Hundreds of buyers had invested in a project located along the Yamuna Expressway way back in 2011, paying a total amount of Rs 100 crore of which 10 percent was paid by the builder to the authority. Work on the project stalled in 2015. Two years ago, a group of buyers decided to approach Uttar Pradesh Real Estate Regulatory Authority (UPRERA).
The regulatory body after several hearings decided to cancel (deregister) the registration of the Sampada Livia project after complaints of project delay and alleged irregularities by promoter PSA Impex Pvt Ltd, and invited the buyers to take over the project and complete it themselves.
“For almost five years there has been no work on site. UPRERA decided to hand over the project to the homebuyers’ body on June 6, 2020 after being satisfied by the detailed project report submitted by the buyers under which buyers have been tasked to complete all 726 units of the project within four years,” Akanksha Aggarwal, who was among the first few buyers to have booked a unit in PSA Impact, and president of the Sampada Livia Buyers (SLB) Welfare Association told Moneycontrol.
UPRERA has handed over the mandate to complete the project to SLB Welfare which had earlier submitted a detailed project report (DPR), with an estimated net construction cost of 243.59 crore and a completion deadline of four years from the start construction of the project. The project has 726 sanctioned units, of which 355 have been sold so far. As per the Detailed Project Report submitted before the Authority, the project is cash flow positive, with a surplus of about 5 crore. The total estimated receivables from sold and unsold units is 248.49 crore.
The buyers are now awaiting re-registration of the project in the name of SLB Welfare.
“Rs 25 crore is the worth of the property, the builder paid only Rs 2.5 crore to the Greater Noida Authority and left us in a lurch for almost 10 years. He had collected Rs 100 crore from us. We require around Rs 240 crore to complete the project 726 units,” she said.
The buyers have managed to complete the tendering process and even lined up the entire team that includes an architect, co-developer, project engineer, technical staff and even got the site cleared for work to begin. They are now awaiting re-registration of the project by UPRERA in the name of the homebuyers’ association and permission from the authority to begin construction.
Of the 355 units that were sold by the builder, a balance of Rs 55 crore is yet to be received. The remaining amount will be realised by selling the remaining 371 units, which will be enough to complete the project. And if we are able to accomplish this task, successfully, this model may be emulated for other stuck projects as well, she said.
UPRERA recently also allowed Jaiprakash Associates to complete Jaypee Greens Knight Court with the support of homebuyers through the association Knight Court Social Welfare Association within 15 months. The total cost of completing the remaining work on this project is close to Rs 145.5 crore out of which Rs. 40.85 crore will be contributed by the promoter and Rs 103.35 crore by the allottees.
This is the second Jaypee project that UPRERA has handed over to the Association of Allottees (AOA) for construction. The first project was Kalypso Court.
Kalypso Court is a housing project launched by Jaypee Associates, the parent company of embattled Jaypee Infratech, way back in 2007. Its UPRERA registration lapsed in June 2019 following which the regulator invoked Section 8 of RERA. As many as 240 homebuyers had bought into units in the four incomplete towers. Seven towers of Kalypso Court were registered under UPRERA in 2018. The project has a total of 15 towers and eight of them were completed by 2018 and did not have to be registered under UPRERA net. The original date of completion of the project was 2012.
“This is proving to be a successful model. The main problem is litigation. The project can be handed over to the homebuyers’ association only once we are assured that the project will be viable – the project should be cashflow positive which means that it should have more amount that what is required to complete the project,” Balwinder Kumar, member, UPRERA, told Moneycontrol.
“There are four to five such projects in the pipeline where AOA has shown interest and we will be processing those cases. The model is proving to be successful as the risks involved are few,” he said.
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,” RERA officials said.
“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 says.
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.
Section 8 of the RERA Act also comes into force in the event of the RERA registration getting lapsed. The authority can initiate the process for getting the remaining work completed. The first right of refusal in the process is with the association of allottees.
Agreement among allottees important
Agreement among all the allottees is also important. The allottees have to trust the committee. “They have to make the payment of the balance amount to the committee,” experts said.
Who gets to pay for the remaining construction?
In these cases, some buyers may have paid 80 percent, others may have paid more. But all buyers may have to pay some amount.
“They will have to show the receipts that they have so far paid and the balance money that is due from them to the committee. These amounts will be kept in a separate account and the committee will have to work with the corpus,” said RERA experts.
The committee will have to make do with the funds collected. They have to decide whether they would want to reduce certain specifications as funds may not be enough.
“Whatever is available and whatever they can do with the balance amount, they will have to do. For example, if there is an ornate lobby, they may have to cut down on those specifications and manage with whatever they have,” they said, adding that the idea is to complete the project and hand over the units to the buyers.
Can it be replicated for other projects?
There could be cases wherein the promoters are in jail or absconding. In those circumstances, there may not be too many choices available to buyers. RERA too can pass multiple orders but that would not have any impact because there is no entity to return monies to buyers with interest. The other option with RERA is to seal the property but in this case, the property belongs to buyers who have been waiting for possession for years.
In such cases, too, this model of handing over construction to buyers may work.
(Source: Moneycontrol)
