MC Explainer: Does 40% lapsed projects post creation of MahaRERA indicate failure of regulator?

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While 60 percent real estate projects in Maharashtra that have been delayed are legacy projects (launched before the Real Estate Regulatory Authority (RERA) came into existence in 2017), an alarming nearly 40 percent projects that have lapsed are ‘new projects’ that were launched after the Maharashtra Real Estate Regulatory Authority (MahaRERA) came into being.

So, does the data accessed by Moneycontrol suggest that MahaRERA has failed to regulate new projects that were launched after it came into existence? We spoke to experts, including lawyers, chartered accountants and developers for their views.

More than 38 percent of the total 4,555 lapsed real estate projects in Maharashtra, also termed delayed, were launched and registered as "new projects" after the MahaRERA was set up in May 2017, according to data accessed by Moneycontrol under the Right to Information (RTI) Act, 2005.

According to the data provided by MahaRERA, a total of 4,555 real estate projects had lapsed in Maharashtra as of March 31, 2022. Of these, 2,789 were old projects delayed by more than six years and registered with MahaRERA as “ongoing projects”. The remaining 1,766, or around 38 percent, were launched after May 2017, registrations of which too have lapsed.

Every real estate project that is registered by a developer with MahaRERA is given three to four years for completion, considered a reasonable time period, followed by the issuance of a registration number for the project.

A simple search on the MahaRERA website using a registration number will provide all details relating to the project. The registration number is to be published by the developer in every advertisement or promotion activity related to the project.

A project is termed as lapsed when the timeline given for completion is not met, and the developer has not applied for an extension.

Once the registration of the project is declared lapsed, the developer cannot advertise, market, book, sell, offer to sell, or invite people to invest in these projects. Such projects cannot be registered by the registrar of the revenue department.

MahaRERA, on June 22, 2022, had launched a vertical dedicated to stalled projects, or those, the registrations of which had lapsed in Maharashtra. The vertical is operational and a separate team will monitor the stalled projects to ensure forward movement, and home buyers get possession of their homes.

While it is expected that projects registered as ongoing may be stuck due to several reasons and their registrations lapse, experts say that MahaRERA needs to take note and analyse the reasons for the lapse of new projects and consequently, their registrations.

Trupti Daphtary, an Advocate & Solicitor based in Mumbai, said, "One of the purposes of enacting RERA is to promote the real estate sector. RERA provides for steps to be taken under the Act by the Authority for lapsed projects. However, the time and manner of implementation of these provisions is of paramount importance. Identifying the lapsed projects is a good move by MahaRERA."

Daphtary added, "The Authority must take necessary and prompt steps such as forming an internal committee/working group at the district level in Maharashtra to identify the reasons for the lapse of projects and the nature of the lapsed projects. The committee/working group may consist of developers, financial institutions, planning authorities, real estate associations, etc. who could, based on the data available, evaluate and submit recommendations in a time-bound manner to the Authority for issues such as how many projects that were given extension during COVID-19 have lapsed, how many have been completed but the developer has not updated, and how many redevelopment projects have been stuck, etc."

She further added, "Based on the available data, the RERA, in consultation with the Government and the appropriate planning authorities, as well as involving the lending institutions and the association of allottees, must consider formulating a framework/policy with regard to lapsed projects. Failing to do so at this stage will be a lost opportunity. Merely framing a policy would not have the desired outcome. Regular follow up by a designated committee and providing solutions to unlock the potential of these projects is the need of the hour."

Also Read: MC Exclusive | Over 50% projects tagged ‘ongoing’ since MahaRERA, still await completion

Mumbai-based Chartered Accountant, Vinit Gada, RERA Advisor and Partner of Swapnesh & Vinit, had this to say. "In my view, five-and-a-half years would be a very short period of time to give any opinion with respect to success or failure of MaraRERA. At the same time, there is huge scope for betterment. From where it started, the situation has improved."

Gada added, "We will have to take a holistic view of the matter when we talk about success or failure. When the Authority was established, there were a number of challenges. Industry had suffered many issues, such as demonetisation, pace of regulatory approval, tax complexities, etc. A balance was required to keep industry alive, while at the same time protecting the interests of customers. The manner in which the Authority has developed itself in maintaining the balance is an achievement. However, there is a flip side to it, too. Customers are still not getting possession, compliances are not being done, project registrations are done in a haphazard manner, execution of the orders passed (is suffering), etc. The positive thing is that the Authority has been actively tackling the challenges thrown at it."

Hitesh Thakkar, Vice-President, NAREDCO West and Partner of Prem Group,  a real estate construction firm, said, "MahaRERA is not a failure. The lapse in new project registration in MahaRERA could be due to lack of compliances by the developers. This could subsequently lead to failure or delay in project registrations. In total, there are nearly 38 compliances. About five of these are to be updated quarterly, and a few yearly; a time-consuming task leading to delay in registration."

Thakkar added, "MahaRERA has appointed NAREDCO to address this issue, which, once sorted out, can help developers streamline their compliance issues and assist in their new project registrations. Apart from this, there are genuine lapses like technical or financial constraints, which take a long time to resolve, causing delay in project registrations. Hence, it is not correct to attribute such reasons to the failure of MahaRERA. It has set many precedents and has gained consumer trust by resolving their disputes."