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Real estate this year: 2017 was a year of hope for homebuyers; actual relief may come in 2018

The legal precedents established in 2017 have laid the foundation for the ‘rules of engagement’ in the real estate sector and these will have a long-term impact

Vandana Ramnani @vandanaramnani1

For homebuyers stuck for years with unfinished projects, the Real Estate (Regulation and Development) Act, 2016 (RERA) that was enforced from May 1 offered a big ray of hope, so did the slew of pro-buyer orders passed by the Supreme Court. All orders issued in the Jaypee case, the Amrapali case or the Unitech case gave homebuyers the much-needed confidence that the year 2018 may finally get them their much-cherished dream home.

While low-interest rates and corrected property prices did make the year a buyers’ market, what took the cake was the slew of new rights for homebuyers specified under the Real Estate (Regulation and Development) Act, 2016 (RERA), including the right to obtain information relating to sanctioned plans, layout plans along with the specifications, approved by the competent authority. Under RERA, buyers were entitled to know stage-wise time schedule for completion of the project, including provisions for water, sanitation, power and other amenities and services as agreed between the promoter and the allottee.

Earlier, most buyers would procure these documents through the Right to Information (RTI) route as it was not obligatory on the part of the developer to share all these documents but under RERA, they had the right to ask for them.

The rights of buyers underlined in RERA were also a good litmus test to know if the builder was serious about the project.  But what upset the cart was the fact that most states diluted RERA norms.

"The notification of RERA coupled with a clear and time-bound verdict from the Bombay High Court favouring the homebuyers was the highlight of the year. In addition, the orders of the Supreme Court in petitions of home buyers of Jaypee, Unitech, Amrapali and Supertech brought about the much-required protection, which the Consumer Protection Act and consumer courts were not able to offer. I would say the year 2017 has been a year of hope for the homebuyers; however, the actual relief is yet to come. The process for delivery of the apartments and refunds has just started and it may take some more time for the buyers to actually feel the positive effects of the orders issued by the top court. The legal precedents established in the year 2017 have laid the foundations of the ‘rules of engagement’ in the real estate sector and these rules are going to have a long-term impact,” says Abhishek Dubey, an advocate based out of Delhi.

RERA the new might for homebuyers

“RERA is slowly but steadily transforming Real Estate Sector since all new projects are now registered or in the process of being registered thereby ensuring transparency, commitment on the part of builders and also a level-playing field for consumers. But there is tardy and lethargic implementation of RERA with a host of dilutions in favour of developers vide rules notified by the states. Most states such as Telangana, Karnataka, Maharashtra, Uttar Pradesh, Andhra Pradesh, Haryana have diluted the Ongoing Projects clause through their rules which will help many ongoing projects escape the net of RERA, thereby defeating the very purpose of RERA. Additionally adding to the confusion, State of West Bengal has passed its own West Bengal Housing Regulation Act and has not even notified Rules not set up Authority,” says Abhay Upadhyay, president, Forum for People's Collective Efforts and national convenor, Fight For RERA.

Till date, 26 states and union territories have notified RERA rules, six states/UTs have formed permanent authority, only one state has formed a permanent Appellate Tribunal, 13 states have set up web portals and 20 states have formed an interim authority and 10 states have an interim Appellate Tribunal.

“We, are hopeful that after the High Court of Bombay judgment, states will be legally obliged to revisit their rules and amend all dilutions,” he says.

While new homebuyers are well protected under the Act, those stuck in ongoing projects are far from getting relief under RERA mainly due to implementation and dilution issues. “It is duty of the government in power to ensure that the laws of the land are seriously implemented. We are hopeful that prime minister Narendra Modi will take cognisance of the matter in 2018 and intervene to ensure RERA implementation in letter and spirit. This is the only way to bring back faith of the homebuyers in governments, judiciary, administration and thereby lift their sinking morale from the new legislation,” says Upadhyay.

As many as 3 lakh homebuyers are stuck with incomplete projects in Noida area alone and most buyers say that the much-touted RERA has not brought them any relief. “While the year 2017 definitely gave us some hope, we want that the year 2018 will be the year of solutions. Buyers should get their homes,” says Indrish Gupta, co-founder, Noida Extension Flat Owners Welfare Association (Nefowa).

It must be noted that UP CM Yogi Adityanath has promised delivery of 80,000 homes by the end of next March in Noida, Greater Noida and Yamuna. The chief minister had also promised stringent action against builders who fail to deliver the flats on time. Action would be taken after the completion of physical and financial audit being done in the three areas, he had said earlier this week.

But homebuyers are not satisfied and have termed his promises as an “eyewash”. “We want that the prime minister should intervene. The co-developer policy should be implemented. The units that have been delivered in Noida or that are about to be delivered are those which had not yet received the occupancy or completion certificate and where people have already moved in. These do not include projects that are stuck due to lack of funds,” says Abhishek Kumar, president of Noida Extension flat buyers’ welfare association.

“Whatever the authorities and the ministers have done so far is an eyewash. A central government must intervene, get a third party involved to complete sick projects,” says Gupta,

The Jaypee case

Homebuyers who have invested in Jaypee projects are hopeful that they will get their homes after a long wait.

It was reported this week that Jaypee Infratech is planning to deliver over 5,100 apartments and plots by March 2018. The company had almost a decade ago proposed to build over 32,000 flats and some plots under the Integrated Wish Town project located in sectors 128, 129,131, 133 and 134 in Noida. With the planned deliveries by March, the total number is expected to touch 11,100 in this project this financial year.

The company has applied for occupation certificate (OC) with the Noida authority for close to 600 units, and is in the process of applying for the same for an additional 4,500 units, it was reported this week.

The National Company Law Tribunal-appointed resolution professional in case of Jaypee projects - Anuj Jain has received bids from companies and fund houses to complete Jaypee’s delayed projects. Earlier this month, in his reply to letters submitted by Jaypee homebuyers, Jain had assured them that ‘he will be taking necessary measures for the protection of the interests of homebuyers’.

The reply also stated that he had submitted an action plan to the Supreme Court in a sealed cover that detailed the steps taken by him under the Insolvency and Bankruptcy Code, 2016. The action plan was submitted in the November 22 hearing of the case.

In December, the Supreme Court also extended the deadline for Jaypee Associates, the parent company of embattled Jaypee Infratech Ltd, to deposit an additional Rs 125 crore with the apex court to Jan 25, 2018. Jaiprakash Associates had deposited Rs 150 crore with the registry this month.

At the hearing on November 22, the Supreme Court had allowed the parent company of Jaypee Infratech Ltd to deposit Rs 275 crore on that day and another Rs 275 crore by December 31 (Rs 150 crore by December 13, 2017 and Rs 125 crore by December 31, 2017).

No specific timeline was given to deposit the remaining Rs 1,450 crore. But the SC order that day did say that “Needless to say that direction for deposit of Rs 2000 crore shall remain as it is. The only indulgence is to pay the same in installments.”

The court has set February 1 as the next date for hearing the case.

On August 9, the Allahabad bench of the National Company Law Tribunal had accepted lender IDBI Bank’s plea and admitted Jaypee as a case for insolvency resolution. It appointed Anuj Jain, an insolvency resolution professional from BSSR & Co, to sit with the IDBI Bank officials and other creditors of Jaypee to arrive at a resolution of the company’s debt.

Over 30,000 home buyers are stuck in incomplete projects floated by Jaypee Infra. While some have paid the full amount to the company, there are others who may have paid either 60 percent or perhaps 90 percent of the amount.

The Unitech case

On December 13, the Supreme Court had stayed the NCLT order which had suspended Unitech’s board and allowed the Centre to take over control of the company’s management.

Attorney general KK Venugopal appearing on behalf of the government had conceded that the Centre should not have approached NCLT when apex court was hearing the matter relating to Unitech's failure to refund home buyers, informed a Unitech lawyer. “This should not have happened. The government should not have approached NCLT when Supreme Court was seized of the matter relating to Unitech’s failure to refund homebuyers,” he had said at the hearing in December.

On December 12, the Supreme Court had expressed serious apprehensions about the manner in which the Centre moved the National Company Law Tribunal (NCLT) on December 8 to take control of embattled real estate firm Unitech’s board without seeking its permission.

The National Company Law Tribunal (NCLT), on December 8, had suspended all the eight directors of the realty firm over allegations of mismanagement and siphoning of funds and had authorised the Centre to appoint its 10 nominees on the board. In its petition filed under section 241 of the Companies Act, 2013, the government had requested the tribunal to remove the eight directors and said that the company has over Rs 6,000 crore debt and over 16,000 undelivered units from a total of nearly 70 projects.

The apex court had on October 30 said jailed businessman Sanjay Chandra will be granted bail only after the real estate group deposits money with its registry by December end. The top court had earlier directed the jail authorities to facilitate Chandra's meeting with his company officials and lawyers so that he could arrange money to refund the home buyers as well as for completing the ongoing housing projects.

Chandra is seeking interim bail from the apex court after the Delhi High Court on August 11 had rejected the plea in a criminal case lodged in 2015 by 158 home buyers of Unitech projects Wild Flower Country and Anthea Project located in Gurgaon.

The next date of hearing has been kept in the second week of January 2018.

The Amrapali case

In September, the principal bench of the National Company Law Tribunal or NCLT had admitted an insolvency petition against Amrapali Infrastructure filed by Bank of Baroda. NCLT appointed Rajesh Samson of Deloitte Touche Tohmastu India LLP as the interim resolution professional (IRP) in the case of Amrapali Silicon City Pvt Ltd.

Bank of Baroda, the lead bank of the consortium comprising Oriental Bank of Commerce and Bank of Maharashtra who are the other lenders, had signed a term loan agreement with Amrapali Silicon City in February 2012. The consortium of lenders sanctioned a loan of Rs 100 crore to Amrapali Silicon City. Amrapali Silicon City has defaulted on total repayment of Rs 71.15 crore, which comprise Rs 59.38 crore of principal overdue and Rs 11.77 crore of interest and penal interest.

In October, the Supreme Court (SC) issued notice to the Centre on a plea by 107 homebuyers against the order by NCLT that admitted Bank of Baroda (BoB)’s insolvency petition against Amrapali Group’s Silicon City project in Noida. Homebuyers had sought quashing of the September order passed by NCLT, and said the moratorium imposed under provisions of the Insolvency and Bankruptcy Code, 2016, violates Article 14 (equality before law) of the Constitution.

Money owed to homebuyers should be treated on a par with debt owed to creditors specified under the code, the petition by homebuyers had said.

The apex court also restrained the directors of real estate major Amrapali Group from leaving the country without its permission. Senior advocate Shekhar Naphade was appointed as amicus curiae to assist it by espousing the home buyers' cause.

The apex court had also directed all the directors, except institutional ones, of real estate firm Amrapali to remain personally present before the court on January 17, 2018 and directed the amicus curiae to open an online portal for home buyers to register their refund claims.

Homebuyers say that they are hopeful that they will get delivery of their units. “We are confident because the amendments to the IBC “explicitly prohibit persons declared as wilful defaulters” or those having a history of siphoning funds from a company, or convicted of fraud, from submitting a resolution plan for companies that are going through the corporate insolvency resolution process. Also, major stakeholder in this particular project is the Noida Authority itself and it is its liability to complete the projects.

“We also draw hope from the fact that there is saleable floor area ratio or FAR that can be developed to generate Rs 2500 crore. What this means is that there is an incentive for a third party to come forward and complete the projects. As per estimates the cost of completing stuck projects is around Rs 1000 crore,” say buyers.

Vandana.ramnani@nw18.com
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