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.
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