Six years of IBC - impact on Real Estate sector

Six years of IBC 2016 www.infralive.com 44 InfraLIVE January 15, 2023 monitoring of real estate projects and timely completion of projects, absence of single-window approval mechanism for projects, ensuring capital adequacy of promoters in the real estate companies/ develop- ers, role of statutory auditors of real estate developers/ companies etc. RERA Act is also a new law. It is facing multiple teething problems. It needs to be sorted out in order to protect the interests of harassed homebuyers. In many states, the sector was earlier totally unregu- lated. GoI/MoHUA are required to follow the practices followed by MCA and constitute a committee on the pattern of standing commit- tee for review of implementation of RERA Act 2016 to oversee the implementation of the provisions of the Act and take timely effective remedial action. Intransient issues of real estate sector The problems of real estate sector are not transitory in nature and will have a wider economic impact because it is not only Amrapali and Unitech that have failed, the big names in the real estate sector such as Jaypee, Supertech, Ansal, Three Cs etc have also failed/ are failing. There are hundreds of real estate companies. The list is getting longer. Shinecity group and Agrani group have caused havoc inBihar andUP. They have collected hundreds of crores o f rupee s f rom unas sumi ng homebuyers and have since run- away. Recently, the MD of Agrani Home Pvt Ltd was arrested by Bihar Police from Varanasi. As per IBBI, real estate sector is second largest contributor of insolvency cases in last six years. It is therefore necessary that urgent steps are needed to protect the allottees and salvage the value of their invest- ments/ company to tackle this problem while keeping the goals of IBC inmind. Admittedly, neither it is possible physically or financially for the homebuyers of real estate projects located in different states across the country to file writ petitions in Supreme Court for resolution of their grievances on the pattern of Amrapali or Unitech group, nor the Apex court would be able to deal with such a huge number of petitions of homebuyers against real estate developers from across the country. Homebuyers have been approaching RERAs/ NCLTs or state police/ EoWfor redressal of their grievances. It has to be admitted that all these agencies have limited powers/ scope of work and aren't able to handle multi- disciplinary ways of mischief done by some of delinquent promoters/ developers. Incorporate the practices employed by Apex Court in IBCandRERA Supreme Court has directly entertained writ petitions of harassed homebuyers in cases of Amrapali, Unitech and Jaypee groups. In these cases, the petitions were admitted in August/ Septem- ber 2017 when both IBC andRERAs were in nascent stages. It was therefore natural for the Apex court to entertain the petitions of harassed homebuyers and take necessary remedial action. The Apex Court while overseeing the Amrapali and Unitech group cases have used unique processes/ kinds of best practices to ascertain the primary causes/ reasons for failure of the promoters and employed various ways to raise resources so as to complete the projects for handing over the flats to the harassed homebuyers or making refund to them. Best Practices followed by SC in Amrapali and Unitech groups cases: 1. Forensic Audit of the CD Group o f c o m p a n i e s b y S E B I empanelled reputed Forensic Auditors, particularly of large CD s h a v i n g u n d e r t a k e n multiple real estate projects and prompt action on forensic audit report/ findings; 2. Ar res t of the promot er s/ directors/ KMPs and their cus todi a l int er roga t i ons/ investigations by ED/ EoW/ homeowners - who have made deposits/ investments in the projects - who suffer the most. However, as stated above, the status of a homebuyer has also been elevated to the status of the financial creditor under IBC and can bring proceedings against the defaulters provided the minimum threshold that has been intro- duced (10 per cent of the allottees in the project or 100 allottees of the project, whichever is lower,) is fulfilled. Therefore, the rights given to allottees under IBC are not without limitations. The trials at court are long, tedious and costly. Starting a petition does not guarantee a proper or desired result, leaving the homebuyers/ depositors harassed, disappointed and thoroughly frustrated. As opposed to this, when the home buyer approaches RERA where, upon showing breach on part of real estate developer, he/she would claim whatever has been paid in full together with interest. It is another matter as to when he/she would be able to get the actual refund after getting the orders of RERAs/REATs (Real Es tate Appe l l ate Tr ibuna l s) executed. There is therefore urgent need for ensuring time- bound execution of orders of RERA/REAT in the states to enable the harassed homebuyers to get the concrete/ actual bene- fits. Other remedies such as under the Consumer Protection Act remain open. Protection of homebuyers underRERAAct In sharp contrast to flurry of amendments in IBC, the RERAAct has not yet been amended even once by the Government of India since 2016, though homebuyers/ consumers across the country have been highlighting major shortcomings of the law. These mos t l y re l at e to execut i on/ enforcements of the orders passed by RERAs/ REATs, completion of stalled/ incomplete registered real estate projects, ensuring close