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Stalled projects: UP-RERA seeks partnership with home buyers

By By Vishal Duggal & Rakesh Ranjan- 13 Feb 2021
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New Delhi (13.02.2021): For a change, UP has set an example.

Uttar Pradesh Real Estate Regulatory Authority (UP-RERA) has devised a collaborative model to revive stalled housing projects. The model seeks to bring original or a new Promoter and the association of allottees (AoA) on a common platform under its watchful eyes.

The importance of the new model lies in the fact that the rising number of stalled projects owing to funding problems or promoter’s wilful failure has disrupted the realty market.

According to Anarock Property Consultants, there are housing units worth Rs 4.05 lakh crores that are either stuck or facing delays in construction across the top seven Indian cities – Bengaluru, Chennai, Hyderabad, Kolkata, Mumbai Metropolitan Region (MMR), Pune, and the National Capital Region (NCR). Out of these, NCR accounts for 1.90 lakh units worth Rs 1.19 lakh crore and MMR 1.80 lakh units worth Rs 2.02 lakh crore. Both NCR and MMR projects were launched before or in 2013.

Against this background, the UP-RERA's move to win back the confidence of homebuyers by seeking their partnership in completing stalled projects with the help of expertise and resources at its disposal may go a long way in reinvigorating and reorganizing the real estate business in the troubled NCR region and elsewhere in the state.

How does this model work?

First, UP-RERA undertakes a close technical and financial study of delayed or stalled projects and explores the possibility of devising an appropriate model to facilitate completion by taking both the promoter and the allottees on-board.  Section 8 of RERA empowers the authority to take away a project from a particular defaulting developer and hand over its completion task to a competent authority, agency, or a buyers' association. Significantly, in case of revocation of registration of a project under Section 8, the association of allottees has the first right of refusal for carrying out the remaining development works.

Second, after the promoter and buyers join hands to complete a particular project, its progress is continuously monitored by the authority’s Project Management Division (PMD) managed by domain experts. Further, UP-RERA chairman Rajive Kumar has established a project monitoring committee under senior member Balvinder Kumar who is assisted by the PMD and conciliation consultant R.D. Paliwal. This committee reviews the progress of construction on a monthly basis with the help of the association of homebuyers, project engineers, technical staff, banks, and financial institutions.

To qualify for revival under RERA supervision, the project should be viable and have a positive cash flow, i.e., it should have more funds than the estimated completion cost. UP-RERA then acts as a facilitator and asks the committee of homebuyers to complete the project. If the original promoter is not part of the project rehabilitation plan, the project is re-registered in the name of the homebuyer’s association or AoA that can assign a different builder to complete the pending work of the project.

The AoA then submits a duly filled detailed project report (DPR) that lays the roadmap to complete all remaining development work of the project with an estimated net construction cost and a new completion deadline. The association must be able to win over the trust of a majority of buyers to ensure that they make the payment of the balance amounts to take the project to its logical conclusion. The buyers’ contributions are kept in a separate account and the AoA has to be very meticulous with the maintenance of this corpus that is subject to regular audit.

So far, UP-RERA has successfully adopted this co-operative model in the case of Sampada Livia, besides Kalypso Court and Knight Court projects of Jaypee Associates.

Recently, the authority has issued an advertisement inviting interest from promoters and buyers’ associations to complete other unfinished projects in a collective mode. The authority has also circulated the link www.up-rera.in/delayedprojects through its website and social media asking the stakeholders to share details about their delayed/stuck project.

It is learned that many homebuyers’ associations have been coming forward along with promoters to take up this initiative as the UP RERA authorities build up their efforts to rehabilitate more stalled projects in 2021.

(By Vishal Duggal and Rakesh Ranjan)

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