Hit by Demonetization Bangalore Brokers Oppose Higher Registration Fee and Penalty Payment under RER

In 2016 demonetization is the single biggest monetary reform that this country has faced. Although the Government of India deserves credit for taking a brave and drastic action to weed out corrupt from grass root level however the policy initiative that in its current state looks terrible on implementation. Hit by this policy real estate brokerage firms from Bangalore and other independent realtors have come out openly against the new state Real Estate Regulatory Act (RERA). This new draft makes it mandatory for brokers to pay a registration fees of Rs 5 Lakh, in a world where brokers earn only 2 percent commission.

The Real Estate Regulatory Act is introduced to install a transparency in the Indian real estate market. The bill mandates the consumers can approach the state government to repatriate any grievance against any builder. For this every state will have to rectify this law and set up a state authority on the lines. Following this norm Karnataka like many other states has also has passed a draft proposal in the state house. Real estate is a flourishing business in Karnataka, however due to the introduction of such measures has sent the brokers into a panic mode and many have expressed their trepidations regarding the bill and its inclusions.

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High Registration fee

According to the new RERA proposal a brokerage agency or independent broker have to pay a hefty sum of Rs 5 Lakh as registration fee for city and Rs 2.5 Lakh for rural areas as registration fee. The registration fee in Karnataka is far higher when compared to similar states like Gujarat and Uttar Pradesh, where the registration fee is as low as Rs 10,000 set by the respective regulatory authorities. This makes it affordable for people who belong to the lower income levels to take a profession as a real estate agent.

As per various real estate pundits the recent demonetization exercise has already affected the real estate business. And with the cost of operation becoming higher day by day it is almost impossible to pay an amount of Rs 5, 00,000 as registration fee.

During the last half of 2016 Bangalore has seen a drop in new real estate project launches. Approximately 63% decrease in QoQ launches has been evident with 4,300 new unit launches. In total around 21,800 new units year to date.

Even with 2% commission there exist an intense competition among the brokers. Many believe the imposition of Rs 5 Lakh as registration fees would flush out the small brokers, facilitating only powerful realtors and corporates. The Bangalore Realtors Association of India has filed a petition against the existing draft for review by the Chief Minister and proposed Rs 25,000 as registration fee.

Concerns over penalty percentage

Apart from the high registration fee there is another provision in the draft which enforces to pay high penalty for flawed developers. The broker community has urged the state government to look into this matter as well. As per the RERA draft a penalty of 5% will be levied in case of default by the developer. As per experts this penalty is hard to implement as the city of Bangalore has only 160 registered entities while 10,000 individuals are operating without any registration. As per various prominent real estate personalities it would be wrong if the state government holds a broker responsible for a default by a developer, given that in most cases a broker is not part of the developer’s wrongdoings.

Riya Sharma writes on behalf of hindustanproperty.com, which is an internet portal dedicated to meet every aspect of the consumers needs in the real estate industry.