Developers, financiers will have to take ‘haircuts’: Committee on stalled housing projects suggests

“The report appropriately addresses all facets & dimensions of diverse issue of legacy-stalled projects. The recommendations will pave the way for completion of stalled housing projects & provide much-needed relief to the lakhs of homebuyers,” Puri said in a post on Twitter/X.

The committee, formed on March 31 with a six-month tenure, held five meetings with stakeholders – homebuyers, banks, developers and regulators. A MoHUA official said the report had been sent to states, which will decide on its implementation.

“The Indian Banks’ Association (IBA) has estimated that 4.12 lakh stressed dwelling units involving Rs 4.08 lakh crore are impacted in these stalled real estate projects. About 2.40 lakh stressed dwelling units of these are situated in NCR. If 75% of these stressed units are resolved, it will add about three lakh units to the housing sector,” the report said.

The committee recommended state governments make a rehabilitation package for which developers would have to commit to a three-year completion timeline. The report gave the example of a package for Noida and Greater Noida. This included a ‘Zero Period’ from April 1, 2020, to March 31, 2022, where interest and penalties would be suspended due to the Covid-19 pandemic and court orders putting a stay on construction within 10 km of the Okhla Bird Sanctuary.

It recommended allowing “co-developers” to help developers complete projects and a partial surrender policy in which developers can surrender unused land against their outstanding dues. The committee also recommended that plan approvals be extended by three years without payment to the Authority. It said no penalty or extra interest would be charged from homebuyers of projects under the state government’s package. The report said the use of the Insolvency and Bankruptcy Code should be a last resort.

The committee suggested that the Real Estate (Regulation and Development) Act, 2016, a provision for registering projects with the respective Real Estate Regulatory Authority (RERA), must be enforced.

One of the issues plaguing homebuyers is the delay in getting registration or sub-lease from authorities despite the project being completed. This, the committee noted, was largely due to builders defaulting on their dues to the authorities.

“In light of these findings, the Committee strongly recommends immediate registration/execution of subleases in favour of these rightful homebuyers. This should not be contingent on recovery of dues from the builders,” the report said.

The panel also recommended that the RERAs identify projects that are mostly complete but haven’t been delivered to buyers due to administrative hurdles like not having no-objection and completion certificates. There should be a resolution for such projects in 30 days, it said.

Reacting to the report, Abhay Upadhyay, member of the Central Advisory Council under RERA and a homebuyer representative who met with the committee along with his group, the Forum for People’s Collective Efforts, said: “The initial reaction is that the report has taken care of homebuyers. It is helpful that the committee has recommended de-linking the grant of registration from recovery of dues from builders.”

He added that the fact the committee had recommended setting up escrow accounts for each project, which is a requirement under RERA, “means that they found it was not happening. This raises doubts on the functioning of RERA”.