NEW DELHI: The primary reason for stress in real estate projects is lack of financial viability and this has resulted in cost overruns, project and time delays, said a report released by a committee headed by G20 Sherpa and former CEO of Niti Aayog Amitabh Kant.
The panel has recommended steps to improve the internal rate of return (IRR) of these projects in which it noted that the use of Insolvency and Bankruptcy Code (IBC) for resolving these projects should be a measure of last resort. It said over 30 projects have been resolved under IBC. However, due to the huge backlog of cases with NCLT, this mode of realisation is prone to severe delays.
The panel recommended that IBC needs to be reformed to deal with the complexities of the real estate sector and has suggested the creation of five additional fast-track benches at the National Company Law Tribunal (NCLT) to expedite the cases including real estate cases.
Both financial and operational creditors have to take a haircut under IBC, while the equity of the developers is generally written off. Homebuyers see long delays and uncertainty regarding the possession of their homes. Among other recommendations, the panel has recommended mandatory registration for all real estate projects with RERA.
It noted that the prevalent delay in the execution of registration/subleases, despite project completion, is largely attributable to instances of builders defaulting on their dues to the relevant authorities. This has adversely affected genuine home buyers who have fulfilled their obligations but are yet to receive their legitimate rights.
“In light of these findings, the panel strongly recommends immediate registration/execution of subleases in favour of these rightful home buyers. This should not be contingent on the recovery of dues from the builders. This would benefit nearly 1 lakh home buyers,” it said.
The panel also recommended that RERA should identify projects where construction projects are substantially completed, yet possession remains undelivered due to varied administrative hurdles on a crash basis for resolution within a period of the next thirty (30) days.