Promoters Of Stalled Real Estate Projects Must Be Barred For Life: Homebuyers' Body FPCE Suggests

Homebuyers' body FPCE has suggested that promoters of stalled real estate projects must be barred for life, besides conducting forensic audits to ascertain the diversion of funds, making projects financially unviable.

Forum for People’s Collective Efforts (FPCE) president Abhay Upadhyay has written to Amitabh Kant, Chairman, Committee on Stalled Projects, suggesting measures for the revival and completion of stuck projects across the country. 

The panel held its second meeting on May 8 to examine the issues related to legacy stalled projects.

In an order dated March 31, the Union Housing and Urban Affairs Ministry has set up a 14-member committee headed by former NITI Aayog CEO Amitabh Kant to examine issues related to stalled real estate projects and recommend ways for their completion. The panel will submit a report within 6 months from the date of its first meeting.

Upadhyay in the letter suggested that an exercise should be done on a pan-India basis to identify projects, which are delayed by more than 5 years, and/or are completely stalled. A state-wise list of such projects should be made with all the necessary details.

After identifying projects, all such projects must be categorised into Financially viable projects, Financially unviable projects and Projects stalled due to reasons other than a paucity of funds.

For completion of long-delayed/stalled projects, Upadhyay suggested that "as a thumb rule, the promoter of the such stalled project must be removed completely".

The work should be given to a new promoter unless the project cannot be completed without the continued involvement of the original promoter, he said.

"Promoters of such stalled projects must be barred/blacklisted for life from undertaking any real estate projects, which involve the sale of dwelling units," said Upadhyay, who is also a member of the central advisory council constituted under RERA (new realty law).

If such promoters are doing projects through some other companies or brand names, those projects/companies must be taken away from them and merged with their stalled projects.

For financially unviable projects, Upadhyay said it must be found by carrying out a forensic audit if the promoter has diverted the funds from the projects, in which case the promoter must be stripped of his personal assets to augment funds.

Besides, all possibilities must be explored to augment additional resources, such as allowing extra area for construction.

"After all avenues of raising additional resources are exhausted for financially unviable projects, a separate corpus fund may be formed to give financial grants to such projects so that they can be completed without putting any extra burden on the homebuyers of such projects since they are already under tremendous stress due to their life savings stuck for a long time," he said.

A separate corpus from the SWAMIH fund should be considered to provide funds for working capital needs to immediately start the project, especially which are financially viable, the association said.

For projects which are stuck for reasons other than financial paucity, the reasons must be identified and related experts must be assigned the task to find solutions by taking up the issues with the governments, departments and authorities concerned.

"It also must be ensured that the promoters of such long-delayed projects are not given any immunity from legal proceedings that might be going on against them," Upadhyay said.

Indian real estate sector has been plagued with the problem of significantly delayed and completely stalled projects for the past several years, affecting the interest of lakhs of homebuyers. 

The problem is more pronounced in Delhi-NCR, one of the biggest property markets in the country. 

Jaypee Infratech, Unitech, Amrapali and The 3C Company are some of the big companies whose projects are stalled in Delhi-NCR.

There are many other builders who have defaulted on their promises to deliver their projects on time to customers, who have already paid almost the entire purchase price.

Not only that, but aggrieved homebuyers are also paying interest on home loans with no signs of any quick resolutions.

Against defaulting builders, homebuyers have approached various courts as well as the National Company Law Tribunal (NCLT) to secure their investments.