Defaulting builders should not get three-year blanket extension to complete stalled projects: Homebuyers' body

There are still projects that are not registered under Real Estate (Development and Regulation) Act, as required.

Reacting to the recommendations made by the 14-member Amitabh Kant committee to look into issues faced by legacy real estate projects across the country, a homebuyers’ body said the timeline extensions granted for real estate projects should be on a case-to-case-basis and on the basis of timelines required to complete the projects under normal circumstances and that no blanket extension of three years should be given to builders.

In a letter to Minister of Housing and Urban Affairs Hardeep Puri, the homebuyers’ body, Forum For People’s Collective Efforts' (FPCE) president Abhay Upadhyay has said that builders whose projects are stalled or delayed for more than two years should be blacklisted and barred from launching new projects in future.

It has suggested that an addendum be included by the ministry while circulating the report of the Committee to the various states and/or any other government departments wherein it is mentioned that the concessions and exemptions given to the builders and/or projects in the report will be limited to only legacy stalled projects. Such projects should be identified and categorised as such to prevent any possible misuse, the letter said.

The extension for a project if granted should be on a case-to-case basis and on the basis of the timeline required to complete the project in normal circumstances and no blanket extension of three years should be given, the letter said.

All such builders whose projects are stalled or delayed for more than two years should be blacklisted and barred from launching new projects in future, it said, adding that the homebuyers of such projects which are being given extension following the recommendations of the Report of the Committee should be simultaneously compensated.

"This could potentially offer relief to builders but at the detrimental cost and continued suffering of homebuyers who have already endured prolonged project delays and an additional three-year extension without any compensation may completely break them both financially and mentally.  This not only raises concerns about fairness of the revival package as recommended by the Committee but also reflects an insensitive and unjust approach to their (Homebuyers) hardships,” the letter said.

“This will encourage builders to continue with their malpractice to divert funds and delay project completion since they neither have been penalised for such abnormal delays in projects completion nor they are under any obligation to pay compensation to suffering homebuyers,” it said.

The Committee has recommended a series of concessions and exemptions for builders in its report. However, the report does not delineate the specific projects that would qualify for these privileges nor has it clearly indicated that these concessions are recommended only for projects that will qualify as legacy stalled projects, it noted.

”This scenario has created a space wherein builders might perceive these concessions and exemptions as inherent entitlements, applicable not just in the case of legacy stalled projects but also for their future projects,” the letter said.

FPCE said that while the report has some very good recommendations to facilitate possession of dream homes to homebuyers, “on deep analysis of the entire report, some very serious issues also come to the forefront which needs your kind intervention.”

According to the association, the committee's findings indicate that there are still projects not registered under Real Estate (Development and Regulation) Act, as required. This raises "serious concerns with regard to the effectiveness, integrity, and commitment of the RERA Authorities to enforce the regulations set forth by RERA", Upadhyay said in the letter.

In one of the recommendations, FPCE said the committee has given project selection criteria that read as "Projects which were started before 2018 and are more than two years delayed can participate in the State Government/RERA led resolution process".

Upadhyay said the committee's recommendation includes projects that were started after the enactment of RERA in 2016, which seems to go beyond the scope of addressing only legacy stalled projects.

"This clearly suggests that even projects initiated after the implementation of RERA are experiencing delays and issues. This again raises doubts about the effectiveness and functioning of RERA in preventing project delays and ensuring timely completion which was one of the prime objectives of RERA," he said in the letter.

FPCE has also recommended that a  'RERA Monitoring Committee (RMC)' primarily composed of homebuyers, distinguished independent individuals, and reputable non-profit organisations be set up.

Notably, this committee should exclude any involvement of builders or their organisations, it added. "RMC's primary role would be to scrutinise the deviations, operational practices, and overall functionality and intent of the RERA authorities, ensuring they are aligned with the true spirit of RERA implementation,” the letter added.

"RMC could present its findings to the Central Advisory Council during its meetings," Upadhyay said.

The 14-member committee that was put in place in March this year by the Ministry of Housing and Urban Affairs (MoHUA) has made a seven-point recommendation that includes mandatory registration of projects under the Real Estate Regulatory Authority (RERA), execution of registration or sub-lease deeds for all occupied units, occupancy of all substantially completed projects and financing of all stalled projects by a government-backed fund.

The panel presented the committee's report to Union Housing and Urban Affairs Minister Hardeep Singh Puri on August 21. The expert committee held five meetings in April, May, June, and July in which presentations and inputs were sought from state authorities, regulators, real estate developers, homebuyers and financiers.

The Committee has recommended that RERA issue directions for opening project-wise escrow accounts. All receipts and payments should be made from this account in accordance with Waterfall Mechanism. The Committee has recommended that where the developer does not take responsibility for completing a project under the package proposed or where he fails to do so, may be dealt with by a RERA-led revival framework. Projects started before 2018 and are more than two years delayed can participate in the state government/RERA-led resolution process, the report said.