From UPSC perspective, the following things are important :
Prelims level : Details of the bill
Mains level : Nothing much
Supreme Court upheld the validity of the Insolvency and Bankruptcy Code (Second Amendment) Act which empowered harassed home buyers to initiate bankruptcy proceedings against errant real estate builders.
- Many real estate builders have been under fire for incomplete projects leaving home buyers in dire straits.
- The Act had brought the home buyers on par with the creditor banks of the property builder.
- Before the Amendment Act of 2018 came into existence, the assets of the bankrupt builder were divided among his employees, creditor banks and other operational creditors. Home buyers had hardly figured.
- The builders argue that home buyers were already armed with the Real Estate (Regulation and Development) Act (RERA).
- SC reasoned that IBC and the RERA operate in different spheres and can be used harmoniously.
- IBC deals with the replacement of the bankrupt builder and lead to a resolution plan. The RERA’s purpose is to protect individual home buyers by requiring the promoter to strictly adhere to the purchase deal and complete the project within a stated period.
- As home buyers were a large, amorphous group, their presence in the CoC would be a nuisance. But, home buyers finance from 50% to even 100% of a housing project. Their absence from the CoC and denying them a voice on future plans would be “manifestly arbitrary.”
Mains Paper 3: Economy | Mobilization of resources
From UPSC perspective, the following things are important:
Prelims level: Enemy Property
Mains level: Alternative measures adopted by the government to increase revenues
- The Centre has allowed state governments to put to “public use” some enemy properties that were left behind by people who migrated to Pakistan since the Partition and to China after the 1962 Sino-Indian war.
- The move comes amid the central government’s efforts to sell more than 9,400 enemy properties, worth over Rs 1 trillion, and Rs 3,000 crore worth of enemy shares.
- As per the Enemy Property Act, 1968, ‘enemy property’ refers to any property that was belonging to a person who migrated from India to an enemy country when a war broke out.
- After the war with China and Pakistan in 1962 and 1965, the government took over the properties, under the Defence of India Act, from persons who migrated to these countries.
- The confiscated property included both movable and immovable properties such as securities, jewellery, land, and buildings.
- Later in 1968, a law called the Enemy Property Act was enacted to regulate such properties and entrusted with the Custodian of Enemy Property (CEPI).
Why in news?
- The guidelines for disposal of the Enemy Property Order, 2018, have been amended to facilitate “usages of enemy property by the state government exclusively for public use.
- Of the total properties left behind by those who took Pakistani citizenship, 4,991 are located in Uttar Pradesh, the highest in the country. West Bengal has 2,735 such estates and Delhi 487.
- The highest number of properties left by Chinese nationals is in Meghalaya (57) .West Bengal has 29 such properties and Assam seven.
Total Estimates of Property
- There are 9,280 such properties left behind by Pakistani nationals and 126 by Chinese nationals.
- A total 6,50,75,877 shares in 996 companies of 20,323 shareholders are under the custody of the Custodian of Enemy Property for India.
- Of these companies, 588 are functional or active companies, 139 of these are listed and the remaining is unlisted.
Mains Paper 2: Governance | Government policies and interventions for development in various sectors and issues arising out of their design and implementation.
From UPSC perspectives, the following things are important
Prelims Level: Particulars of the RERA
Mains Level: The issues related to bad implementation of RERA rules in different states.
- It is a year since the Real Estate (Regulation and Development) Act, 2016 (RERA) came into effect (May 1)
- A year after the real estate legislation came into effect, the follow-up in many States has been dismal
- There is still a long way to go before the real estate sector operates in an “efficient and transparent manner and protect the interest of consumers”
Implementation of the Act: Issues
Dilution of the RERA rules
- Only 20 of the 28 States (the Act is not applicable in Jammu and Kashmir) have framed the rules stipulated under RERA to carry out its legal mandate
- In some States such as Uttar Pradesh, the Act’s provisions have been watered down in favour of builders by altering the definition of “on-going projects” which need registration under RERA
- There is also a dilution on the penalties for non-compliance
The speedy dispute redress mechanism envisaged by the Act is yet to take shape
- Apart from Maharashtra, only Punjab and Madhya Pradesh have appointed a permanent regulatory authority (to be established within a period of a year)
- To ease the transition, RERA allows State governments to designate an existing body as the regulatory authority until a permanent one is established
- This has resulted in 13 States working with only a designated regulatory authority. West Bengal is yet to even designate a regulatory authority
- Additionally, only six States have set up the online portal contemplated by the Act
- In the Northeastern States, RERA has been challenged on certain constitutional grounds — of land belonging to the community and autonomous councils
Conflict between the IBC and the RERA
- One of the most notable provisions of the RERA is the requirement to keep 70% of funds received for a project in a separate escrow account
(a step to prevent a diversion of funds which usually happens and in turn results in project delays)
- Perhaps because of this stipulation and the overall ill-health of the real estate sector, many developers are now facing insolvency proceedings under the new Insolvency and Bankruptcy Code (IBC)
- There appears to be a potential conflict developing between the IBC and RERA which needs to be checked as it would be against consumer interests
Government is taking the cognizance of the issue
- Recently, the Central government notified June 30 as the date by which all States have to do away with dilutions and bring in all incomplete projects within the ambit of RERA
- This date is also the deadline by when permanent regulators have to be formed and for the websites of all States to become functional
- One hopes that in due course, developers will recognise that they can no longer operate with impunity by arbitrarily escalating costs of construction or missing timelines without being held responsible
Mains Paper 3: Economy | Infrastructure: Energy, Ports, Roads, Airports, Railways etc.
From UPSC perspective, the following things are important:
Prelims level: Securities and Exchange Board of India, REITs, InvITs
Mains level: Various initiatives taken for reviving infrastructure growth in India
REITs and InvITs regulations amended
- The Securities and Exchange Board of India (Sebi) has amended REITs and InvITs regulations to facilitate the growth of such trusts
- This has been done in order to make real estate investment trusts (REITs) and infrastructure investment trusts (InvITs) more attractive
- Both trusts will have to provide a mechanism for resolution of disputes with their shareholders and partners in the holding firm
- InvIT will have to file the final placement memorandum with Sebi within 10 working days from date of listing of the units issued therein
Real estate investment trusts (REITs)
- Real Estate Investment Trusts or REITs are mutual funds like institutions that enable investments in the real estate sector
- This is done by pooling small sums of money from a multitude of individual investors for directly investing in real estate properties so as to return a portion of the income (after deducting expenditures) to unitholders of REITs, who pooled in the money
- A REIT in India is allowed to invest mainly in completed and revenue generating assets and other approved investments
- REIT will have to distribute the majority of its income among the unit holders
- REITs are set up as a trust under the provisions of the Indian Trusts Act, 1882
- Like a mutual fund, it has three parties – Trustee, Sponsor(s) and Manager – to avoid any conflict of interest issues
- REITs are regulated by the securities market regulator in India- Securities and Exchange Board of India (SEBI)
Mains Paper 3: Economy | Effects of liberalization on the economy, changes in industrial policy and their effects on industrial growth
From UPSC perspective, the following things are important:
Prelims level: Particulars of the RERA, PMAY, etc.
Mains level: Newscard briefly discusses some important reforms done by the government in the Real Estate Sector
Significance of the Real Estate (Regulation and Development) Act 2016 (RERA)
- The act brought unprecedented levels of transparency into real estate projects
- RERA promises to minimize delays in projects, weed out unscrupulous developers, and provide homebuyers with detailed information on the specifications and the progress of the projects they invest in
- The Real Estate sector also got benefited due to simultaneous implementation of the RERA and the GST
Other government’s efforts for encouraging Real Estate Sector
- The sector will also benefit from the amendments that were made late in 2016 to the Benami Transactions Prohibition Act
- This, coupled with the central government’s stated intent to make Aadhaar linkage compulsory for all property transactions, will help in curbing malpractices and stopping the inflow of black money into real estate
- The recapitalization of banks will also rejuvenate the banking sector and give a boost to lending(for the sector)
Positove Consequences of these reforms
- These reforms will bring transparency and accountability in the sector
- Developers need to be sufficiently funded to achieve RERA compliance
- Small or cash-starved developers will probably have no choice but to partner with larger, established players to survive
- Moreover, unscrupulous developers—big or small—will have no place to hide in the transparent environment that RERA will usher into the industry
- The real estate sector will be institutionalized, and probably have fewer—but larger and more reliable—developers in the years to come
Pradhan Mantri Awas Yojana (urban) (PMAY)
- The PMAY were amended to encouraged married or single people to invest in property
- The government is trying to attract both middle-income and low-income groups to this segment
- In September, the central government extended, under PMAY, the benefit of interest subsidy on home loans for households in the middle-income group
- This scheme was originally scheduled to end in December, but has now been extended till March 2019
New policies by the government
- The Union budget for 2017–18 granted infrastructure status to the affordable housing segment
- More recently, the ministry of housing and urban affairs introduced as many as eight public-private-partnership options to encourage private investments in affordable housing projects
- These new policies, if implemented well, could give a much-needed boost to this segment and make it a powerful growth driver for the real estate sector
The way forward
- A boom in affordable housing and the resulting construction and allied jobs can help make a significant dent in the malaise of joblessness
- It can also have a multiplier effect on the national gross domestic product, and boost the demand for different categories of products and services
- India’s real estate is transitioning to a new era after what has been a rather eventful year
Mains Paper 2: Polity | Structure, organization & functioning of the Executive & the Judiciary
From UPSC perspective, the following things are important:
Prelims level: RERA, Government of India (Allocation of Business) Rules 1961, Real Estate (Regulation and Development) Act, 2016, Street Vendors Act, 2014, Government e-Marketplace
Mains level: Changes being brought in by government to ease governance processes
- The matters related to the administration of the RERA for regulation of the real estate sector and to protect the interest of consumers will be dealt by the Housing and Urban Affairs Ministry
- The central government has amended the Government of India (Allocation of Business) Rules 1961, in this regard
Real Estate (Regulation and Development) Act, 2016
- It mandates the establishment of the Real Estate Regulatory Authority (RERA)
- The RERA is for regulation and promotion of the real estate sector
- It will ensure sale of plot, apartment or building in an efficient and transparent manner and protect the interest of consumers in the real estate sector
- The law also has provisions for the establishment of an adjudicating mechanism for speedy dispute redressal related to the real estate sector
Other responsibilities given to ministry
- The administration of the Street Vendors (Protection of Livelihood and Regulation of Street Vending) Act, 2014, will also be done by the same ministry
- The Act is to protect the rights of urban street vendors and to regulate street vending activities
- The development, operation and maintenance of the National Public Procurement Portal Government e-Marketplace has been brought under the commerce ministry
- The government had last year launched an e-market platform for public procurement of goods and services
- The online platform followed the Centre’s decision to close the Directorate General of Supplies and Disposals (DGS&D), the procurement arm of the Centre
- Aim: To secure the interests of home buyers and expunge corruption and inefficiency from the sector
- Provisions: It’s mandatory for residential and commercial projects to come under the purview of a real estate regulator
- The builders would be responsible for fixing structural defects for 5 years after transferring the property to a buyer
- It is mandatory for every developer to deposit at least 70% of money secured from clients in an independent “third-party” bank account
- It has powers to monitor financial transactions and settle property disputes
- Context: Budget allows full pass-through for real estate investment trusts (REITs) and infrastructure investment trusts
- How? By removing the dividend distribution tax (DDT) at the special purpose vehicle (SPV) level under a business trust
- For banks: There are possibilities in the use of REIT structure to help state-owned banks not only add to tier-1 capital, but also raise cash
- A bank REIT would be a very sought-after product in view of the quality of both assets and a well-regulated bank
- The Union Cabinet recently gave its approval to the Real Estate (Regulation and Development) Bill, 2015.
- The Bill aims to protect the interest of consumers, promote fair play in real estate transactions and ensure timely execution of projects.
- It regulates both commercial and residential real estate projects.
- It seeks to set up Real Estate Regulatory Authority in states and union territories to oversee real estate transactions.
- It makes registration of real estate projects and real estate agents with the authority mandatory.
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
- 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
- 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
- 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
- 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
Published with inputs from Pushpendra
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.
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.
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.
Published with inputs from Arun