News: Realty bites: 33 lakh families across India suffering from problem of project delays-15.11.2017

Realty bites: 33 lakh families across India suffering from problem of project delays

As many as 33 lakh families who have invested their hard earned money in real estate across 50 cities in India are suffering from delay in completion of residential projects. This accounts for almost 62 percent of under-construction housing projects that have been delayed for anything between 6 months to 24 months, says a report by Liases Foras, a real estate research firm.

“There are multiple reasons for these delay in possession of housing units – there have been several judicial interventions in the past due to which projects have been delayed, there have been regulatory compliance issues, between 2007 to 2009 builders when for an exuberant price regime – as prices went up, they went on a land hunting spree as a result of which the price of land today is 10 times that of prices in 2005. They purchased land at higher prices as a result of which prices of projects went up and affordability of people went down,” says Pankaj Kapoor, managing director, Liases Foras.

While the Real Estate Regulatory Act or RERA is aimed at bringing developers in line by ensuring that projects are not launched without approvals being in place, it has little teeth to solve issues pertaining to delays concerning ongoing projects as in most states these are outside the ambit of RERA.

RERA only aimed at ensuring new projects do not get delayed

“For this, it may be a good idea to rate the level of risks associated with real estate projects. That can help the government to come up with a strategy to make builders fall in line. The government can even consider putting in place a stress fund to help delayed projects, ask developers to come on board to complete unfinished projects but all these have their own challenges,” he says.

There are also a large number of housing projects where work has been delayed for more than five years, says Abhay Upadhyay, president of the flat buyers’ body, Fight for RERA, adding that the real estate regulation Act is only aimed at ensuring that new projects do not get delayed. It has its own challenges when it comes to delay in ongoing projects.

Many states like Telangana, UP, Haryana, Karnataka etc have diluted their rules and have left many ongoing projects out of the ambit of RERA and thus those projects are not monitored and many may never be completed.

Further, there is no report that in case of ongoing projects, developers have deposited 70 percent of the unutilised money already collected from the allottees in a separate bank account which would have signalled restarting of stalled projects. In the absence of such a confirmation there is every possibility that construction in those projects is not yet begun despite the project being registered under RERA, he says.

“Keeping that in mind, we had written a letter to prime minister Narendra Modi requesting him to constitute a high-level empowered committee to identify such risky ongoing projects and take pro-active steps to ensure that in future there is no Jaypee Infra or Unitech like cases. It must be noted noted that the real estate authority does not have the power to compel any builder to arrange funds by monetising assets from other group companies owned by him. In such a scenario, a high-level committee can play a major role as it will have the power to compel developers to arrange for funds from sources outside the projects that have been delayed,” says Upadhyay.

RERA cannot ensure completion of projects that are in danger of being abandoned

It does not have the authority to force builders to complete the projects by getting in money from associated companies. Thus, it has no power to get projects that are in danger of being abandoned completed.

It simply states that the real estate authority may, on receipt of a complaint revoke the registration granted to the developer if the promoter defaults or violates the terms and conditions of the approval or is involved in any kind of unfair practice or irregularities which includes making a false or misleading representation concerning the services.

It also states that once the registration of the promoter is revoked, the authority can debar the promoter from accessing its website in relation to that project and specify his name in the list of defaulters and display his photograph on its website and also inform the other Real Estate Regulatory Authority in other states and union territories about such revocation or registration.

It can also take steps to freeze the account, and thereafter take such further necessary actions, including consequent de-freezing of the said account, towards facilitating the remaining development works to protect the interests of homebuyers. Under extraordinary circumstances, the authority can consult the government of that state to take action as it may deem fit including the carrying out of the remaining development works by competent authority or by the association of allottees or in any other manner, as may be determined by the Authority.

The Central government had recently informed the Bombay high court that in Maharashtra alone, 5.3 lakh apartments in under-construction projects were delayed, and that more than one-fifth of these were delayed by more than three years. The court had asked the housing and urban development ministry to provide details and the number of delayed projects.