The government has announced setting up of Rs 25,000 crore Alternaive Investment Fund (AIF) to provide financial help to stuck residential real estate projects in the country. While the AIF has brought cheer to the real estate industry, there have arisen some concerns on the part o the homebuyers in regards to the conditions set by the government for the release of money to the projects. In an interview to RealtynInfra.com, Abhay Upadhyay, President-Forum For people’s Collective Efforts, talks about some of the safeguards that should be built into the process of implementation of the rescue fund and modification of some of the conditions that have been set for the release of money. Here are the excerpts:
Ques: How does this Rs 25,000 Alternate Investment Fund (AIF) solve the problems of home buyers? Is it sufficient?
Answer: Many real estate projects are stuck across India because of liquidity issues. Promoters are over leveraged and hence can’t borrow more money from Financial Institutions. They also cannot realise further funds from homebuyers as they have not completed construction up to the requisite stage. Due to severe credibility crisis leading to complete lack of faith in real estate companies, there is huge unsold inventory which is further restricting flow of funds to the sector.
Under these circumstances, this special window of Rs 25,000 crore will be a lifeline and will set the ball rolling for such projects. If properly used, this will restart construction work, leading towards the completion of such stuck projects. This will also lead to homebuyers committing their further payments and will also help in reduction of unsold inventory which will be a win-win situation for both homebuyers and promoters.
Since there is no census done by the Ministry of Housing despite our repeated demands for the last two years for the same, we do not have accurate data as to how many real estate projects are delayed across India. However, as per our very rough estimate, there are around 5 lakh homebuyers stuck in delayed projects across major cities in India.
We believe that, since all such projects cannot be taken up in the very first year, hence a time bound roadmap should be prepared for completion of all stuck projects pan India within a maximum timeframe of next five years. From that perspective, we consider the special window of Rs 25,000 crores a very good beginning in the very first year of the Government, which may be reviewed going forward.
Ques: Govt has now included NPA and NCLT projects under this AIF. What other kinds of projects should be included or which caveats should be dropped for this fund to benefit more home buyers?
Answer: We welcome the Governments move to include both NPA and NCLT real estate projects to be eligible to get funds from AIF. It would have been better if the Government simultaneously had also worked to get all net-worth negative projects turn to net-worth positive projects by attaching personal and companies assets of promoters of such projects by bringing money back into the project after monetising such attached assets, as it is a well-known secret that promoters have personally enriched themselves leaving the projects bankrupt.
Also, the new criteria inserted that Projects should be RERA registered to be eligible for funds under AIF needs to be modified as it will completely deprive delayed and incomplete ongoing real estate projects from states like West Bengal and Telangana. This is because West Bengal has not implemented RERA and instead chosen to implement its own state Act – West Bengal Housing Industry Regulation Act, 2017, while Telangana has excluded all ongoing projects from the ambit of RERA through its real estate rules which says only those project needs to be registered with RERA for which building permission has been approved on or after 01.01.2017 by competent Authorities.
Similarly some of the Ongoing projects in the state of Uttar Pradesh, Maharashtra, Haryana, Karnataka, Tamil Nadu, Punjab, Chhattisgarh etc. have escaped registration under RERA in their respective states due to illegal real estate rules notified by these states against the provisions of RERA.
Needless to say, that home-buyers of delayed projects in all the aforementioned States cannot be punished for no fault on their part. They are equally or in many cases bigger sufferers of delay.Also, it needs to be clarified that the said AIF has not been created nor its utilisation/disbursal will be under provisions of RERA. RERA Authorities have also no mechanism or any tracking system to either stop diversion of funds or its misuse.
Hence, in order to be just and fair to homebuyers of all projects in all states, it is imperative on the Government to change the eligibility criteria to get funds from AIF from being RERA registered projects to all ongoing projects launched prior to RERA.
Ques: Govt has announced this Rs 25,000 crore AIF. What safeguards should be put in place for the fund to function properly?
Answer: The real estate projects to be eligible for funding under AIF has to be net worth positive. This may be a huge challenge as promoters of most of the projects have over leveraged themselves in terms of bank loans and they also have huge market outstanding which includes dues to development authorities. To satisfy this criteria, promoters may resort to manipulations to somehow show that their projects are net worth positive and hence Government needs to be extra alert and watchful otherwise there will remain a possibility that the funds granted from AIF may turn bad.
Further, there is a need for more transparency in the selection criteria of real estate projects for funding from special window and in its disbursal. Considering the track records of builders who are responsible for the NPAs of banks to the tune of thousands of crores, they should be kept at arms-length and no funds should be disbursed directly to them. This is also necessary because we still do not have any such mechanism to track either diversion of funds or its misuse.
We also would like to suggest formation of a task force under the Housing Ministry consisting representative of home-buyers, Mo/HUA officials, State Governments officials, Financial Institutions, Independent persons of repute, Industry experts (other than builders) to identify projects nearing completion which should be taken first for completion, to monitor end use of funds disbursed and progress of construction in such projects.
The said task force should identify a Public-Sector Enterprise who may be assigned the job to complete such identified projects under its supervision. The task force should prepare timelines for completion of all such delayed projects and should also assign due priority according to the status of completion of each project. Also committee of homebuyers of respective projects should be formed to keep close watch on progress of project and to receive feedback of any wrong doing.
It should be ensured that no builder is a part of such task force since the entire exercise will be primarily against their misdeeds and hence they may use their influence to derail the whole process and to ensure favour for their own projects./