A unified system of clearances is expected within the next four months, UP RERA chairman Rajive Kumar tells Moneycontrol.
Over 13,000 complaints have been formally filed with UP RERA, and almost 7,000 of those have been disposed of, UP RERA chairman Rajive Kumar tells Moneycontrol’s Vandana Ramnani.
He also reveals that the broad framework for rating real estate projects has been completed. It would be a couple of months before the first series is ready.
The regulator has also issued notices for de-registration to seven realtors based on either the audit findings or the fact that the projects were not moving ahead.
Kumar is also of the view that builders coming forward as project management consultants to complete unfinished projects is a positive development and should be encouraged as it ensures the delivery of the project.
Q: What has Uttar Pradesh Real Estate Regulatory Authority (UP RERA) achieved so far?
A: UP RERA was set up in August 2018, and we were able to start our hearings within a month, which was on September 4, 2018. Initially, the idea was that the headquarters of UP RERA would be in Lucknow. The state government at that stage thought that, with almost 75 percent of our problems and complaints coming from NCR, we should have a bench here. Therefore, both these benches started functioning here from September 2018.
As of now over 13,000 complaints have been formally filed with RERA, and almost 7,000 of those have been disposed of. So, our effort is that, with the backlog slowly getting out of the way, we should be able to come to a conclusion on the complaints within the stipulated 60 days.
Q: What are the steps the UP RERA authority may be taking to reassure homebuyers to invest in new projects that have been registered under RERA. Right now the thrust seems to be on only investing in ready-to-move-in apartments?
A: I would briefly like to mention about the architecture of the whole RERA Act. As far as the act is concerned, there are two groups of projects. One is ongoing, those that were not completed on the stipulated day when RERA came into existence. And, the others are the new projects. For new projects, there is a process for registration. An escrow account has to be opened. Whatever money is taken goes into the escrow account, and at least 70 percent of that has to go in for the completion of the projects so that the money is preserved and utilised for completion. Additionally, there is a stipulation that not more than 10 percent money can be taken in advance even for registered projects till an agreement to sale is signed and that it has an approved formulation by the state government which takes a balanced view of the interests of both the promoters and the buyers. This is for new projects.
For the ongoing projects, the stress has been mostly on ensuring the completion of these projects. And, there are various reasons why we hear that there are a lot of stuck projects, especially in the NCR region. And, to that extent, I would say that RERA has been proactively pursuing both with the buyer groups and the promoters to ensure timely completion. And, the results till now have been very positive.
It is correct that at this moment, partly because of the confidence issues and partly also because of taxation issues, there has been a trend for people going in for completed projects. Having said that, there has been a substantial inventory which is now getting completed in the NCR region, where a lot of choice will be available to the buyers. I am happy to report that Greater Noida and this region in UP has had an almost 30 percent growth over the last year in terms of sales. So, slowly, that confidence is coming back.
Q: Your view on the recent Supreme Court order that buyers should be granted refund.
A: A decision has come in recently from the Supreme Court, and there have also been earlier decisions with relation to NCDRC and other forums. The RERA Act is very clear that, if a project is delayed, a buyer has the option either to continue with the project or to ask for a refund. As far as the legal status is concerned, there is complete clarity, and the Supreme Court has further reiterated that position. They have also mentioned about the reasonableness of delay and the unreasonableness of delay. Obviously, the point is that the buyer cannot wait for the flat for eternity. But, I would also like to take you back to the observations that were made by the Supreme Court in the case of Chitra Sharma and Jaypee Infratech. There, they observed that a balanced view has to be taken from the interests of those who want to exit the project and who want to see their flats completed.
As far as we are concerned, we are looking for projects which should be completed by December of 2019. If there is a project which is very close to completion, we would rather that the project gets completed at the earliest, given the liquidity conditions in the market today. We prefer the money to be put there. The refunds should be the subsequent step so that at least those 70-80 percent people get their houses completed. More importantly, the value of the completed flat is much higher than an incomplete flat. From that perspective also, somebody has to realise the value of the flat from the market, it makes more sense to get it completed.
Q: Some builders have alleged that the paper work associated with RERA is too stringent and that may have slowed down projects. Is that true?
A: I don’t think so. As far as UP RERA is concerned, I should bring this to your notice that it was RERA from day one that started with online registration of complaints and projects. And, we are further enhancing and improving the process for the registration of projects. We should look at the pre-RERA era and the post-RERA era. Earlier, the requirement for compliances was not there. And, therefore, this notion that we have to do certain compliances is very natural. But, from our side, we are trying to ensure that this process is as smooth as it can be. It is time bound.
Whatever responses are required, it should be done online on an electronic mode so that repeated visits can be avoided. At this stage, I can say that most of the builders, especially those who have a very good track record, are very positive about RERA. For example, members from Credai and other institutions like NAREDCO are of the view that this is a very positive step and that, in the long run, everybody will be benefited. Getting used to any discipline requires some bit of support from each side.
Q: It has been alleged that, in some cases, the 70 percent amount put aside in an escrow account is being used by developers to repay their own loans. Is UP RERA doing anything about it? Have you approached banks?
A: I would like to clarify here that there is a requirement under the RERA Act that 70 percent of monies the buyers put in against the project in an escrow has to be utilised for purposes of completion of that project. Now, if there is some builder who has taken a loan against that project and utilised it for that project, the repayment of that amount can be through that 70 percent to that extent. But, in case these loans pertain to other projects, this 70 percent is sacrosanct and is tied up for that project only. We have also taken up this issue with the banks recently. Bankers need a certificate from the structural engineer, a chartered accountant and an architect together to let monies be withdrawn out of this 70 percent fund.
It has been alleged that some developers are fraudulently obtaining occupancy certificates and coercing homebuyers to take possession? What is UP RERA doing about it?
A: The larger issue at this moment is that the buyers are saying that, without an occupation certificate (OC) or a completion certificate (CC), they are being asked to take possession. As far as the law is concerned, it is absolutely clear that one should have an OC for that particular tower or building. Finally, the CC is needed when the possession is to be offered along with that property. There have been decisions of the honourable Supreme Court said that the liability of either the interest payment or delay or otherwise would end only once an OC or a CC and an offer of possession is given, whichever is later.
Now, as far as the OC per say is concerned, there is a bit of a confusion because people feel that, once the OC is given, all facilities should be in place. They also feel that, if a phased development is happening, all facilities should be there by the time the completion is obtained. But, there might be a tower-wise completion where lift safety, fire safety and all other statutory requirements for that particular tower are to be completed. So, we may have a case where there is an OC, but some of the facilities will take time to come up. As far as issuing of OCs and CCs is concerned, this is within the purview of the concerned development authorities, who have passed the original map. And, I am sure that people do the due diligence. In case somebody has an objection, there is a provision where that can be raised. In case a specific matter is taken up with us, we will also take it up with the authorities.
Q: Any update on the proposal that UP RERA would be rating projects based on quality?
A: The basic idea is that both the promoter of a project and the project itself should get a rating so it would be helpful to the buyers. Eventually, it would be helpful to the builders also because they would want to be in a higher star-rating. The broad framework for this exercise has been completed. I think it will take a couple of months before we come up with the first series because it is a fairly involved exercise.
Q: How many builders in UP may have undergone a forensic audit till date and how many builders have actually been delisted?
A: I will take this question in two parts. Initially, RERA ordered audits of certain projects. This is a broad fact-finding kind of audit where we get to know whether things are in order. The second level is when there are major discrepancies or it needs a detailed probe. In that case, a forensic audit is required. So, in most cases, we have ordered an audit, and a total of 75 such projects came up. We have categorized them into categories A, B and C. Almost a half the projects is in categories A and B, which are broadly moving reasonably okay. Category C is for projects that we have to work upon. Wherever there are diversions or the money is used elsewhere, we have issued notices to the promoters.
In seven cases recently in the NCR region, we have also issued notices for deregistration of the projects based on either the audit findings or the fact that these projects were not moving ahead.
Q: Your views on builders coming forward as project management consultants to complete unfinished projects.
A: This is a very positive development. Three projects were stuck for a while and two developers have come to an agreement to complete these projects in a time-bound fashion. There are a couple of similar proposals which have come to us either as a result of the deregistration notice or on their own volition. We have always followed the provisions of sections 7 and 8 under RERA, where the process of deregistration is carried out. Even otherwise, within the powers of RERA, we would very much welcome and support all such initiatives where a co-developer comes in, whether by the way of PMC or by formally joining the company or of having an MOU or an agreement to complete the project.
We support all such initiatives because it ensures the delivery of the project. And, for that, the broad arrangement that we have issued in some of the cases is that there is a monitoring committee. We have a conciliator with us here, and he is the referee. There are representatives from both the buyers’ and the builders’ side. They do a regular monitoring both of the monies being spent as well as of the physical progress. I think this is the model forward to complete those projects where the promoters are not able to arrange funds. Otherwise, these are viable.
Q: What about the unified system of clearances that has been proposed?
A: That is a work in progress. We expect that we should have a concrete plan within the next four months.
Q: How many builders have so far been penalized for not completing projects in time?
A: Our approach till now has been to see that the projects get completed. There are exceptional cases where either the promoters are just not coming forward or they have done major bungling and have vanished or are in jail. In such cases, we are taking action under sections 7 and 8, which is to first offer it to RWAs, thereafter to find a co-developer in consultation with the state government. In some cases, we have also recommended an action of investigation by a specialized police agency so that it can be tracked where the money went and, wherever possible, retrieved. But, as I said, our thrust is to see if a co-developer can be found or, in some cases, if an RWA can take over the responsibility for a viable project.
Q: Overall, are you saying that conciliation is the way forward?
A: Yes. We have made a special provision on our website. If somebody lodges a complaint and the person feels that it is amenable to conciliation, there is a pop-out which says: “Would you like to go in for conciliation?” We immediately pass it on to the concerned builder. If he also says yes, we have a conciliation officer. There are two representatives of the homebuyers’ body. There are representatives from the builders’ body. The concerned complainant, the builder and a conciliator all sit together and try to find a solution. Our view is that, wherever things happen with consensus, there are hardly any issues on execution. To that extent, everybody is facilitated. The process is quicker, and the follow-up is email@example.com