematic amendments to the bill on his blog:
* The threshold of 70% of buyer money, which was to have been set aside in a separate bank account and only be used for construction costs, has been reduced to 50%.
* The earlier bill had a clear definition of “carpet area” contained within it. The new BJP bill refers the definition of “carpet area” to the definition of “rentable area” as used by the National Building Code. This Code, however, can be amended by the government without running it though parliament, thus allowing for quick changes later on which, presumably, would be anti-buyer.
* Earlier, builders couldn’t change the plan once it was approved by the regulator. Now they can make “minor altercations”.
* The new bill provides an escape clause for delayed projects which will not penalise delays due to “issues with completion certificate, approvals etc”. “This can be easily misused by the builder to delay and litigate,” says Ajay Maken.
Why did the Bharatiya Janata Party make these changes?
Other than boilerplate answers ("protects everyone’s interests"), the BJP is yet to put out a proper justification for these changes.
It was clear that the real-estate industry did not like this bill and the regulation it sought to provide. By disallowing ambitious terms like “super area” (the bill has a pre-defined “carpet area” instead”), making it mandatory for sales to proceed only after all clearances have been obtained and mandating penalties and punishments if builders fails to comply with certain stipulations, the bill sought to readdress, to some extent, the lopsided balance of power in the builder-buyer relationship.
These amendments would give the real-estate industry some reason to cheer.
India’s real estate industry, more than any other, is seen to be working hand in glove with politicians. This politician-builder nexus means that governments almost always end up favouring the developer. And even though the Congress seems to be creating a fair bit of noise now, it must be remembered that it didn’t actually do anything in its 10 years in power other than introducing a bill right towards the fag end of its tenure, an obvious election sop.
What next?
The legal status of this bill is up for grabs in the near future and it remains to be seen what the fate of those amendments will be. As a political topic of agitation, however, this will strike a chord with many middle-class urban Indians for whom buying a house is the biggest and toughest thing they’ll ever do. This Khosla ka Ghosla segment is the one Rahul Gandhi has his eyes on with this political play.
