Karnataka real estate regulator asks association of allottees to take over delayed project in Bengaluru

As per the resident welfare association estimates, the project requires Rs 83 crore to be completed.

Karnataka's Real Estate Regulatory Authority (KRERA) has allowed the resident welfare association (RWA) of one of the Bengaluru projects to take over its completion after the developer failed to complete it.

Until Q1FY22, 65 apartments out of 132 at the project Hanging Garden were sold.

"The Authority hereby permits the association of allottees to take over the project under Section 8 of the RERA Act and complete it within 18 months. Any liability on the sold units, including the title transfer, shall be the responsibility of the developer," the KRERA said in an order on August 3.

Section 8 of RERA empowers authorities to hand over the completion task to the buyers' association. It comes into force when the RERA registration lapses.

The developer Orchid Elite Developers Pvt Ltd had failed to complete the project despite obtaining a Covid extension.

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Sub Editor|Moneycontrol

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The case

The RWA said the project remained 50 percent complete since 2016 with only the skeleton structure, brick walls and plastering done. The initial 45 customers or majority of the buyers have paid more than 80 percent of the price, aggregating to about Rs 47 crore.

The KRERA noted that the RWA was previously registered under the Karnataka Societies Registration Act 1960. The Authority directed them to be registered under the Karnataka Cooperative Societies Act 1959 to take over the completion of the project.

As per the RWA estimates, the project requires Rs 83 crore to be completed. Both the developer and the RWA had promised to complete the project.
While the RWA plans to partner with another company SLV Infrastructure, the developer had initially formed a partnership with Nestoya Homes Pvt Ltd.

"On going through the submitted documents, the Authority felt that the developer partnership will not work out due to a lack of responsibility, accountability, and unproven creditworthiness of the partnership," the KRERA said.

The bench also found inconsistency in records produced by the developer regarding quarterly and annual updates; sold and unsold units.

The order

The KRERA noted that following the handover, the association will execute the project, pay delayed compensation for 39 cases, and manage the pre-EMI of the homebuyers.

"The project registration expired in 2021 and the developer did not opt for registration under the KRERA. The promoter has also failed to complete the project seven years after signing the sale agreements with the homebuyers," it said.

Thus, the KRERA found that the defaults on the part of the developer were significant and had affected the allottees over time. Following this, the KRERA asked the RWA to take over the project and complete it within 18 months.

It also said that the existing bank account of the developer will be frozen while the financial transactions will be maintained by the RWA in a separate account.

A list of questions has been sent to the developer and Moneycontrol will update this report after receiving a response.