The Forum for People’s Collective Efforts (FPCE), a forum of homebuyers, has sought Prime Minister Narendra Modi’s intervention for interest waiver on home loans. It also wants the extension of project completion by builders to be restricted to only the actual lockdown period.

In a letter to the Prime Minister dated June 1, the association suggested that the government’s policy should focus on homebuyers instead of builders for revival of this sector, reports news agency PTI.

The forum has requested PM Modi to issue directions to the ministry of housing and urban affairs to modify its advisory that provides a blanket extension to all real estate projects across the country for at least six month with an additional three months at states’ discretion, over and above the one year already provided under section 6 of the realty law RERA.

Instead, it said that the extension in projects completion timeline should only be for the actual period of lockdown when construction wasn’t permitted.

“Anything other than this, is patently illegal and should not be promoted by the very custodians of the law,” it said.

Pointing out that the extension in projects’ timelines “increases the EMI, rent, mental agony and harassment,” the letter said that it is the home buyers who need support from the government.

“In-fact, Sir it is the home buyers of the country who are in dire need for support from your government as they are facing unprecedented job losses and pay-cuts,” the letter said.

Last month, Union finance minister Nirmala Sitharaman , as part of the Centre’s economic stimulus to industries affected by the coronavirus outbreak, had said that the Covid-19 pandemic should be considered an event of ‘force majeure’ or an ‘act of God’ and announced to extend the registration and completion date by six months of all projects registered under the Real Estate Regulatory Authority (RERA). This would apply to all real estate project registrations expiring on or after 25 March and individual applications are not needed.

The homebuyerrs body said the government has given a moratorium on EMI payments for six months, but it would only increase the future interest liabilities.

The FPCE has also suggested waiver of interest amount during the moratorium period on EMIs payable by home buyers. It sought amendment in section 24(b) of the Income Tax Act, 1961, removing the 5 years limitation in claiming deductions on interest on home loans.

As shopping malls get ready to open from June 8 with standard operating procedures in place, some heads of malls say that this will lead to rise in maintenance costs by at least 15 to 20 percent.

In order to ensure social distancing norms, mall owners said they have put in place a system that would allow only one person for every 75 sq ft in the mall. They will also have a live feed showing the number of people inside the mall at any given point in time to ensure social distancing norms are not flouted and there is no overcrowding.

Food courts and parking capacity too have been reduced by half. Some malls will be encouraging retailers to take pre-bookings from customers.

"It is important that shoppers should feel safe,"Jayen Naik, Senior Vice President, Operations and Projects, Nexus Malls, told Moneycontrol, adding that even if it leads to additional costs, mall owners would have to bear it for now to ensure that confidence among customers is restored.

The SOPs released on June 4 mandate staggered entry of shoppers into the mall and deployment of adequate manpower by the mall management to ensure social distancing norms.

SOPs state that frequently touched surfaces like door knobs, elevator buttons, hand rails, benches and washroom fixtures in common areas as well as inside shops, elevators, escalators should be cleaned and regularly disinfected using 1 per cent sodium hypochlorite mandatorily.

Deep cleaning of all washrooms shall be ensured at regular intervals. In the food-courts, adequate crowd and queue management is to be ensured and not more than 50 per cent of seating capacity should be permitted, the SOPs underlined.

There should be proper crowd management in the parking lots and outside the premises and preferably separate entry and exits for visitors, workers and goods/supplies should be organized, the SOPs have said.

Physical distancing of a minimum of 6 feet, when queuing up for entry and inside the shopping mall should be maintained as far as feasible while the number of customers inside the shop should be kept at a minimum, so as to maintain the physical distancing norms.

Thermal screening provisions will be placed at the entrance and visitors will be allowed only if they use face cover or masks, which should be worn at all times inside the premises, the ministry has said.

For air-conditioning/ventilation, the guidelines of CPWD shall be followed which inter alia emphasises that the temperature setting of all air conditioning devices should be in the range of 24-30 degree C, relative humidity should be in the range of 40-70 per cent, intake of fresh air should be as much as possible and cross ventilation should be adequate.

Amitabh Taneja, Chairman, Shopping Centres Association of India (SCAI), has welcomed the guidelines put in place to contain the spread of COVID-19.

"The Shopping Centres Association of India has already prepared and circulated an even more exhaustive and stringent SOPs that not only conform to the guidelines set forth by the Health Ministry; to ensure that malls and shopping centres offer the safest possible environment to the shoppers and staff alike," he said.

Nexus Malls has joined hands with a global certification firm Bureau Veritas for their 'Safety First' initiative. The objective of ‘Safety First’ is to comply with optimum standards of health and safety recommendations of the WHO/local authorities are implemented without any deviations, said Naik.

The company has also put in place an app that records not only the number of people entering the mall, but also those exiting it in order to restrict entry if required.

"Sanitation material would be required on a daily basis and additional manpower would have to deployed be it those ensuring sanitation, checking shoppers are the entry or the backend staff. This is sure to increase maintenance costs by at least 15 to 20 percent," he told Moneycontrol.

Mukesh Kumar, CEO, Infiniti Mall, said their malls are fully covered and adhere to all the SOPs.

"There’s hardly anything that we have not planned. As far as costs are concerned, I don’t see costs getting involved in this. SOPs have been developed to ensure that even smaller malls can adhere to them and they can’t spend too much money. We have made sure that we do not have to spend too much on capex and that it remains within the reach of people. A few thousands is what it will cost," he said.

DLF Shopping Malls would be launching a new version of its Lukout app, which would be integrated with the Aaragya Setu app and would have social distancing features.

"All that the shopper would have to do is show it to the camera and get his temperature checked instantly. Since he would be QR coded, he would get priority access into the building," said Pushpa Bector, Executive Director DLF Shopping Malls.

one week post the opening of the malls. We are also trying to do it at the periphery of the building itself so that customers do not have to go through the embarrassment of getting their temperature checked in front of many people. It would be done discreetly. In case they are found with high temperature, they would be politely asked to come back again. Those being dropped off in their cars would get their cars sanitised at the ramp itself," she added.

Every third dollar changing hands on Singapore Exchange Ltd. is because of someone buying or selling units in a real estate investment trust. But has the city’s REIT mania gone a bit too far?  

The coronavirus pandemic has raised hard questions that have only simmered under the surface until now. 

As an asset class, REITs have blossomed in the Asian financial center, where land is in short supply but money is abundant. Singaporeans love property, and the idea of owning units in a trust that passes at least 90% of rental income to investors has always seemed like a better alternative to parking cash in a bank account, especially in an era of near-zero interest rates. 

REITs also became popular because the tiny island, its Asian Tiger years well behind it, doesn’t have many opportunities at home for people to invest in growth. A budding love affair with all things digital and fintech could have infused some youthfulness into the kind of risks the mass affluent are comfortable owning. But before they could blossom, the virus came. It’s unclear if the economic destruction will destroy the fledgling startup culture by making Singaporeans “adverse to risk, and seeking the safety of ‘iron rice bowls,’” as former civil servant Devadas Krishnadas puts it. 

But something doesn’t seem quite right even in the world of institutionalized rent collection. Here too, the pandemic is forcing a revaluation. If a store is unable to sell because people are scared to go out or the government doesn’t want them to, is a six-month moratorium on rents fair? Owners got up to 100% property tax rebates when the disease first threatened to decimate travel and tourism, but many didn’t pass them on fully. Struggling tenants became upset, so Singapore passed a law in April, ordering commercial owners, including REITs, to pass on tax remissions unconditionally and give a moratorium(2) on rent payment if any merchant requests it. 

Landlords are worried. Such a deferment means a near-term cash-flow shock, future bad debts and a degrading of REIT finances that could, in their words, “destabilize the banking industry and Singapore’s financial ecosystem.” Besides, doesn’t capitalism require those who can’t honor contractual obligations to make way for those who can? 

The “creative destruction” argument rings hollow when advanced by landlords who have no problem enjoying state support themselves. Covid-19 will go away one day, but the friction between tenants and landlords will remain. About 10,000 small and midsize tenants have come together to demand a fair tenancy law. The conflict would be productive if it led to a search for new models of risk sharing. 

Looking within the industry may be a good starting point. Singapore-listed Sasseur Real Estate Investment Trust owns retail outlet malls, where the likes of Burberry, Coach and Salvatore Ferragamo hawk new and out-of-season fashion. The properties are in China, and they solve a specific problem: Customers are compensated (and the retailers penalized) heavily if merchandise turns out to be fake. But as CEO Anthony Ang explains, where Sasseur truly differs from Singapore’s other institutional landlords is in its business practices. Instead of paying rent to the REIT, tenants share roughly 15% of their revenue with its Chinese parent. The so-called entrusted manager keeps some of it to run the properties, and shares a fixed sum and a sales-linked variable component with the Singapore trust to pay out to unit holders. 

This risk-sharing formula, which is still fairly uncommon, passed its test in the first quarter, when China took the brunt of Covid-19 closures. The variable portion of the REIT’s revenue plummeted by 55%, in line with tenants’ sales, but the fixed rental went up almost 4%, and the overall take declined by much less. Nervous investors who sold off the stock heavily in February went back in after China reopened. Sales have yet to normalize fully, but confidence is back. 

Can the template be copied? Large Singapore landlords like CapitaLand Mall Trust have come to the business from real estate, unlike Sasseur founder, Vito Xu, who drifted into property ownership after introducing high-end European fashion to Tier 2 Chinese cities, starting in his hometown of Chongqing. Also, Sasseur requires a natural churn: Leases accounting for 65% of revenue will expire this year, offering Xu a chance to bring in new brands to titillate the customer with constant novelty. Singapore landlords typically have three-year contracts, the time a supermarket anchor tenant needs to stabilize footfall.

SBICAP Ventures, the manager for the government's Rs 25,000-crore stressed asset fund, has decided to cut the internal rate of return (IRR) to 12 percent from 15 percent.

While this is expected to help real estate developers in the mid and affordable housing segment to fund their ongoing projects, which may have suffered due to the lockdown and also help expedite the process of buyers getting their homes, experts said the main challenge of existing lenders not willing to give a no objection certificate (NoC) until they receive equal status still persists.

SWAMIH INVESTMENT FUND I is the name of this Rs 25,000 crore special window announced by the government in November last year.

Sources told Moneycontrol that even during lockdown, as many as 50 projects have received preliminary approvals and 8-9 projects have been given final approval. The total funding involved in these 50 projects is over Rs 5,000 crore.

These investments are linked to progress in construction work and will pick up post the lockdown.

"The investments in these projects are construction linked. Since no construction took place on sites in the last two months due to COVID-19, no payment has been released. There is also an escrow mechanism in place to ensure that there is no fund diversion. As soon as lockdown is lifted and actual construction begins on site, we are hoping that there will be a spurt in disbursal in the next two to three months," sources said.

Legal processes involving signing of documents/agreements, stamping will also be undertaken post the lockdown, they said.

Will SBICap’s lowering of IRR to 12% from 15% help?

Irfan A Kazi, chief investment officer, SWAMIH Investment Fund I in a post on LinkedIn said:  "We have taken another step forward to support the real estate sector...Given the extraordinary circumstances, SWAMIH Investment Fund I shall now provide construction funding at a 12% IRR."

While some real estate experts said SBICAP’s decision to reduce IRR to 12 percent is a positive move, others said many issues such as lenders not willing to give a no objection certificate (NoC) still remain.

The reduction in the rates will potentially allow more development companies to approach the fund. This will help the developers in the mid and affordable housing segment to fund their ongoing projects which may have suffered due to the current lockdown, they said.

Secondly, the AIF expects a return on its investments in projects, which is very high given the fact that the projects in the ambit of the fund are "stalled".

This high RoI leads to an increased in project cost, which eventually passes on to the already aggrieved homebuyer.

"Given the current crisis at hand, it is only fair to ask that the fund given by GOI is disbursed quickly to complete stuck projects.  Given the cuts in repo rates announced by RBI to 4 percent, the fund should be given within an expected RoI of 8- 9 percent," Credai had said.

In November last year, the central government announced a Rs 25,000-crore fund to help complete over 1,500 stalled housing projects, including even those that have been declared NPAs (non-performing assets) or admitted for insolvency proceedings. The move is likely to help 4.58 lakh housing units across the country. Only RERA-registered projects with positive net worth will be provided funds.

In February, the government said over Rs 540 crore had been invested in some stuck residential projects.

The alternative investment fund (AIF), set up to provide last-mile funding for stalled real estate projects by the government, had cleared Rs 540 crore for two housing projects in Mumbai and Bengaluru earlier this year. The fund had received maximum deals from NCR and MMR region as also from other five top cities. Deals had also come in from Dehradun, Bhiwadi, Goa, Nashik, Jaipur, Bhopal, Amritsar, Coimbatore, Vizag and Surat.

Real estate body National Real Estate Development Council (NAREDCO) has signed a memorandum of understanding (MoU) with the Uttar Pradesh government to provide employment to 2.5 lakh migrant workers who have returned to the state following the coronavirus pandemic.

The MoU was signed by NAREDCO’s UP chapter in the presence of chief minister Yogi Adityanath in Lucknow on Friday, news agency PTI reported.

“We have signed an MoU with the UP government for providing employment opportunities to 2.5 lakh labourers of UP who have returned from different states because of coronavirus,” NAREDCO-UP President RK Arora told reporters in a video conference.

He called the pact a “win-win situation for labourers, the state government and homebuyers.

“This MoU is a win-win situation for labourers from UP, state government developers and also homebuyers. Labourers will be absorbed and construction work will start,” Arora said.

According to the initial pact, around 1.25 lakh workers will be absorbed at Ghaziabad, Noida and Greater Noida in the national capital region, while the remaining 1.25 lakh will be taken for projects across other cities in UP.

Arora said the association, with 250 developers as members of its UP chapter, will also provide training to labourers to undertake construction works.

The real estate sector has been badly hit following the nationwide lockdown imposed on March 25 to control the spread of coronavirus disease Covid-19.

Earlier this month, Union housing and urban affairs minister Hardeep Puri had said that reverse migration of labourers and a breakdown of construction material supply chains had adversely affected real estate projects and that they will take quite some time to restart in full gear across the country.

“As we have already seen stalling of a lot of projects in Delhi-NCR [National Capital Region] due to various reasons, leading to a lot of litigations, etc, it is vital to take remedial measures now to ensure that Covid-19 does not lead to a complete breakdown of the real estate sector. Such a situation will result in many stalled projects resulting in a huge losses for all the stakeholders especially homebuyers,” he while speaking at a webinar on the 3rd anniversary of the Real Estate Regulatory Authority (RERA).

However, later with relaxations announced in the curbs, the government allowed construction activities in urban areas where workers were available on site and no workers were required to be brought in from outside.

On Friday, after the MoU with the Yogi Adityanath government, NAREDCO-UP president RK Arora said the association will get data of labourers from the state government, after which it will run an awareness campaign to attract labourers on their sites.

The real estate sector in India had been facing significant headwinds much before the COVID-19 crisis struck. The sector suffered from a lack of availability of funding from banks, NBFCs and HFCs. Besides, certain structural changes implemented by the government in the recent past, such as demonetisation and introduction of GST, had also adversely impacted the demand for residential real estate and led to built-up unsold inventories with developers.

With favourable initiatives undertaken by the government with a view to bringing transparency in the sector, reduction in GST rates for new projects, and lowering of lending rates, the calendar year 2020 was expected to herald a recovery in the real estate sector in India. However, the COVID-19 pandemic and its economic fallout would now delay the recovery in residential real estate.

Most of the residential real estate projects in India have been historically funded by banks and NBFCs. However, with funds from NBFCs drying up, the capital required for completing under-construction projects is likely to come from real estate funds and Alternative Investment Funds (AIF) willing to provide last mile funding against the security of project cash flows on a priority basis. The government has already committed to providing debt funding for completing stuck projects through setting up of a dedicated AIF in the form of SWAMIH.

The prices of real estate have been under pressure since 2014 due to lower demand. There is a significant pile-up of unsold real estate units with developers. In a recent webinar discussion organized by National Real Estate Development Council (Naredco), Deepak Parekh, chairman of HDFC had advised the developers to reduce the prices of real estate units to accelerate the liquidation of unsold inventories. This would significantly impact the value of unsold inventories held by the developers.

Further, after COVID-19, the recovery in demand for affordable housing is expected to be faster compared to other segments given the economic conditions of buyers.

Given the expected adverse impact on sales and cash flows in under development projects, it will be important for funding agencies to factor the impact of COVID-19 in their evaluation of the project. Here are some areas that need to be adequately covered as part of due diligence on under development residential real estate projects.

A stress test on sold receivables

Sold receivable from a project represents balance cash inflows from sold inventory. Sold receivable for a project would include a) amounts which are demanded against completed milestones but not yet paid by customers (Amount due) and b) amounts to be demanded in future on completion of future milestones (Amount not due). Value of sold receivable is one of the key securities for loans granted to a developer.

Diligence procedures on such sold receivables should involve understanding the proportion of such sold receivables (both due and not due) from sales which are not backed by a registered agreement of sale. While such unregistered sales were always subject to the risk of potential cancellations in the past (and thereby, reduction in the corresponding value of sold receivable), the probability of customers opting for cancellations due to COVID-19 would significantly increase.

The risk of such cancellations is very high in case of unregistered sales where the customers have only paid nominal advances (5-10% of Agreement value). Besides, registered agreement for sales is also subject to the risk of cancellations especially in markets where stamp duty and registration costs are not significant.

Value of unsold inventories

The level of unsold inventories with real estate developers was already higher prior to COVID-19. COVID-19 would further lead to a dent in customer demand. Oversupply of inventory without adequate demand may lead to a reduction in selling prices for these units. This would impact the underlying value of the collateral being offered to the funding agency. Besides, the timeline for liquidation of such unsold inventories would be further elongated amid tepid demand.

While diligence procedures by funding agencies should include detailed analysis around average selling prices and sales velocity across different units, historical trends in average sales rates and velocities may not be indicative of selling prices and velocities in the future. Funding agencies would have to build appropriate sensitivities around sales prices and velocity for liquidation of unsold inventories while estimating future cash flows.

Vendor claims

Vendor payments may be stretched and there may be claims from vendors for losses due to idle time. Disputes with vendors would further impact construction progress thereby impacting the overall project completion timelines.

A proper assessment of vendor liabilities and claims should be done as part of diligence. Diligence procedures should include a reading of vendor contracts to understand the commercial terms agreed, including the right to such idle time claims.

Customer claims

COVID-19 would impact construction and project completion timelines. The period of such delays may vary across developers and projects and may even extend beyond timelines committed under RERA, at times. Diligence procedures should include a careful reading of Agreement for Sale entered with customers to understand the committed timelines, force Majeure clauses and customers’ right to interest claim and cancellation for delays.

Further, the agreements registered prior to the implementation of RERA in case of units sold in Maharashtra would continue to be governed by erstwhile Maharashtra Ownership of Flats Act (MOFA). The timelines for the handover of units in such cases and the corresponding interest obligation for delays would therefore, be governed by clauses of MOFA.

The Maharashtra government on Tuesday said it has kept the circle rates unchanged for the current fiscal as it could not assess new rates in wake of the current coronavirus crisis. Ready reckoner rate, also known as circle rate, is the minimum price at which a property has to be registered in case of its transfer.

Every year, the government's revenue department determines the stamp duty ready reckoner rate for the state according to market dynamics, which are revised on April 1 of that year.

The registration department generates the maximum revenue for the state.

"Initially due to limited employee strength and later due to the extended lockdown, the assessment of the annual statement rate (ASR) could not be done.

As a result, the rates were kept unchanged for the period from April 1 till May 31, till further orders. However, since the assessment could not be completed within the timelines, it has been decided to keep the rates unchanged for the entire fiscal till further orders," the government said in a circular.

The development comes at a time when the real estate developers' associations have been seeking stimulus packages and reduction in ready reckoner rates to help the second largest employment generating sector come out of the crisis.

Recently, former chief minister Devendra Fadnavis had also suggested a 40 per cent reduction in the ready reckoner rates.

To curb the spread of the deadly coronavirus, chief minister Uddhav Thackeray had imposed partial lockdown in Maharashtra from March 18 itself.

Later Prime Minister Narendra Modi announced a nation-wide lockdown from March 25 which has now been extended till May 31.

Even as the government has allowed relaxation in certain areas, allowing commencement of construction activities, mass migration of labourers from Maharashtra has been a cause of concern for the developers.

Stating that the novel coronavirus, or COVID-19, pandemic is much worse than the 2008 global financial crisis, the Confederation of Real Estate Developers' Associations of India (CREDAI) has written to Prime Minister Narendra Modi beseeching him to boost liquidity by reducing the rate of interest to 5 percent and introducing a scheme wherein homebuyers need to pay only the margin money upfront and no EMIs for 24 months.

It also demanded that the Rs 25,000 crore stress fund for completing stalled housing projects be deployed at the earliest.

The real estate developers’ body has proposed certain benefits for homebuyers to encourage investments in residential properties:
- Reduce the maximum rate of interest on new home loans to 5 percent by subsidising interest component of EMIs for the next five years.
- Raise limit of principal deduction on housing loan under Section 80C to Rs 2.5 lakh and interest deduction under Section 24 to Rs 10 lakh.
- No levy on capital gains for residential properties held for a period of longer than one year.

- Resume subvention-based funding.

It wants National Housing Bank and the Reserve Bank of India (RBI) to withdraw their circulars on subvention-based funding, with only safeguards being the acceptable rating of the developers and the project.

The economic uncertainty and job insecurity in the aftermath of COVID-19 may not encourage homebuyers to purchase property at this point in time. “A scheme whereby a homebuyer would need to pay only margin money with no EMI for 24 months will address this insecurity. Here, RBI may allow housing finance companies (HFCs) a 24-month subvention scheme to homebuyers via developers. This 24 months’ subvention can be adjusted by extending the loan tenure by 24 months with the subvention amount recovered in the last two months,” the CREDAI letter stated.

With regard to boosting liquidity, CREDAI said a one-time restructuring scheme as was permitted by RBI in 2008 may be quickly instituted by all lending institutions. “Since real estate was already reeling under a cyclical downturn before COVID-19, such restructuring needs to be allowed for all accounts which were standard as on December 31, 2019.”

To boost liquidity, it wants “appropriate directions may be issued to all banks and non-banking financial companies (NBFCs), including HFCs, to institute a scheme to permit additional credit equal to 20 percent of existing real estate project-related advances with no additional security, if need be by extending government guarantees, without the classification of the project as a non-performing asset (NPA).”

It has also suggested that penal interest charged by banks and financial institutions should be suspended for a period of one-year or until such time as it takes for the pandemic to abate.

Steps should also be taken to control cartelisation of raw material for construction, CREDAI said. “Across various states, there has been an increase of Rs 100-250 per bag of cement and about Rs 2,000-2,500 per tonne of steel. This will lead to increase in construction costs and will have a cascading effect on homebuyers.”

The Supreme Court on Friday asked the Centre if it was prepared to release an emergency loan of Rs 500 crore for funding stalled Amrapali group housing projects. The Centre said it would get back with a response by May 27, the next date of hearing in the case.

The Centre was also asked to consider a possible waiver of service tax chargeable on these projects.

Concern over funds drying up for construction came up before the apex court in a note prepared by Court-appointed receiver, senior advocate R Venkatraman, who suggested a slew of measures to ensure timely execution of the projects.

Among the measures he suggested in a five-page note was a direction to banks to release loans to homebuyers, even to non-performing asset (NPA) account holders, restructuring of existing loans by banks. Funds to complete the housing projects have to come from the sale of unsold housing inventories, sale of other Amrapali properties, and balance receivables on sold units from homebuyers who have taken loans, he said.

The bench of justices Arun Mishra and UU Lalit sought the response of the Centre on each suggestion in the note. Additional solicitor general (ASG) Vikramjeet Banerjee informed the bench that the finance ministry will be meeting over this issue in a day or two. He said that since this involves spending of public money, any exception in the rules to be made for Amrapali has to be accompanied with reasons.

The bench told ASG, “The homebuyers are suffering. [The] Government must take care of providing funds to the National Buildings Construction Corporation (NBCC) as there are no private players involved.”

NBCC informed the court that two projects undertaken by it were complete while tenders need to be issued on three projects. It was then that the court suggested ASG seek instructions from the government on issuing Rs 500 crore upfront to NBCC.

In addition, the court wished to know whether the Reserve Bank of India (RBI) guidelines will allow issuance of loans to NPA account holders based on the receiver’s suggestion. Venkatramani told the court that UCO Bank had in principle agreed to fund the unsold inventories, preferably through a consortium of banks.

Venkatramani told HT: “Some big players have expressed interest in completing the projects. But they require a strong assurance. The court’s tentative order is intended to provide strong support to NBCC before tenders for projects are issued in the coming months.”

The Goods and Services Tax payable by NBCC on construction and service tax deposited by home buyers, if waived, could save approximately Rs 1,000 crore, he added.

Earlier this week, the Uttar Pradesh RERA (UP RERA) allowed the homebuyers' association of a project in Noida to take charge of the completion of four stuck towers. It is currently in discussions with the original builder (Jaypee Associates) to come on board as a contractor.

The question here is: Can RERA Authority approach homebuyers' associations or the original developer or for that matter bring in a third party to complete a stalled project? Interestingly, RERA can take over an unfinished realty project if it is 80 percent complete. It can act as a facilitator and work with the committee of homebuyers to complete the project under Section 8 of RERA.

RERA authorities Moneycontrol spoke to said this could become a successful model to complete stuck projects going forward, especially after COVID-19, when there are bound to be more such cases wherein developers may not be in a position to complete projects due to lack of liquidity issues.

"This model of completing stuck real estate projects can work and will certainly be tested post-COVID-19 because we will have many more developers falling by the wayside. It is then that the authorities would have to empower homebuyers to come forward and take on the task of completing the stalled projects with the help of RERA Authority," MahaRERA Chairman Gautam Chatterjee told Moneycontrol.

Prima-facie, this appears to be an excellent move and will also set a very good precedent. But it is also very important to know (a) how the project will be funded and (b) if the builder has taken more money than what work has been done by him and how RERA plans to recover excess money from him," said MS Shankar, General Secretary, Forum for People's Collective Efforts.

Section 8 of RERA empowers authorities to hand over completion task to buyers' association

The RERA Act clearly states that “Upon lapse of registration or on the revocation of registration under this Act, the Authority, may consult the appropriate government to take such action as it may deem fit including the carrying out of the remaining development works by a competent authority or by the association of allottees or in any other manner, as may be determined by the Authority.

Provided further that in case of revocation of registration of a project under this Act, the association of allottees shall have the first right of refusal for carrying out of the remaining development works," the Act said.

There are clear provisions in RERA under which the Authority also has the power to take away the project from a particular developer and assign it to another agency to complete it.