Sovereign entities’ real estate solutions are an example for DDA to follow

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The Uttar Pradesh Real Estate Regulatory Authority (UP RERA) posted a big win last week when it partnered with the Jaypee Group and its buyers to get the Kalypso towers completed and ready for handover. Located in WishTown in Gautam Buddha Nagar, this was the first project rehabilitated by the UP RERA under Section 8 of the Real Estate (Regulation and Development) Act.

Towers 7 and 8 were granted occupancy certificates and about 148 buyers can now be offered possession by the developer. The occupancy certificates for towers 11 and 12 are being processed and all 274 buyers will then be able to get possession of the flats they had booked in 2010-11.

In ironing out issues to take the project through to completion, the UP RERA established processes that have now come to be known as the ‘Kalypso model’ in the real estate sector.

The promoter had registered the eight towers with the UP RERA in 2017, but could complete only four by the time the registration expired. In July 2020, the UP RERA granted the promoter 18 months to complete the remaining towers.

This had the support of over 50 percent of the buyers, who had formed the Progressive Welfare Society. Escrow accounting the builder’s initial fund helped kickstart the project and establish trust among the buyers. Under meticulous supervision of the UP RERA, the project progressed despite Covid-19 challenges and the developer applied for occupancy for towers 7 and 8 in December 2021 and for towers 11 and 12 in May 2022.

All Parties Engaged

The important aspect of the process was the appointment of a construction consultant by the UP RERA who was able to address the day-to-day operational issues. With the involvement of the allottees, all parties were fully engaged in the common mission of getting the project completed.

In any dispute, both warring factions typically take extreme positions. Getting them to give some and take some and evolve a process by which the common goal can be achieved is usually possible for a government-backed entity. However, unless a clear line of action is drawn up and meticulously monitored, this does not go through.

In the end, the process that evolves can function as a template to address other such problems. The UP RERA now intends to apply the same formula in 14 other projects across the state. Having a strong leader in chairman Rajive Kumar, backed by an efficient team of officers, helped the process to evolve and stay on track.

Similar success was achieved by the Special Window for Completion of Construction of Affordable and Mid-Income Housing Projects (Swamih) investment fund set up by the government of India, with SBICAP Ventures its investment manager.

Again, with a strong leader in chief investment officer Irfan Kazi and team, the method of completing stalled projects in minimum time without time and cost overruns was achieved. The trick here was meticulous detailing, assessment and a clear intent to deliver. Since 2019, about 251 projects amounting to 150,000 units have been given preliminary or final approval. About 7,200 units in 13 projects have been completed.

Again, with sovereign backing, the framing of rules and implementing them and enforcing adherence was possible. Since the mandate was clear, Kazi and his team could override the risk assessment that traditional lenders were bound by and lend to projects that had future potential but poor past track record.

Efficient System

Also, the entire purpose of the effort was completion at any cost. All funds and receivables were deployed across different phases of the project simultaneously and the entire project could be kick-started.

No money was paid to intermediaries. All vendors and service providers were paid directly by Swamih, creating an efficient system of trust and competence. As a result, not only did projects start getting completed, but Swamih could also exit early projects with 12 percent returns and deploy those funds in more projects.

This wave of positive activity was possible because of clarity of purpose and a robust system that was evolved and implemented across projects. Government backing and a clear mandate, like that of the UP RERA, was the first step to success. But a strong sense of commitment by the leaders, reflected in the teams on the ground, and an uninterrupted line of credit alone could have achieved such dramatic results.

Delhi Land Pooling

Now, let’s see what happens when a government entity, which left a nebulous promise in the market, withdrew its overt support of a project. The much-awaited Delhi land pooling project elicited investments in the range of Rs 40,000 crore to Rs 45,000 crore by various entities.

The promise was that the aggregation agency would be the Delhi Development Authority, which would allow non-contiguous land to be aggregated as one unit. The land owners would get 60 percent of continguous developed land back in return. The development authority was to be the DDA.

To make the project viable, a floor area ratio (FAR) of 400 had been promised. Finally, when the land pooling policy was announced, the FAR was halved to 200, reducing viability.

In addition, the entire activity was made sector-wise, with the largest developer or group of developers to form the development entity for a sector. As soon as a nebulous private entity with a vested interest in how the cookie crumbles takes charge, trust and transparency go out of the window and the entire exercise is still hanging fire.

The only way forward for the Delhi land pooling activity is if the DDA itself gets into the driver’s seat and frames non-partisan rules for the benefit of many and not the privileged few. The UP RERA and Swamih fund are proof of the success of this model. Can the DDA bite the bullet and work for the greater benefit too?

E Jayashree Kurup, Director, Real Estate & Cities, Wordmeister Editorial Services, writes on real estate and housing. Views are personal, and do not represent the stand of this publication.