Bottom Line: Track2Realty debates whether amnesty given to the developers by the banks, development authorities and the courts actually serves the purpose of safeguarding homebuyersâ€™ interests. Â Â Â
Contrary to the general perception that the eco system is getting tougher for the builders due to home buyersâ€™ activism, vigilante media and judicial intervention, the facts suggest that the developers have been given too long ropes to cross the bridge over the buyersâ€™ interests. As a matter of fact, there are many instances of amnesty to the developers in the last few years.
When the homebuyers of Amrapali in Delhi-NCR announced massive protest, the Noida administration immediately intervened to deny permission of protest with Section 144 and instead asked the buyers to come to table with the builder
The authorities of Noida, Greater Noida and Yamuna Expressway that allotted the land parcels to developers on deferred payment have time and again heeded to their request to reschedule the payment plan when the builders have defaulted
The authorities of Noida, Greater Noida and Yamuna Expressway cleared an exit policy for developers if they fail to fully or partially complete project after land being allotted
In the wake of non-payment to the banks the builders have on many occasions been allowed to restructure the payment
In some instances even the courts have granted the developers extra time to complete the project with strict warning or some fine
The Supreme Court has given stay on the demolition order of extra towers by High Court with project Emerald Court by Supertech
UP and Gujarat dilute RERA law; UP provided four exemptions to exclude incomplete projects from the category of â€śongoing projectsâ€ť, Gujarat has exempted all projects launched before notification of the rulesÂ
All these instances clearly suggest that once the home buyers have made the payment to the builder, the policy makers and the judiciary take a lenient stand to offer the developers amnesty. The basic philosophy is that any punitive action against the developers will hurt the delivery timelines and hence the buyersâ€™ cause.
The moot point nevertheless is that amnesty to the builders is at what cost and for whose benefit. The home buyers allege such amnesty does not help their cause and rather give the developer an escape route.
Gaurav Gupta, a home buyer in Paras Tierea, Sector 137, Noida is extremely critical of such amnesty to the builders. According to him, instead of penalizing the builders if they are offered amnesty after failing to fulfill their business commitment then the policy makers are setting a bad precedent for the future.
â€śTo the best of my knowledge majority of the builders in Uttar Pradesh and Haryana who were offered amnesty have failed to take advantage of it and correct their wrong doings. This is what compels the buyers to take it to streets. Unfortunately, there is no amnesty for buyers if they default,â€ť says Gupta.
Grey zones with amnesty to buildersÂ
Majority of the builders who are beneficiary of various amnesty schemes have failed to reverse their fiscal mismanagement or delivery delays
Amnesty to builders lends a perception that builders who have compromised with the buyersâ€™ interest can get away without getting penalized
There is no mechanism to verify whether the builder has defaulted by will or due to market dynamicsÂ
The developers naturally have reasons to stand with the peer group. Vineet Relia, Managing Director, SARE Homes maintains that considering that the real estate sector has been facing a slowdown in the wake of weak demand, measures like these are important in sustaining momentum to some extent. Some development authorities like Greater Noida have restructured their payment plans to help allottees, while restructuring of debt by banks is a move to tackle mounting bad loans in the banking system and bring relief to the banks.
â€śWhile the recent judgment of NCDRC does place a higher financial burden on developers, but the move will only help improve efficiency and transparency in the sector. Â While these measures are welcome, the realty sector is yet to come out of the slump which can only happen when demand picks up,â€ť says Relia.
Parth Mehta, Managing Director – Paradigm Realty feels quasi ownership in real estate makes it so unique that policy adaptations are required to suit the real estate sector. Till the time the project is not delivered the ownership doesnâ€™t get fully transferred. The turnaround time for a project delivery is generally 3 to 4 years and when the business cycle changes it generally hurts the project during the execution, thus buyers as well as builder is affected.
â€śIn my view such amnesty definitely helps to solve buyers and builders problems at large.Â Amnesty provided to builder helps in getting the possession or regularization of the flat, thus at any given stage even with certain loss of time buyer receives the possession or occupation of the flats. In the final analysis buyers are definitely getting benefited,â€ť says Mehta.
Interestingly, these amnesty schemes are not just Indian reality. In the neighbouring Pakistan too the government is designing an amnesty scheme to address the concerns of the real estate sector, which was reflected in freezing investment and reduced number of property transactions.
The only difference is that in Pakistan the policy makers have favoured a targeted amnesty, which could benefit genuine property buyers and real estate developers rather than those parking their ill-gotten money in plots. Thus, it is a purpose specific amnesty for real estate developers and first time property buyers.
In India, it is an awkward situation in the real estate sector today where amnesty to builders is lending credence to the perception of the developers getting escape route. While exceptions are always there, the general trend has been that of delay in delivering projects which has had a negative impact on the sector. Unless consumersâ€™ confidence is not restored, the sector will not be able to stand back on its feet.
In this context, developers insist that the relaxation to builders is an attempt to help them serve the consumers better by expediting delivery of projects.Â But whether the amnesty is actually serving its purpose is quite debatable today.Â
By: Ravi Sinha