Report from the panel on abandoned real estate projects is submitted

A report on the delayed real estate projects and suggestions for their completion was provided by a 14-member committee established to investigate their condition.

The Insolvency and Bankruptcy Board of India, the National Housing Bank, the Real Estate Regulatory Authority (RERA) of Haryana and UP, as well as officials from the Union Finance Ministry, Uttar Pradesh and Haryana state governments, and the committee was established in March by the Union Housing and Urban Affairs Ministry.

Sunil Mehta, the chief executive of the Indian Banks’ Association, informed the committee that “60% of the stalled projects” had already been purchased, with a capital commitment of Rs. 1.9 lakh crore, which was an intriguing outcome.

Approximately 2.40 lakh (44%) of the 4.12 lakh “stressed” housing units, or Rs. 4.08 lakh crore, were located in the National Capital Region, according to the IBA estimate quoted in the committee’s report. While the Mumbai Metropolitan Region is home to the remaining 21% of the units.

The committee, whose report was given to Housing and Urban Affairs Minister Hardeep Puri, was presided over by former NITI Aayog CEO and India’s G20 Sherpa Amitabh Kant.

Stress is caused by an inability to make ends meet

In its report, the committee came to the conclusion that the “lack of financial viability” that resulted in cost overruns and schedule delays was the primary cause of the stress in these projects.
The issue might be resolved by increasing the projects’ internal rates of return in order to attract finance.

It emphasizes that using the Insolvency and Bankruptcy Code or other judicial interventions should only be done as a last option.

All parties would need to suffer a “haircut” or get less compensation in order for the projects to be sustainable, it said.

The committee reaffirmed the requirement of the Real Estate (Regulation and Development) Act, 2016 that all projects with land larger than 500 square meters or more than eight flats must be registered with the relevant state RERA.

It was emphasized that this law needed to be upheld and that project registration would increase openness.

It also suggested separating the granting of registration or sublease to homeowners by land authorities from the collection of fees from developers. The committee estimates that this would assist roughly 1 lakh homebuyers.

The committee also suggested that the RERA identify projects where purchasers of homes were not receiving no-objection and completion certificates in projects that were essentially finished as a result of administrative challenges. Regardless of whether the developers have paid their dues to the authorities, the authority should accelerate the certificate-granting procedure for such projects.

packages for restarting stalled projects

A major suggestion was that state governments put up a rehabilitation program to restart the delayed projects.

According to the committee, developers that accept the package must pledge to finish the projects in three years. The model package for Noida and Greater Noida was provided as an example by the committee.

This includes a Zero Period for a period of two years beginning with the COVID-19 epidemic in 2020, at which time the government would forgo charging developers with interest or other penalties.

Additionally, the developers would be permitted to hire a “co-developer” to finish the job. In exchange for a remission of the dues for such area, the committee suggested a “partial surrender policy” in which developers may return portion of the undeveloped land to the authority.

Since they are state matters, the majority of the committee’s recommendations are within the jurisdiction of the relevant state governments. The Union Housing and Urban Affairs and Finance Ministries were tasked with acting on some of the proposals, nevertheless.

The committee recommended revising the SWAMIH fund’s minimum Internal Rate of Return and initial charge requirements.

Additionally, it requested that MoHUA provide a thorough plan to the fund Ministry that would allow banks to fund new mortgage loans for prospective purchasers of the unsold inventory of the abandoned projects.