FM held discussions with realtors, homebuyers, RERA officials.
Liquidity crisis faced by real estate developers, the need to harmonise provisions of RERA, IBC and the Consumer Protection Act, setting up of a stressed asset fund for completion of stalled projects and the issue of banks not passing on the benefits of reduced interest rates to buyers were some of the issues discussed at separate meetings Finance Minister Nirmala Sitharaman held with realtors and homebuyers.
Sitharaman held two separate 'consultation' meetings — the first with realtors' associations and the second with homebuyers groups — to discuss how to strengthen the realty sector. Three RERA chairmen from Gujarat, UP, Madhya Pradesh and tribunal Chairman of Tamil Nadu and consumer organisations were invited for the meetings. Housing minister Hardeep Puri was also present at the meetings.
Issues that came up for discussion included the need to harmonise provisions of RERA, IBC and the consumer court provisions. "They all seem to be working in parallel and that does not end up providing a solution," sources said, adding the government needs to look at them in a harmonised manner and introduce necessary changes.
The Supreme Court bench had said last week that RERA should be read in harmony with the IBC amendments. RERA is not in derogation of any act, and in case of conflict between RERA and IBC, IBC prevails, the court made it clear. The consumers have the option of seeking remedy under any provision — the Consumer Protection Act, IBC or RERA, it had said.
The issue of setting up a stressed asset fund for project revival and providing access to stressed realty projects to national infrastructure investment fund that exists also came up for discussion, sources said.
High rates of registration, high guideline rates in some states was discussed and so was the fact that RERA requires to be strengthened and be given more teeth.
"The fact that RERA often does not have the power to implement its own decisions has to send them to a civil court was discussed," sources said.
A separate high-level meeting is expected to be held in a fortnight under the chairmanship of the cabinet secretary to discuss the modalities of setting up of a stress asset fund to complete stalled projects, sources said.
Expressing concern that the situation may worsen during the upcoming festive season if steps were not taken to induce demand, real estate developers represented by CREDAI and Naredco apprised the minister of the challenges facing the sector.
"Liquidity crisis and the need for tax rationalisation are two major challenges facing India’s real estate and infrastructure industry, and quick resolution of the same would go a big way in enabling Indian real estate and infrastructure to play its role in enhancing GDP growth as also creating jobs," said Niranjan Hiranandani, president of National Real Estate Development Council (NAREDCO).
"The meeting indicates the sense of earnestness and urgency. On behalf of CREDAI, we hope to have succeeded in highlighting the urgency to ease the liquidity constraint in the interest of timely delivery to homebuyers. CREDAI also argued in favour of RERA being given due recognition in resolution of legacy issues. Immediate and positive steps from the Government will enable developers to contribute their might to achieving PM’s vision of Housing for All by 2022," said Jaxay Shah, national chairman, CREDAI.
Abhay Upadhyay, president, member Forum for Peoples’ Collective Efforts (FPCE), General S K Bahri, chairman, Federation of Apartment Owner Association Gurgaon, Shirish Deshpande of Mumbai Grahak Panchayat and Jaypee homebuyers were invited for the meeting with the FM.
"This is for the first time homebuyers have been invited to such a meeting. This sends out a message that the government is concerned about the industry and homebuyers and that definitely some concrete steps would be taken to address their problems," said Abhay Upadhyay, president, member Forum for Peoples’ Collective Efforts (FPCE).
Homebuyers suggested setting up of a Stressed Asset Fund for completion of stuck projects to the tune of at least Rs 10,000 crore. "The objective should be to complete all pending real estate projects pan India within a span of 5 years by providing for such stress fund continuously for next 5 years," they said in a list of recommendations submitted to the FM.
They also recommended that the government set up a task force at the ministry level to identify projects nearing completion which should be taken first for completion and to identify a public sector enterprise who may be assigned the job to complete such projects under the supervision of the task force, said Upadhyay.
Buyers have also suggested that steps should be taken to ensure that promoters of projects whose projects are completed utilizing the proceeds from the stress fund should be stripped of all their assets including personal and company's assets, to realise the entire funding utilised for completion of those projects. They should also be barred from carrying on business for life time.
"To achieve this within reasonable time, extra power may be given to authorities for seizure and attachment so as to complete the entire exercise within six months," they said.
Homebuyers have also apprised the minister of banks not passing on the benefits of reduced interest rates to buyers. "Presently, banks / FIs have a system of increasing the interest rate on home loans, taken on floating basis, whenever there is an increase in the rate, however, in case of reduction in rates banks do not reduce the interest until applied for by the buyer. This is a classic case of unfair trade practices," buyers said.
By doing this, banks are conveniently increasing the tenure of the home loan, which is not known to the homebuyer who has availed the home loan, they said.
Buyers have also proposed that the GST on premium housing projects be enhanced from existing 5 percent to 8 percent (including input tax credit).
"The regime of 8% GST with ITC benefit should be brought back to real estate sector in order to reduce GST burden for consumers. Since, with ITC benefit, the net GST rate will be less than 5% which will bring in huge relief for consumers. Needless to say, that present GST regime of 5% without ITC Benefit is actually translating into a tax burden of around 14% for consumers which is becoming heavy burden for them," homebuyers said.
They have also requested the FM to bring about a few more amendments to the Insolvency and Bankruptcy Code to provide that 'in case of liquidation, homebuyers would be primary secured creditors'. This will instill confidence and bring prospective buyers back to the market," he said.Jaypee homebuyers who attended the meeting said that they had asked the FM that government should intervene to ensure that the resolution plan for the embattled real estate firm Jaypee Infratech is cleared. "Banks and NBCC should sort out their differences and the government should prevail upon the banks to vote in favour of the resolution plan that has been rejected thrice. We have also upraised the FM that no financial help with be required from the government as JIL has assets to take care of construction and bank dues," homebuyers said.Subscribe to Moneycontrol Pro and gain access to curated markets data, trading recommendations, equity analysis, investment ideas, insights from market gurus and much more. Get Moneycontrol PRO for 1 year at price of 3 months at 289. Use code FREEDOM.