RERA may Add to Woes
The government is exploring ways of resolving a long-brewing real estate crisis that’s left home buyers in the lurch as developers have struggled to complete projects. With many of these delayed for up to five years and more, one of the proposals under consideration is raising money to finish stalled buildings by selling off the other assets of developers.
For instance, the National Company Law Tribunal (NCLT) recently admitted a plea by bankers to start insolvency proceedings against Jaypee Infratech for defaulting on debt. Thousands of buyers who’ve paid for Jaypee homes, many through loans, are unsure about what will become of their investments. More debtladen realty companies could be pushed into bankruptcy , putting even more homebuyers at risk.
“We will discuss with the corporate affairs ministry if the bankruptcy code provides any legal ground for the sale of oth er assets of companies to fund completion of pending projects,“ a senior government source said.
The ministry of corporate affairs will examine whether the Insolvency and Bankruptcy Code (IBC) provides legal ground for such a move. The government is also exploring the possibility of appointing a receiver or state agency to complete stalled projects. What’s adding to the government’s concern is that with the Real Estate (Regulation and Development) Act coming into force, the problem could grow to bigger proportions with more stalled projects going insolvent. The law is aimed at enforcing better fiscal discipline on developers and will benefit consumers in the long run but in the short term its requirements may put the companies under greater cashflow pressure.“We may have to take the legal way through NCLT, which can pass an order to appoint an authority -maybe a state agency -to sell assets of builders and with the money from sale of assets, the pending projects could be completed,“ the source said. Insolvency proceedings, he said, can carry on simultaneously .
Last week, NCLT’s Allahabad bench admitted the insolvency plea of IDBI Bank relating to the default of a `526 crore loan by Jaypee Infratech.
It has appointed Anuj Jain of KPMG India as the interim resolution professional (IRP) to carry out proceedings under the code.
The biggest incomplete project of Japyee is Wish Town in Noida.The company has reportedly handed over only 5,500 apartments of the proposed 32,000 apartments and 3,000 plots planned on 800 acres. The project has 305 towers, of which 250 are incomplete.
Japyee Infratech is among 12 big corporate loan defaulters against which the Reserve Bank of India has asked banks to start insolvency proceedings. The others include Bhushan Steel, Bhushan Steel and Power, Electrosteel Steels, Lanco Infratech, Alok Industries and Jyoti Structures.