Homebuyers in apartment complexes that were stalled on account of unusual circumstances such as the pandemic are set to benefit from a proposal to give builders financial relief to enable them to complete the projects.
The panel proposed a moratorium on payments that builders owe land-owning authorities in such cases. This would enable the developers to improve their finances and complete the housing projects, people familiar with the matter said.
The builders will be allowed to clear their dues in stages. Upon completion of payments, buyers will be able to get their homes registered.
The proposal by the committee headed by Amitabh Kant, India’s G20 Sherpa and former CEO of Niti Aayog, is expected to provide relief to more than 2.5 million homebuyers in the country who are waiting to take possession of their apartments or get them registered. The panel is said to have submitted its report to the ministry of housing and urban affairs.
A spokesperson for the ministry did not respond to calls and messages seeking comment on the matter.
The focus was on providing relief to over 400,000 units and more than 2.5 million homebuyers invested in the stalled real estate projects, the people said.
The committee divided projects into three buckets – where work has not started, projects that were stalled after construction started, and those where builders handed over possession without registering the properties.
Some of the projects have become commercially non-viable on account of the high interest and accumulated amounts owed to the authorities. According to the panel, it is important that a reasonable interest rate be charged and the focus is on completing the projects.
Insolvency cases
In cases where the Supreme Court has issued an order, the committee proposed that the order be implemented and repetitive judicial review is not required.
The panel was of the view that the Insolvency and Bankruptcy Code should be amended so that only stalled projects should be taken up for resolution and not the builder company. This would ensure that the developer’s other projects are not adversely affected, the people said.
It proposed that the insolvency process should not impact homebuyers and that they should continue to receive possession of their units, they said.
The committee said state real estate regulators should be tasked with finding a solution to stalled projects and focus on getting them completed.
For real estate projects in Noida, the panel suggested a four-year moratorium – two years on account of stoppage of work due to a ban on activity around the Okhla Bird Sanctuary and two years for COVID-related disruption. It proposed that the land-owning agencies provide relief to the builders on dues/payments that are to be made by them.
Developers welcomed the committee’s proposals, while homebuyers said the suggestions were by and large in their favour.
“The sector has been facing several challenges, especially with regard to the calculation of dues of authorities. These should be rationalised so that project dues are cleared and completion certificates are received and buyers get to register their units,” said Manoj Gaur, chairman of the Confederation of Real Estate Developers' Associations of India.
“We are hopeful that these would favour buyers waiting for either delivery of their units or getting them registered,” said Abhishek Kumar, president of the New Era Flat Owners Welfare Association.
The ministry of housing and urban affairs set up the committee headed by Kant in March to look into issues related to completing stalled housing projects.
NCR, MMR
The 14-member committee comprised top central and state government officials, including the Infrastructure and Industrial Development Commissioner and Chairperson, Noida; secretary in the Department of Financial Services; secretary in the ministry of corporate affairs; chairperson of the Insolvency and Bankruptcy Board of India; managing director of the National Housing Bank; chairperson of the UP Real Estate Regulatory Authority; and chief investment officer of SBI CAP Ventures.
According to Anarock, a real estate consultancy, construction of as many as 500,000 homes worth Rs 4.48 lakh crore are stalled across seven markets. The National Capital Region (NCR) and the Mumbai Metropolitan Region (MMR) together accounted for 77 percent of such projects.
The NCR has 240,610 stuck or delayed units worth over Rs 1.81 lakh crore. MMR has 128,870 stuck units worth about Rs 1.84 lakh crore.
Many developers of delayed projects are said to be facing a cash crunch because of financial indiscipline and alleged diversion of funds. They find it difficult to complete the projects because funding has dried up or is available only at high interest rates, and that too, only to select developers.
The other major issue is the amount that developers owe the land-owning authorities. The stalled projects have to be viable for them to be completed, said experts.
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