Challenges, opportunities & criticism of the Real Estate Regulatory Bill 2016

The Real Estate Regulatory Bill, 2016 is being hailed as a much-needed step to reform the real estate sector. It will help regulate the sector and bring in clarity for both buyers and developers.

What was the need for regulation in the real estate?

• The real estate sector has some issues such as a lengthy process for project approvals, lack of clear land titles, and prevalence of black money
• There wasn’t complete transparency as far as govt approvals were concerned
• There were also instances when projects were sold without adequate clearances
• The delayed projects, sometimes by up to 6 years and arbitrary changes in layout plans are rampant in the sector

How does the Bill seeks to regulate the sector?

The basic thrust of this Bill is to regulate the delivery of projects to home buyers. It provides them a legal safeguard for their investment, and seeks to address timely delivery of houses. It seeks to enforce the contract between the developer and buyer and act as a fast track mechanism to settle disputes

• It establishes state level regulatory authorities called Real Estate Regulatory Authorities (RERA)
• The Bill establishes state level tribunals called Real Estate Appellate Tribunals.  Decisions of RERAs can be appealed in these tribunals
• It makes mandatory the disclosure of all information for registered projects like details of promoters, layout plan, land status, schedule of execution and status of various approvals
• The Bill prohibits a developer from changing the plan in a project unless two-thirds of the allottees have agreed for such a change
• It says that builders must specify the time-frame for completion of projects and stick to it, or be ready to pay penalties
• The Bill mandates that 70% of the amount collected from buyers of a project be used only for construction of that project < This provision will effectively allow developers to continue their practice of diverting funds collected for a project towards land acquisition or other projects, and will work in their favour by also allowing them to grow their land and/or project portfolio>

How will the Real Estate Regulatory Authorities help improve the sector?

• Residential real estate projects need to be registered with RERAs, except few
• Promoters cannot book or offer these projects for sale without registering them
• Real estate agents dealing in these projects also need to register with RERAs
• On registration, the promoter need to provide details of the project to the RERA

Challenges ahead

• The Bill will make life difficult for builders, as they would face more red-tapeism now, especially in procuring relevant approvals.
• This Bill does not address the developers demand of a single-window clearance from the govt
• The implementation of the Bill is up to the states, it leaves builders with greater chances of being harassed

Impact

• Timely completion of projects would lead to a steady increase in supply of homes
• It is expected that these measures will eventually bring down home prices and increase demand
• It will be good for the overall economy too, as the housing sector has strong backward (cement, steel and other building material industries) and forward (furniture and furnishings, interior decoration, electrical and electronics) linkages with other industries
• More number of job creation in the economy

Criticism

• The builder lobbies argued that the bill should have a time-frame for municipal and other authorities to give timely approvals, because the delay in approvals lead to delays in handing over possession of apartments
• In terms of pricing, which is governed by circle rates, it will be difficult to monitor

Future

• The states’ support for faster clearances to projects will be required to make this Bill successful
• Govt is also trying to bring in a National Urban Rental Housing Policy, which would take into account the requirements of tenancy hassles in modern days

 

Sagarmala Project: Smart ports for Blue Revolution in India

The Union Cabinet chaired by the Prime Minister Modi, on March,2015 gave its ‘in-principle’ approval for the concept and institutional framework of Sagarmala Project. Let’s take a glance on it.

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What’s the prime objective of Sagarmala?

The prime objective of the Sagarmala project is to promote port-led direct and indirect development and to provide infrastructure to transport goods to and from ports quickly, efficiently and cost-effectively.

What’s the current issue and background of ports in India?

• At present there are around 200 ports (small and big) in the country, of these, only 12 are major ports which are government owned ports, which handle about 58% of sea-borne traffic.
• These major ports operate as Trusts under the Major Ports Trust Act, 1963, except for the Port of Ennore, which is a company under the Companies Act.
• There are legacy issues with these govt owned major ports, they do not keep pace with emerging technology, requirements of international trade, emerging trends in containerisation, flexible rules, size of ships etc.

Which are the 12 Major Ports ?

These are Kolkata (including Dock Complex at Haldia), Visakhapatnam, Chennai, V.O. Chidambaranar (Tuticorin), Cochin, New Mangalore, Mormugao, Jawaharlal Nehru Port Trust (JNPT), Mumbai, Kandla and Ennore.

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Just, Look back into the history?

In 2003, then PM Vajpayee proposed Project Sagarmala with following features:

• Setup Sagarmala Development Authority (Similar to National highway authority of India).
• It will get money via Maritime development cess. (5 paise per kg on cargo).
• It will improve ports, shipping industry, inland water transport, coastal shipping.
• PPP and FDI to gather more investment.

Then, which are the Key pillars to achieve Smart-development ?

• Supporting and enabling Port-led Development through appropriate policy and institutional interventions.
• Providing for an institutional framework for ensuring inter-agency and states’ collaboration for integrated development.
• Port Infrastructure Enhancement, including modernization and setting up of new ports.
• Efficient Evacuation to and from hinterland.

What are some of the measures to make Smart Ports?

• Ports should be registered as Companies under Companies Act.
• The port administration should only look after the provisions of infrastructure and safety and not day-to-day running of the port
• There is still no regulation to control the trade practices.
• Hence, there is a dire need to introduce a regulatory architecture that takes care of ex-ante declaration of rates of services.

Then, what’s the plan to implement such a vast initiative?

• For a comprehensive and integrated planning for “Sagarmala”, a National Perspective Plan (NPP) for the entire coastline shall be prepared within six months.
• It will identify potential geographical regions to be called Coastal Economic Zones (CEZ).
• While preparing the NPP, synergy and integration with planned Industrial Corridors, Dedicated Freight Corridors, National Highway Development Programme, Industrial Clusters and SEZs would be ensured.

What are the suggestions for effective mechanism at state level?

• Set up State Sagarmala Committee to be headed by CM / Minister in Charge of Ports.
• Sagarmala Coordination and Steering Committee (SCSC) shall be constituted under the chairmanship of the Cabinet Secretary and others.
• This Committee will provide coordination between ministries, state governments and agencies connected with implementation and review the progress of implementation of the National Perspective Plan.

How does it ensure the sustainable development in CEZ?

• This would be done by synergising and coordinating with State Governments and line Ministries of Central Government through their existing programmes.
• Such as those related to community and rural development, tribal development and employment generation, fisheries, skill development, tourism promotion etc.
• In order to provide funding for such projects and activities that may be covered by departmental schemes a separate fund by the name ‘Community Development Fund’ would be created.

What’s the role of Institutional Framework ?

• It has to provide for a coordinating role for the Central Government.
• It should provide a platform for central, state governments and local authorities to work in tandem and coordination under the established principles of cooperative federalism.

What’s the role of NSAC?

A National Sagarmala Apex Committee (NSAC) is envisaged for overall policy guidance and high level coordination, and to review various aspects of planning and implementation of the plan and projects.

So, Is it Good to have smart ports on the line of Smart Cities?

Can you answer some questions?

#1. Can you examine the bottlenecks in Indian port infrastructure and list the initiative taken in recent times to address this issue?

#Q.2 Indian port infrastructure can be revamped by Sagarmala project by effective management? critically comment.

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Published with inputs from Arun

National Waterways Bill 2015: Time to take to Water

 

The approval of the National Waterways Bill, 2015, by both Houses of Parliament clears the decks for increasing the use of India’s extensive network of rivers, canals and other water stretches for transport. Let’s see this in brief.

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Under bill, 106 additional inland waterways will be added to the list of national waterways, taking the number to 111

Under Entry 24 of the Union List of the Seventh Schedule of the Constitution, the central govt can make laws on shipping and navigation on inland waterways which are classified as national waterways by Parliament by law

Let’s see background of Inland Waterway Transport

<Why Govt has cleared decks for National waterways?>

• Inland Water Transport is considered as the most cost effective and economical mode of transport from the point of view of fuel efficiency
• One horse power can carry 4000 Kg load in water whereas, it can carry 150 Kg and 500 Kg by road and rail respectively
• Further in a study as highlighted by the World Bank, 1 litre of fuel can move 105 ton-Km by inland water transport, whereas the same amount of fuel can move only 85 ton-Km by rail and 24 ton-Km by road
• Studies have shown that emission from container vessels range from 32-36 gCO2 per ton-Km while those of road transport vehicles (heavy duty vehicles) range from 51-91gCO2 per ton-km.(Environment friendly)
• Many countries in Europe and elsewhere carry over 40% of their passenger and freight traffic through water. But in India this proportion is only 3.5 per cent
• Inland water transport’s share in the country’s total transport sector is less than 0.4%
• This is partly because of the inability to shift cargo between modes of transport without disruption

Let’s learn about five existing and one proposed waterway

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1. Allahabad-Haldia Stretch of the Ganga Bhagirathi-Hooghly River
2. Sadiya-Dhubri Stretch of Brahmaputra River
3. Kollam-Kottapuram Stretch of West Coast Canal and Champakara and Udyogmandal Canals
4. Kakinada-Puducherry Stretch of Canals and the Kaluvelly Tank
   Bhadrachalam-Rajahmundry Stretch of River Godavari and Wazirabad-Vijayawada Stretch of River Krishna
5. Talcher-Dhamra Stretch of Rivers, Geonkhali-Charbatia Stretch of East Coast Canal, Charbatia-Dhamra Stretch of Matai River and Mahanadi Delta Rivers
6. This is a proposed national waterway b/w Lakhipur and bhanga of the Barak river

What are the Benefits of inland waterways?

• Recognised as fuel efficient, cost effective and environment friendly mode of transport, especially for bulk goods, hazardous goods and over dimensional cargos
• Reduces time, cost of transportation of goods and cargos, as well as congestion and accidents on highways
• Immense potential for domestic cargo transportation as well as for cruise, tourism and passenger traffic.
• Systematic development will open up progressive economic and transport opportunities in the country
• Open up considerable investment and business opportunities in the areas like water-based tourism, construction and operation of terminals, creation of storage accommodation, and provision of other facilities required for smooth water-based navigation
• Help to generate millions of new jobs

Are there any limitations/ problems to implement this national waterway project?
If any, How to solve those limitations?

• India’s water channels will need to have adequate width, depth and air clearance. Many rivers are seasonal, with water flows declining sharply after the monsoon
• Navigating such rivers in the lean season may, therefore, require regular and extensive dredging and desilting
• Higher water salinity, especially in the coastal regions and estuaries, and constant inflow of silt in the rivers can also be problematic
• Water highways will require more river ports with their support infrastructure – road and rail connections, warehouses and other services
• Heavy investment will be needed also to procure equipment, including dredgers, shipping vessels and barges of different sizes

What are the sources of funding and finances?

• Financial approval of the competent authority for each waterway would be taken based on outcome of techno-economic feasibility studies, that are being undertaken by the Inland Waterways Authority of India (IWAI)
• IWAI will develop the feasible stretch of National Waterways for shipping and navigation purpose through mobilization of financial resources
• Govt will explore multiple sources of finance, including market borrowings and tapping the National Clean Energy Fund (NCEF) and the Central Roads Fund  (CRF)

<The National Clean Energy Fund (NCEF) is a fund created in 2010-11 using the carbon tax – clean energy cess – for funding research and innovative projects in clean energy technologies of public sector or private sector entities, upto the extent of 40% of the total project cost. The Fund is designed as a non lapsable fund under Public Accounts>

<Central Road Fund (CRF) is a non-lapsable fund created under Section 6 of the Central Road Fund Act, 2000 out of a cess/tax imposed by Union Govt on consumption of Petrol and High Speed Diesel to develop and maintain National Highways, State roads (particularly those of economic importance and which provides inter-state connectivity), rural roads, railway under/over bridges etc.> 

To know what is cess, how it is different from tax and surcharge, click here

1. Private participation in infrastructure is needed – but will be possible only if such ventures become economically viable. For this, they will require adequate and assured 2-way traffic
2. But the traffic in bulk goods, such as coal, minerals, food grain, fertiliser and similar other commodities is often unidirectional, compelling the vessels to return empty or under-loaded. This aspect will need to be weighed and addressed
   

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   Published with inputs from Arun