The Hindu Business Line

‘Un­sold in­ven­tory in on­go­ing projects spells a cri­sis’

- VARUN AG­GAR­WAL THOMAS K THOMAS

Ma­ha­rash­tra was one of the first States to es­tab­lish a Real Es­tate Reg­u­la­tory Au­thor­ity in 2017. Two years on, in spite of the pres­ence of Ma­haRera, Ma­ha­rash­tra has one of the high­est un­sold in­ven­to­ries in the coun­try, with close to 48 per cent houses ly­ing un­sold. Chair­man of Ma­haRera, spoke to Busi­nessLine about the chal­lenges and how the reg­u­la­tor is try­ing to en­sure projects are com­pleted on time even when builders go pen­ni­less. Ex­cerpts:

Gau­tam Chat­ter­jee, What are the key chal­lenges be­fore RERA?

The tran­si­tion from legacy prob­lems to mov­ing to­wards a cleaner pro­fes­sional en­vi­ron­ment will take longer than I ex­pected. The macro sit­u­a­tion over liq­uid­ity and stress in the fi­nan­cial sec­tor has added a new pain point. We are aware of in­stances where the money de­posited by home buy­ers is be­ing taken away by the fi­nancier to meet debt re­quire­ments.

We also have a highly un­sus­tain­able 48 per cent un­sold in­ven­tory. In the 13,000 on­go­ing projects, if half of them are un­sold, it’s a ma­jor cri­sis. If the prod­uct is as per the re­quire­ments of the peo­ple, then peo­ple book flats and de­vel­op­ers don’t have to look for in­sti­tu­tional in­vestors. To­day, at the rate at which we are go­ing, the un­sold in­ven­tory will take at least two years to get utilised. So far, half the money in the sec­tor was com­ing from in­vestors and that has gone away now. Most buy­ers are still in a wait-and-watch state, hop­ing for prices to drop fur­ther, put­ting more pres­sure on the sec­tor.

Has this squeezed new projects?

In­ter­est­ingly, we are see­ing 1,000 new projects or 100,000 homes get­ting reg­is­tered per quar­ter. This au­dac­ity of de­vel­op­ers is a little puz­zling. Most of th­ese projects are from de­vel­op­ers with ex­ist­ing large parcels of land and who are us­ing them to build af­ford­able hous­ing. The new projects are ful­fill­ing the ac­tual needs of home buy­ers while the ear­lier projects, now ly­ing un­sold, were tar­geted at in­vestors. We could be see­ing a cor­rec­tion in de­mand and sup­ply.

Are projects get­ting done on time?

When we an­a­lyse the 13,000 old projects, about 8,000 at the time of RERA reg­is­tra­tion were projects that had time over-run al­ready. Other 5,000 were on­go­ing. All th­ese 13,000 had the op­tion to come up with a new project com­ple­tion time­line. Some of them came up with a weird time­line of 2025, not re­al­is­ing that all this in­for­ma­tion is in the pub­lic do­main. We have cre­ated a web­site which gives such de­tails of projects across Ma­ha­rash­tra. Some builders un­der­stood and re­vised the time­line to 2023. We have also seen about 2,000 projects ask­ing for an ex­ten­sion of one year. Even af­ter the ex­ten­sion, there are prob­lems with sev­eral projects.

RERA has or­dered 253 projects to be auc­tioned to re­cover in­vestor money. How long will this take?

Th­ese de­vel­op­ers are in fi­nan­cial trou­ble. In all th­ese projects, it is the case of 2-3 buy­ers try­ing to stall the project by ask­ing for a re­fund of their money. The RERA Act al­lows buy­ers to walk out of a project with in­ter­est if the project is de­layed. If every­body tries to take ad­van­tage of the price ar­bi­trage and try to exit the project with in­ter­est, the project will come to a halt. Once we pass the or­der to col­lect the money from the devel­oper, it goes to the col­lec­tor who has to auc­tion the prop­erty to re­cover the money to give it to the buyer. An auc­tion will never fetch you the right amount. In th­ese 253 cases, two col­lec­tors have started the auc­tion process by lock­ing down the project. Now be­cause of some five peo­ple who wanted to exit the project, 500 buy­ers are stuck.

How will you solve this sit­u­a­tion?

We have to work out a blue­print to see how the project can get com­pleted, where the money will come from and where is the gap. Then we tell the buy­ers that ‘ul­ti­mately, you have to meet that gap.’ We tell them to first fo­cus on get­ting the home by meet­ing that fund­ing gap, and then what­ever ex­tra money they spent. RERA will look at whether there are un­sold flats in the project that can be auc­tioned through the col­lec­tor and the money paid to the buy­ers. We have cre­ated res­o­lu­tion pan­els un­der Ma­haRera. This panel will in­ter­act with all stake­hold­ers.

Read RERA fact­box, full in­ter­view on­line

 ??  ?? Gau­tam Chat­ter­jee, Chair­man of Ma­haRERA
Gau­tam Chat­ter­jee, Chair­man of Ma­haRERA

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