If real estate data proves that today's property scenario is a buyer's market, here's another bit of information in their favour. The real estate bill, which is now likely to be passed only in the winter session of parliament, seeks to crackdown on fly-by-night operators, penalise defaulting realtors and even recommends jail term of up to three years for repeat offenders.

It has also built in additional safeguards to regulate all kinds of transactions between home-buyers and builders and will regulate the entire process right from the stage of registrations of projects to the delivery of possession to the buyer.

The Real Estate (Regulation and Development) Bill had been referred by Rajya Sabha to a Select Committee on May 6 for its examination with instruction to submit its report by the last day of the first week of the next session of Parliament, which is the current monsoon session. It has gone through revisions and amendments after having been passed by the Cabinet.

According to a report in the Hindustan Times, the housing and urban poverty alleviation ministry has accepted all 38 recommendations made by the 21-member Rajya Sabha select committee which submitted its report on the real estate bill last week.

Key recommendations of the bill include barring realtors from diverting more than 50% of money collected from a buyer to other projects. State governments can make the provisions stricter and increase the 50% threshold but not lower it. This will put liquidity-starved builders in a bind. The builders are already struggling due to rising unsold inventory and dipping sales. The clause will make it difficult for developers to acquire additional land if their capital is locked up in a single project. In metros like Mumbai, New Delhi and Bangalore, cost of construction can be as low as 5-10% of the cost of acquisition of the land.

Protection from fly-by-night promoters: More often than not, promoters take bookings for apartments in the under-construction period even before the project is registered. However, once the bill is passed, promoters will not be able to sell flats without getting projects registered (this can only happen once approvals are in place) and also not accept more than 10 percent of the cost of the flat, without first entering into and registering a written agreement for sale with the purchaser. This provision will better protect consumers as these agreements will also require builders to specify the likely date of possession of the apartment.

All housing projects on more than 500 sq mt would have to register with the proposed real estate regulator. According to the original provision in the Bill, builders could register with the regulator only if the project was on land exceeding 1000 sq metre.

The interest rate payable by the promoter or allottee in case of any default by either would be the same. Failure to do so would lead to a penalty of 10% of the project cost. For subsequent violations, they will be charged another 10% of the project cost or sentenced to a three-year jail term.

“The agreement will ensure that the until-now measly interest rates paid by defaulting builders should be brought on par with the interest rates that buyers, who default on their payments, are required to shell out,” panel member and Bengaluru Member of Parliament Rajeev Chandrashekhar was quoted as saying by the Financial Express.

Real estate regltry bill will transform n boost invstmnts n strong protn for consumers! Reqd in real estate sctr! Delayed due to disrptn! — Rajeev Chandrasekhar (@rajeev_mp) August 3, 2015

Further, every state will have to set up a Regulatory Authority and as quasi-judicial Appellate Tribunal as the two tier-dispute resolution mechanism.

The panel has also redefined the carpet area as the net usable floor area of an apartment, excluding the area covered by external walls, areas under services shafts, exclusive balcony or verandah area, and exclusive open terrace areas, but includes the area covered by internal partition walls of the apartment. This move is aimed at preventing builders from including the balcony area into the carpet area. Similarly, the committee has defined car parking garage and other service areas so that there is no confusion between the actual conveyed carpet area and other ancillary areas.

The bill was originally proposed to cover only residential properties but it now covers both residential and commercial real estate.