While some realtors applauded the new legislation saying it would bring in more transparency into the sector, others criticised it for being too harsh in prescribing stiff penalties that can be imposed on developers.
"It is a welcome step. We had been waiting for the same since long as it would bring buyers' ease along with transparency and respect to the sector," said Navin M. Raheja, president, National Real Estate Development Council (NAREDCO).
"The bill will help streamline the clearances process for all developments."
The Confederation of Indian Industry also welcomed the bill which was pending since 2007.
It hoped that the new legislation will bring in enhanced protection to consumers and not just replicate existing laws.
"We must keep in mind that multiple acts exist for protection of consumer interests Hence, it needs to be ensured that the proposed real estate regulatory authority (RERA) does not end up merely replicating various functional roles," said Firdose Vandrevala, chairman, CII national committee on real estate and housing.
The union cabinet Tuesday cleared the bill to set up a regulator for the sector with provisions for jail term for the developer for putting out misleading advertisements about projects. According to the bill, developers would have to register their projects which measure 4,000 sq metres or more with the regulator. And they can launch projects only after acquiring the statutory clearances.
Provisions in the bill mandate property agents to get themselves registered with the regulator. The bill also makes it mandatory for developers to provide some portion of project townships for the lower income groups.
The bill also has provisions to curb misleading advertisements related to projects by providing a clear definition of carpet area. The bill envisages establishment of fast track dispute resolution mechanisms.A developer may have to pay up to 10 percent of the total project cost if found guilty of misleading the buyers.
For the second offence of a similar nature, the bill provides for a jail term for the developer.
These penalty provisions have attracted the ire of the sector.
"The real estate regulator bill should have been more balanced taking view of challenges faced by developers and consumer grievances," said Anshuman Magazine, chairman and managing director, CBRE South Asia.
"While consumers need protection, for real estate development to happen more efficiently, and in a transparent manner, administrative reforms are also required urgently."
Some realtors also said the strict regulatory norms will effect the liquidity required in the sector and increase the time period of projects which may lead to an increase in prices by three-four percent.