On Friday, one of India’s largest builders threw up its hands and told the Supreme Court that it did not have the money to give refunds to home buyers in some of its projects. It said that if it had the money it would have completed the project instead.
This is symptomatic, in a way, of the state of many builders in the country with projects to be finished, home buyers breathing down their neck, but no cash flow to restart stalled construction at these projects.
Yes there are bright spots with some builders standing out of the crowd, but there are just too many of them saddled with unfinished projects. Home buyers are worried, and so should the government.
The court, in the Unitech case, has asked for the list of home buyers who want a refund and those who want possession of their homes with interest of course. Let us see how the court finally resolves the issue, especially when the builder has said upfront that it does not have money to pay refunds.
Such situations shouldn't arise but these are tough times when many builders have their backs against the wall.
But every case like this shouldn’t have to be decided by the courts.
That brings me to the point that a group of home buyers have been raising on the draft rules of the new real estate regulatory act. They point out that the rules are unclear so far on how existing projects, many of which are massively delayed, will be treated when they register with the to-be-setup regulator.
If the rules finally do not take into account the fact that in many ongoing projects builders have collected more than 80-90% of the money from buyers and yet those projects are stuck, and the need is to ask builders to keep aside whatever amount of money is required to finish the project (not just what the buyers owe to the builder), it will not serve the purpose.
With just 5-10% of money to be received from buyers, who will finish these projects then? Will the home buyers be asked to pitch in more? Will that be fair? If the builder throws up his hand, like Unitech has, what happens to the project and its buyers?
RERA can be helpful in bringing sanity to this industry and help it mature, but only if some of these questions are answered.