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UP RERA’s novel approach to a festering property crisis can take off only if there is a collective effort on the part of buyers, the Noida Authority, the government and third parties

UP RERA: A Path Less Trodden


~By Venket Rao


The real estate sector is going though one of its severest downturns. There have been delays and defaults across markets, leaving homebuyers wringing their hands in despair. While there is anguish and frustration among them, developers are stuck with a liquidity crunch. Their very survival is in doubt. With dues mounting and thousands of units undelivered, the government has been trying to bring this explosive situation under control.

This has led to great activism among buyers, leading to judicial intervention. The introduction of the Real Estate (Regulation & Development) Act, 2016 (RERA), and constitution of the Real Estate Regulator in Uttar Pradesh (UP RERA) brought cheer to buyers in Noida and Greater Noida which saw many uncompleted projects, with skeletons of buildings standing like silent sentinels.

Yet, slow implementation has made UP RERA the punching bag of many. However, now with the appointment of a full-time chairman and members, there is quite a bit of urgency in quickly changing perceptions. This is exemplified by a recent order of UP RERA where it explored the possibility of buyers taking over a stuck project.

In probably a first in the country, UP RERA directed 700 homebuyers of Shubhkamna TecHomes to come up with a financial plan to complete the housing project in Sector 137. Sold in 2011, the project was due for completion and handover in 2014. The Resident Welfare Association (RWA) has now been asked to seek the consent of 60 percent of the buyers for takeover and present a financial plan for completion of the project. A member of UP RERA is also believed to have said that upon receipt of the plan, it would be forwarded to financial consultants for checking its viability and to Noida Authority for its views.

Section 8 of RERA provides that “upon lapse of registration or revocation of registration under the Act, the Authority may consult the appropriate government to take such action as it may deem fit including carrying out of the remaining development work by the competent authority or by the association of allottees or in any other manner as may be determined by the Authority”. Further, the second proviso to Section 8 gives a first right of refusal to the association of allottees for carrying out the remaining development work.

While the order is an effort to find a solution to this festering crisis, it is fraught with challenges. These are:

  • Referring to a situation of “lapse of registration or revocation of registration”, Section 8 does not contemplate a blanket use of powers vested with the Authority. Therefore, to stand the test of judicial scrutiny, enough care needs to be taken by the Authority in actually handing over the project to an RWA.
  • UP RERA has to engage in a consultative process with the right government.
  • The role of Noida Authority is very important as substantial amounts could be outstanding towards land dues.
  • Financial viability in a stuck project is always in question simply because if there was some value left, the promoter would never let it be. Apart from that, the promoter would have created all kinds of third party rights, liabilities and claims which may not be within the knowledge of the RWA.
  • Banks, institutions, NBFCs and even private moneylenders could be interested as they may be impacted by such a move and could step in with claims.
  • Unless there is value in the project, no project can be completed. Therefore, any financial plan ignoring any rights and claims and merely restricted to construction and development of the project may not sail through easily.
  • Further, due diligence to vet the financial plan may leave a critical, legal area unattended.
  • Participation of/direction to the promoter in the whole exercise is critical.
  • The order or directions should not become an escape route for promoters to wriggle out of their obligations.
  • Enough care should be taken so that there is no front-ending of RWA for the promoters in seeking such orders for other projects. Only genuine cases should be taken up.

In case a project is handed over to an association of allottees, a suitable monitoring mechanism for financial and legal adherence is essential for its completion. Eventual handing of the units to the allottees should be done with a clear and marketable title.

This order of UP RERA is novel and commendable. It is out of the box and treads a new path cautiously. UP RERA has vast powers and extraordinary problems require extraordinary solutions. It all depends on the collective effort of not only UP RERA and homebuyers, but also of Noida Authority, the government and third parties to see that this takes off. The hopes of all homebuyers rest on it.

                                                                 —The writer is founder, Intygrat Business Advisory (P) Ltd, and has worked extensively in the real estate sector

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