The Real Estate (Regulation and Development) Bill, 2015, which intends to protect home buyers, bring in transparency and plug the flow of unaccounted money into the sector, was passed by Rajya Sabha. The Bill provides that 70 per cent of sale proceeds will have to be kept aside by the developer in an escrow account and it can be utilised for land cost and construction of the related project.

An escrow is a financial instrument held by a third party on behalf of the other two parties in a transaction.

It, therefore, provides greater certainty to buyers that the money they pay to the developer will be utilised for development of the project where they have bought houses.

The Bill will help establish state-level real estate regulatory authorities and appellate tribunals to regulate transactions relating to both residential and commercial projects and ensure their timely completion and handover. It calls for disposal of complaints at both appellate tribunals and regulatory authorities within 60 days, thereby setting a timeline for resolution of disputes.

Compared to the previous version of the Bill, in which constructions below the size of 1,000 square metres or 12 apartments were left out of the accountability ambit, the new Bill has reduced the size and exempts projects only below 500 square meters.

The bill states the builder has to return the payment with interest to buyers who are affected by such “incorrect, fast statement contained in the notice, advertisement or prospectus or the model apartment, plot or building as the case may be”. The authority can even order “compensation” to consumers in case of misleading advertisements.