The Amitabh Kant-led committee set up by the Ministry of Housing and Urban Affairs (MoHUA) to look into the issue of legacy stressed projects has recommended that all stakeholders, including developers, financiers, and land authorities take haircuts to make affected projects financially viable. The haircuts should be on a pari passu basis, it said.
MSME-type scheme offering subsidised interest rates
To encourage financial institutions to fund stalled projects, a scheme offering subsidised interest rates, similar to Micro, Small, and Medium Enterprises (MSME), is recommended. "Such a scheme would reduce the perceived risk, stimulate financial support, and lead projects to completion,” it said in a report submitted to Union Housing and Urban Affairs Minister Hardeep Singh Puri earlier this week.
"Additionally, the Central Government may consider a guarantee fund similar to MSME for such finances. The MoHUA will prepare a detailed scheme and send it to the Ministry of Finance, in this regard," the report stated.
Judicial interventions be resorted to only as a last resort
The Committee has recommended that all state governments avoid further litigation where the Supreme Court has already delivered judgments. It has also recommended allowing plan approvals and extensions for developers and co-developers without requiring clearance of dues. The Committee has suggested a few reforms in the IBC to “better accommodate the complexities of the real estate sector”.
These include project-wise Corporate Insolvency Resolution Process (CIRP). It has proposed that the IBC enable Resolution Professionals (RPs) to transfer the ownership and possession of a plot, apartment, or building to the allottees during the resolution process. An option may also be given to the allottees to acquire such units on an ‘as is where is’ basis or on payment of balance required to complete the unit during the process. Houses which are under possession of allottees should not be included in the IBC process, it said.
Suspend interest and penalties on account of COVID
The Committee has recommended that state governments announce a rehabilitation package aimed at bolstering financially distressed, incomplete projects. The package should be designed to make the projects financially viable. Developers adopting this package would have to commit to a three-year completion timeline. “The state RERA will set quarterly project targets and oversee progress as per the RERA Act,” it said.
To alleviate financial stress caused by extraordinary circumstances, the Committee also suggested suspending interest and penalties due to events like the COVID-19 pandemic (April 1, 2020, to March 31, 2022). The state governments could examine and provide further zero periods based on the local conditions and circumstances, it recommended.
Induct co-developers for project completion
For harnessing additional funds to ensure project completion, the committee suggested allowing developers to induct co-developers, either for the entire projects or specific parts thereof without any permission from Noida, Greater Noida, and other land-owning authorities. However, land authorities would be informed of such inductions. This will foster collaborative efforts and expedite completion times, the report stated.
Proposes flexible policy allowing for partial surrender of land
This will give developers a greater degree of flexibility to adjust their commitments based on their operational capabilities. All dues on the surrendered land will be waived off, the committee said in the report. "No penalty/extra interest/extra cost will be charged from homebuyers in projects where state government's rehabilitation package concessions have been availed," the report said.
If a project has excess land, it can provide immediate resources for construction. This land could be used for shopping centres and other such uses. Land authorities should permit this on a payment basis, the panel said.
This optimisation can provide financial relief and expedite project completion, it said, adding that permission to mortgage should be given by land authorities without insisting on 100 per cent clearance of dues so that builders can mobilise resources for completion of projects and payment of dues.
The committee recommended that developers pay 25 per cent of the balance due to the authority after the concessions, within 60 days, as a measure of commitment.
In the report, the panel said that it believes this model package can be particularly beneficial for regions like Noida and Greater Noida and "we encourage all other state governments to consider similar adaptations."
Mandatory registration of projects under RERA
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 of 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.
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