Considering the endless delays in the delivery of thousands of apartments, the Union Ministry of Housing and Urban Affairs (Mo-HUA) is mulling the framing of new rules under which developers would have to refund home-buyers’ full payment with interest if the project is delayed beyond a stipulated time frame.
“There are large numbers of cases where the home-buyer’s money is stuck because of delays in the delivery of flats. While under RERA there is provision for punitive measures against developers, there is no easy exit route for stricken home buyers,” a senior official from Mo- HUA said.
Despite the provisions for a refund included in RERA law, regulators have been discouraging refunds in many cases, arguing that such a move would further delay the project.
“During our interaction with Real Estate Regulatory Authorities (RERA) in different states, project delay was one major concern. The proposal is that if a developer is delaying residential projects beyond one year, the buyers will have the option to exit and they can claim a refund with interest equal to home loan interest rates,” the official added.
The proposal is being seriously considered by the ministry and it is expected to begin consultations on it with various state regulators soon. In the last two-three years, there has been a surge in the number of stalled projects. Various reports from property firms suggest that there are currently roughly three lakh homes in NCR alone which are either stuck due to errant builders and lack of funds or are already facing insolvency. This list includes all the top names like Unitech, Amrapali, Jaypee, 3C Developers and Logix, which remain in limbo for one reason or another.
“As many as 100 builders have defaulted in the UP-NCR region with their projects having been delayed by three to six years on an average. If they do not complete the projects, we will go ahead and deregister or take over the projects,” Balwinder Kumar, member of UP RERA bench said.
While the average delay is of 3-5 years, there are 21,000 apartments in residential projects of Logix group, Today Homes, Rudra Buildwell, Omaxe and Supertech which fall under the ‘extremely delayed’ category over seven years. Regulatory bodies are already imposing penalties on developers, deregistering them and taking over projects. For instance, last month, the Uttar Pradesh Real Estate Regulatory Authority (UP-Rera) decided to deregister six builders for failing to meet their commitments to buyers over project delays. Earlier this month, MahaRERA had also issued a Standard Operating Procedure (SOP) allowing homebuyers to remove developers from the project. However, these measures are not helping distressed homebuyers paying both EMI and house rents. Last week, the Supreme Court in one of its rulings had observed that a buyer cannot be required to wait indefinitely for possession of his apartment.
“A buyer can be expected to wait for possession for a reasonable period. A period of seven years is beyond what is reasonable. Hence, it would have been manifestly unfair to non-suit the buyer merely on the basis of the first prayer in the relief sought before the state consumer disputes redressal commission,” a bench comprising Justice DY Chandrachud and Justice Hemant Mehta said. The housing ministry official also pointed out that the interest rate paid by the developer would be equal or higher than home loan rates, which would only keep increasing throughout the period of delay.
The need to penalise inordinate project delays