“Despite RERA, most of the ongoing projects have not been completed. It is time now to end this problem by creating a stress fund to the tune of at least Rs 10,000 crore to complete stuck real estate projects on pan India basis. The objective should be to complete all pending real estate projects pan India within a span of five years by providing for such stress fund continuously for the next five years,” said Forum for People’s Collective Efforts in its recommendations to the finance minister Nirmala Sitharaman.
“This will clean up the sector, infuse rapid development, restore faith in the sector and with strict implemtation of RERA, the chances of recurrence of such delays will be minimal,” it said.
The body has also recommended that the government constitute a task force under the ministry of housing and urban affairs to identify projects that are close to completion. “These should be taken up first for completion. Public sector enterprises that may be assigned the job to complete such projects under the supervision of the task force should also be identified,” the forum said.
It has also suggested that promoters of incomplete projects that utilise funds from the stressed asset fund, should be stripped of all their assets, including personal and company assets to realise the entire funding utilised for completion of these projects.
“They should be barred from carrying on the business for a lifetime. To achieve this within reasonable time, power may be given to authorities for seizure and attachment so as to complete the entire exercise within six months,” the homebuyers’ body said.
As per ANAROCK data, the top seven cities currently have a total stock of 5.6 lakh delayed housing units worth ₹4,51,750 crore. These units were launched either in 2013 or before that. Lakhs of buyers across top cities – particularly MMR and NCR – have been left in limbo, leading to inconceivable mental stress and financial pain.
Top cities like NCR and MMR collectively account for 72 percent of the total stuck housing units across the top seven cities worth Rs 3,49,010 crore – nearly 77 percent of the total worth of the stuck projects. In comparison, the main Southern cities of Bengaluru, Chennai and Hyderabad together account for a mere 10 percent of the overall stuck housing units of a total worth of Rs 41,770 crore. The Southern cities have predominantly been driven by service-class end-users, leaving limited scope for developers to be unprofessional.
The demand to create a stress-asset fund had been put before the government previously as well, largely because the sector has been reeling under one of its worst liquidity crises further aggravated by the NBFC crisis in 2018. The fact that nearly 5.6 lakh housing units worth a whopping Rs 4.5 lakh crore in top 7 cities are stuck under various stages of non-completion indicates that there is a dire need to create stress-asset fund which will help bail out lakhs of distressed homebuyers. With many developers of these stuck projects facing severe liquidity crunch, it is imperative that the government comes forward to aid the aggrieved homebuyers and also unleash the sector of its woes of stalled projects, said Anuj Puri, chairman – ANAROCK Property Consultants.
Earlier this year, real estate body Naredco had said that the realty sector is undergoing a ‘crisis situation’ and demanded that the government should intervene by infusing Rs 2000 crore in a stressed asset fund to kickstart construction in stuck housing projects.
“The stressed fund of Rs 2000 crore will be the maximum amount required to put back 2.5 lakh apartments. This will be funding only for an intermediate period to help complete stalled projects of developers having negative net worth. Additional funds would come from sale of unsold units, customers’ collections and monetisation of surplus land with the developers concerned,” it had said.
“We feel that a stressed asset fund can be created by the government itself. Better way would be that the urban development body take back the land parcel bought by builder which has not been developed. The amount paid for by the builder that is required to be refunded should not be returned directly to the builder but put in an escrow account. This escrow fund should be utilized to complete the unfinished project. The government can take back the land and auction it in good time,” Chairman Naredco, president PHD Chamber of Commerce and Industry and CEO DLF, told sources in an exclusive interaction.
Source: Moneycontrol, June 23,2019