Kolkata: Home buyers, whose funds remain stuck in incomplete housing projects for a long time due to builders’ failure to stick to assured construction schedules, don’t feel reassured by the apparently favourable interventions of courts, Competition Commission of India and Union government by way of amendments to relevant acts.
Over five lakh home buyers are currently victims of incomplete housing projects in seven large cities—National Capital Region (NCR), Mumbai, Kolkata, Chennai, Bengaluru, Pune and Hyderabad. Of the seven, the problem is most acute in NCR. In addition, there are sufferers in tier two and three cities, though the incidence of default may not be as pronounced as in the seven large cities, according to the president of Forum For People’s Collective Efforts, which looks after the interests of home buyers.
The forum’s president Abhay Upadhyay, who is also a member of Central Advisory Council of Real Estate Regulatory authority (RERA) under the Ministry of Housing and Urban Affairs, told NewsClick that, their organisation has urged the Union government to create a stress fund to tackle the problem and offer relief to the lakhs of people whose funds are stuck in incomplete projects as the situation has assumed serious proportions. According to information compiled by the forum, the time over-run ranges from two years to seven-eight years. There are some cases where the time over-run extends to a staggering 10 years, giving the ventures the look of abandoned projects.
Some idea of the quantum of funds involved in the incomplete projects may be had from the fact that average price of the dwelling units is in the range of Rs 35-50 lakh per unit. It is safe to assume that 40-60% of the value per unit have already been paid in instalments to the builders.
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The next important suggestion of the forum to the Centre is that all the incomplete projects should be handed over to public sector undertakings, which are operating in the construction segment with requisite resources and proven expertise.
The housing ministry should set up a task force to prioritise projects – projects incomplete but where progress has been maximum should be taken up first. Progress already registered should be a key criterion for determining the priority for completion with support from the stress fund, supplemented with proceeds from sale of unsold units, collection of balance from parties who have made part-payments and sale of seized personal assets of builders who, it is established, have diverted home buyers’ funds. The task force should also be assigned the responsibility of monitoring implementation by PSUs.
On being asked what has been the reaction of the Centre to the suggestion for setting up a stress fund, Upadhyay said that his “impression is that the government has made note of it”. An indication that the finance ministry may be considering the proposal for a stress fund can be gleaned from the remarks of Housing and Urban Affairs Secretary Durga Shanker Mishra at an event organised in New Delhi on Monday (August 19) by National Real Estate Development Council, whose parent organisation is the ministry.
“The discussion for stress fund is on in the finance ministry, according to my information. The proposed stress fund will not only be for the real estate sector but also for other infrastructure sectors, including power”, a PTI report quoted Mishra as saying.
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Now, about favourable amendment to relevant acts, court verdicts and Competition Commission (CC) ruling. The Supreme Court on August 9 upheld a central law, which empowered harassed home buyers to initiate bankruptcy proceedings against errant real estate builders. The judgement confirmed the constitutional validity of the Insolvency and Bankruptcy Code (Second Amendment) Act of August 2018, which gave home buyers the status of “financial creditors” with power to vote in the Committee of Creditors. Financial creditors have the highest priority in the distribution of proceeds from asset sale and liquidation.
In a recent ruling, the CC imposed a fine of almost Rs.14 crore on Jaiprakash Associates for abusing its dominant market position by imposing unfair and discriminatory conditions on home buyers. The company, referred to in the ruling as the Opposite Party, perpetrated undesirable industry practices causing substantial harm to competition and consumers. It also ignored its responsibility as a dominant player to set fair standards of industrial practices for other players in the market to emulate.
This ruling also informed the public that the scheme of the Competition Act and regulations made thereunder do not provide for withdrawal of the information filed under Section 19 of the Act. In this case, the complainant at a later stage of the proceedings wanted to withdraw the case contending that all the pending disputes with the firm had been settled.
The Supreme Court verdict and the CC ruling are in favour of home buyers but do not have immediate relevance for those who have already paid the instalments, which are at stake, and who are waiting indefinitely to get possession of the dwelling units, explained informed sources. Steps to set up the suggested stress fund and resumption of construction activity alone would be reassuring for them, they added.