Developers, financiers will have to take ‘haircuts’: Committee on stalled housing projects suggests

Source: The post is based on the article “Developers, financiers will have to take ‘haircuts’: Committee on stalled housing projects suggests”  published in Indian Express on 22nd August 2023.

What is the News?

A committee formed by the Union Housing and Urban Affairs Ministry to suggest ways to revive stalled real estate projects has submitted its report.

About the committee to examine stalled Real Estate projects:

The committee was chaired by former NITI Aayog CEO and India’s G20 Sherpa, Amitabh Kant.

Mandate: To examine stalled real estate projects and recommend ways to complete them.

What is the status of housing projects?

The committee cited the Indian Banks’ Association (IBA) as estimating that 4.12 lakh dwelling units of Rs.4.08 lakh crore were “stressed” and about 2.40 lakh (44%) of these were in the National Capital Region.

Another 21% of the units were in the Mumbai Metropolitan Region.

The committee concluded that the main reason for the stress in these projects was the “lack of financial viability”, which had led to cost overruns and time delays.

What are the recommendations given by the committee?

In order to make the projects viable, encourage stakeholders — that is the developers, financiers, land authorities etc  to take a “haircut” or accept less than what is due to them.

Delink the grant of registration or sub-lease by the land authorities to the homebuyers from the recovery of dues from developers. About 1 lakh homebuyers would benefit from this.

Expedite the issuance of no-objection and completion certificates for projects that are substantially complete but face administrative obstacles.

Recommend state governments establish a rehabilitation package to revive stalled projects with a commitment from developers to complete them within three years.

Reserve judicial interventions like using the Insolvency and Bankruptcy Code as a last resort.

Suggest a “Zero Period” for two years, starting from the onset of the COVID-19 pandemic in 2020, where interest and penalties on developers are waived.

Developers should be allowed to get a “co-developer” on board to complete the work.

Propose a “partial surrender policy” where developers can return unused land to authorities in exchange for a waiver of dues on that land.

Who will implement these recommendations?

Land is a state subject. Hence, most of the recommendations of the committee fall within the purview of the respective state governments.

The Ministry of Housing and Urban Affairs will send the recommendations of the committee to all states, who will decide on if and what they want to implement.