Identifying financial viability as the primary reason for stress in real estate projects, an expert committee headed by former NITI Aayog CEO Amitabh Kant has said judicial interventions such as Insolvency and Bankruptcy Code (IBC) should be used only as a last resort in case of stalled housing projects
The committee had been set up by the Union Housing and Urban Affairs Ministry in March to tackle the problem of incomplete real estate projects following a recommendation made by the Central Advisory Council under the Real Estate (Regulation and Development) Act, 2016.
It submitted its recommendations to Union Minister for Housing and Urban Affairs Minister Hardeep Puri on Monday.
According to the report, the primary reason for stress in real estate projects is lack of financial viability which has resulted in cost overruns and delays.
The report observed that steps are needed to improve the Internal Rate of Return (IRR) of these projects which would attract more funding and judicial interventions such as IBC should be used only as a last resort.
‘Win-win situation’
“The project resolution should be a win-win situation for all stakeholders,” the ‘Report of the Expert Committee on Rehabilitation of Legacy Stalled Real Estate Projects’ said.
The committee held the view that all stakeholders, including developers, financiers, land authority etc. will have to take haircuts to make the projects financially viable.
The 14-member committee made a seven-point recommendation which includes mandatory registration of projects under the RERA (Real Estate Regulatory Authority), execution of registration or sub-lease deeds for all occupied units, occupancy of all substantially completed projects and financing of all stalled projects by a government-backed fund.
According to the committee, the Indian Banks’ Association has estimated that 4.12 lakh stressed dwelling units involving ₹4.08 lakh crore are impacted in these stalled real estate projects.
About 2.40 lakh stressed dwelling units of these are situated in the National Capital Region. If 75% of these stressed units are resolved, it will add about three lakh units to the housing sector. The resolution of these stressed units will assist the middle and lower middle class in getting houses for which they have already paid a substantial amount. In addition, it will provide a major impetus to economic activity and growth.
Apart from Mr. Kant, the committee includes the NOIDA CEO, the secretary of the Department of Financial Services of the Union Finance Ministry, the Corporate Affairs Secretary and the chairperson of the Insolvency and Bankruptcy Board of India, as well as officials from the Uttar Pradesh and Haryana governments.
“The report appropriately addresses all facets and dimensions of diverse issue of legacy stalled projects. The recommendations will pave the way for completion of stalled housing projects and provide much-needed relief to lakhs of homebuyers,” Mr. Puri posted on X (formerly Twitter).
“Given the strong forward and backward linkages of the sector, it will also give an impetus to overall economy, leading to higher growth in future,” the Minister said, adding States and Union Territories would need to ensure effective implementation of the recommendations made in the report for delivery of booked units to homebuyers.
