How and Why should we Regulate Real Estate in India?

Let's first start with the "Why". 

Today, anyone can become a builder and/or a real estate agent, and/or a property manager. Now, why is that a bad thing? Well, if everyone who chose to become a builder or agent, chose to operate ethically, there would be no problem. But, as we know, that rarely happens. If you have been lucky enough to not have been duped by someone in the profession, I am sure you would have heard of a friend who has.   
What's worse, is that nothing stops these unethical professionals, after having duped your friend, to continue operating! That is where a License and/or a Registration comes into play, which an individual/company is required to have by law, and which can be revoked, for the violation of the rules and regulations set by the Regulatory Authority. 

And it's not just a question of the professionals behaving unfairly. Recently, me and my husband were considering investing in a plot in Hennur in North Bangalore. It came at an attractive price, and we were close to sealing the deal with the current owner, when we happened to stumble on the fact, that the government had issued them a notice to acquire the land! Note that today there is no public database, where the status and legal validity of real estate projects can be checked.  

Now, coming to the "How". Let's see how the real estate market is regulated in developed countries:

United States: 
In the United States, every agent and broker is required to have a State issued License that gives them  the legal ability to represent a home seller or buyer in the process of buying or selling real estate in the United States. A broker represents one side - either the buyer or seller. In fact, representing both is called "undisclosed dual agency", which is unethical and illegal in all states. Now, compare this with India, where "dual agency" is most common, and most brokers will not work with others to close a deal, with the impact that deals become harder to close, as information is not freely shared. 
Rental properties in the US, are handled by property managers. In fact, if an owner is collecting rent directly from the tenant, many states require the owner to have a business license. Property managers are responsible for keeping owners and tenants satisfied with the condition of the property that they own and/or rent. The manager works for the owner but also responds to the needs of the tenant. Property managers are also required to have a state issued License. 
Real Estate developers in the US, on the other hand, do not need a License. 

England:
Surprisingly, until 4 years ago there was no Licensing scheme for Realtors in England.  It was introduced by the NAEA (National Association of Estate Agents) in November 2010.  However, England has several associations besides the NAEA. For example, companies which manage rented residential property are often members of the Association of Residential Letting Agents. Companies or individual landlords who accept tenancy deposits for "assured shorthold tenancies" (the usual form of residential tenancy) are required by statute to be members of a Tenancy Deposit Scheme.Companies which manage apartment buildings are often members of the Association of Residential Managing Agents (ARMA). There are also several educational institutions that accredit Real Estate professionals in England. For example, land agents will need to be accredited by the Royal Institute of Chartered Surveyors, which means they will have been examined by the terms of this institute. There is also a qualification produced by The Association of Residential Lettings Agents called the Technical Award in Residential Lettings and Property Management (TARLPM). 

Australia: 
Australia mandates all their agents to be licensed. In fact, the law requires agents must conduct mandatory identification checks of all people wishing to sell their property. This aims to protect the property owners following fraudulent sales of properties.

Canada: 
In Canada, Real estate agents must be licensed to begin working. Licensing is handled at the provincial level. Agents must have completed secondary school, complete a real estate training course and become licensed by their provincial government. Moreover, to use the designation of “realtor,” an agent must become a member of their local real estate board and of the Canadian Real Estate Association. 

Coming back to India, in 2013, there was in fact a Regulatory Bill passed, which proposed the following:

• To set up three real estate bodies in India – a Central Advisory Council (CRC) and a Real Estate Regulatory Authority (RERA) and a Real Estate Appellate Tribunal (REAT) for every state or union territory.

• The core objective of this Bill are twofold - to ensure sale of immovable properties in an efficient and transparent manner and to protect the interest of consumers in the real estate sector.
  
• RERA is responsible for publishing on the website a list of all the registered real estate projects with sufficient details about each of them.  RERA maintains a similar database of Real Estate Agents as well which includes registered agents as well as the defaulters.
  
• The function of CAC is to recommend the Central Government on implementation of the act, towards protection of consumer interest, to foster growth and development of Real Estate Sector among others.
  
• Provisions restricting launch of projects or advertisements unless all approvals are received.
  
• Mandatory  for the promoters to deposit 70% of the funds of the construction cost of the project in a separate bank account.
  
• Registration of real estate project and real estate agent . 
  
• Prohibition on taking more than ten percent as advance from the buyers without a written agreement. 
  
• Civil and criminal liability for the contravention of various provisions of the Bill
  

This Bill has been approved by the Union Cabinet on June 4, 2013, but has yet to take effect. 

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