What do homebuyers and developers want in the New Year?

As we roll into 2023, thousands of homebuyers are still stuck with undelivered homes or apartments -- supposedly completed, but without the facilities promised in snazzy brochures.

Over 500,000 housing units remain stuck in various construction stages across the Delhi-National Capital Region (NCR), Mumbai Metropolitan Region (MMR) Bengaluru, Chennai, Hyderabad, Pune and Kolkata.

Hundreds of thousands of homebuyers who are yet to receive possession of their apartments are paying not only Equated Monthly Installments (EMIs), but also rent.

Their troubles do not end there. Thousands who have received the keys to their homes, which had been expected to come with swanky club houses, swimming pools and even rooftop restaurants, are stuck with a gated community existence bereft of such facilities.

Elevators either don’t exist or don’t work. Power is still supplied by diesel generator sets, water by tankers and a car park in the basement is either still a work-in-progress or doesn’t exist.

Many real estate cases are still stuck in insolvency courts.

Since India's Insolvency & Bankruptcy Code (IBC) was implemented in 2016, 25,225 cases involving a total of Rs 10.5 trillion have been disposed of under its Sections 7, 9 and 10.

A joint report by property consultant ANAROCK and law firm Khaitan & Co pointed out that while real estate cases comprises just 5% of all cases filed under the IBC, their resolution rate is among the lowest.

RERA

Also, when it seemed that the Real Estate (Regulation and Development) Act, 2016 was the best mechanism to resolve diverse grievances of homebuyers and help eradicate problems like project delays and mis-selling, it has now emerged that more than 38% of the total 4,555 lapsed real estate projects in Maharashtra, registered as ‘new projects’ after the Maharashtra Real Estate Regulatory Authority (MahaRERA) was set up in May 2017, have now been delayed.

As many as 2,789 projects that have lapsed were old projects delayed by more than six years and registered with MahaRERA as “ongoing projects.” The remaining 1,766, or around 38%, were projects launched after May 2017, whose registrations also lapsed.

Will 2023 come to the rescue of homebuyers, should they still nurse hope? 

All pre-RERA/legacy projects should be looked at seriously, especially those that are still incomplete. Issues facing them should be resolved and possession of completed units be handed over to buyers, some of whom are waiting for their homes for more than a decade.

A task force to look into these stuck projects should be constituted immediately, says Abhay Upadhyay, president of the Forum for People's Collective Efforts, a pan-India homebuyers' body.

Considering that MahaRERA was the first RERA to be set up in the country, the fact that around 40 percent new projects have been delayed is worrisome and reflects the state of affairs. If this persists, RERA could well be headed towards failure, he says.

Mutual Fund example

To strengthen RERA, lessons should be learnt from Securities and Exchange Board of India (SEBI) that does not allow Mutual Funds that have defaulted to to launch new funds.

All regulatory authorities should make sure that builders who have not delivered projects on time be denied RERA registration numbers at the onset so that they are compelled to complete old projects before launching new ones, he says.

Last but not the least, incomplete real estate projects should not be handed over to buyers, Upadhyay added.

And what is it that the builders are looking forward to? 

According to Niranjan Hiranandani, national vice chairman of the National Real Estate Development Council, the Information Technology (IT), and IT-enabled services policy framework that can augment commercial real estate development and other asset classes such as residential, retail, logistics, industrial and data centres should be adopted.

“Statutory and government approvals should be also brought under the purview of RERA while stating the accountability for delays in approvals, causing delays in project delivery,” he adds.

Affordable housing

Affordable housing needs a push by the government because sales and new supply in this segment faltered during the pandemic. The affordable housing supply by private entities has reduced significantly since Covid-19, largely because buyers suffered economically and went into a wait-and-watch mode.

Now, there is a need to make this segment attractive again, not least because it resonates well with the government’s housing for all initiative, says Anuj Puri, chairman of ANAROCK Group.

For this, the government needs to seriously reconsider revising the pricing of homes within the affordable housing budget city-wise. While the size according to its definition (60 sq. m. carpet area) is fairly appropriate, prices of units is definitely not viable across most cities.

For instance, for a city like Mumbai, a Rs. 45 lakh budget is far too low and hence it needs to be increased to at least Rs. 85 lakh. Similarly, in NCR, buyers have to go out to the peripheries to buy affordable homes which are unfortunately not very accessible by public transport or are fairly low on the livability index, he said.

One major reason that will benefit homebuyers is that with this price revision, more homes will fall within the affordable price tag and more buyers can avail of multiple benefits under affordable housing such as lower Goods and Services Tax (GST) rates at 1% without input tax credit, government subsidies and the most tax deduction of  Rs 3.5 lakh on interest repayment of home loans. This will attract more buyers to take the plunge and push demand.

There is an express need for more tax sops for homebuyers as well as investors. The Rs 2 lakh tax rebate on housing loan interest under Section 24 of the Income Tax Act needs to be hiked to at least Rs 5 lakh; this will add momentum to housing demand, particularly in the affordable segment, which the developers will surely hope for in 2023, Puri added.