Handing over ‘nearly ready’ flats part of revival strategy
NEW DELHI: A 14-member expert committee on stalled real estate, headed by Amitabh Kant, has recommended a slew of measures to revive them, including handover of flats on an “as is where is basis”
in projects that are nearly ready with homebuyers exempted from paying the remaining dues to the
builder. It has suggested financing windows that will include additional facilities for existing home loans by
restructuring them and treating them as “standard assets”, while making funds available to developers at a
low cost. The main focus of the recommendations submitted to the ministry of housing and urban affairs is to make
the project viable, for which it has recommended measures ranging from a moratorium or a zero period
for disruptions caused by Covid-19 or events such as the ban on construction around the Okhla Bird
Sanctuary. Several of these steps were reported first by TOI on Thursday
The committee has suggested a reduction in interest (and linking it to SBI’s marginal cost of lending rate
of June 1, 2020), allowing co-developers in the projects, permission to partially surrender land,
monetisation of excess land and higher floor area ratio to make the projects viable. Once a builder opts for
the “rehabilitation package”, it will have to pay 25% of the dues within 60 days and the remaining 75%
over three years at simple interest.
In cases where developers do not opt for the revival package, the panel wants the state or the real estate
regulator to step in and appoint an administrator wherever the project is delayed by two years.
The administrator will be tasked with selecting a new contractor, with all agencies involved expected to
take a haircut in line with the rehabilitation package and ensure that homebuyers have a say in the
decision-making.
The state RERA will also have to identify projects where construction is substantially complete and can
be handed over by ensuring that the required approvals are given. In these cases, properties that are almost
ready can be handed over to homebuyers, who can complete them without paying the last instalment to
the builder.
The committee, which had representatives from the Centre and states, has proposed that Swamih, the fund
for revival of stalled projects, should be asked to arrange for money on a priority basis and banks should
provide loans at a lower cost, based on a guarantee. This is a model that was used post-Covid to offer
relief to MSMEs.
For those with a home loan, and whose account has turned non-performing due to the delay, the proposal
is to treat them as “standard assets” for the additional disbursements of existing mortgages which are
restructured. “Banks should be allowed to offer fresh finance to new buyers who purchase new inventory
in the stalled projects,” a member of the panel said.
While providing funds, the committee wants to ensure that the money is first used to complete the
projects and no cash flow is shared with the original promoters till work is finished and all dues of lenders
and land-owning authorities are cleared.
As reported by TOI, the committee has proposed tweaks to the Insolvency & Bankruptcy Code and said
that it should be used only as a last resort in case of real estate and wants state governments and banks to
avoid “unnecessary” litigation.
Several cases, where the committee of creditors has cleared the plan, have been held up due to litigation
in the National Company Law Tribunal or other legal forums.
Five new NCLT benches have also been proposed to fast-track cases.
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