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Mumbai: For a home buyer, the huge discount offered in an under-construction project is very attractive in the extremely hot real estate market of the city. But is it more prudent to wait for the completion of a project and obtain the occupation certificate before taking up the flat at a slightly higher cost?
Especially since the city has innumerable sad stories of families who paid lakhs or crores to book flats but could not take possession of their homes for years.
A businessman who paid Rs 30 crore for a luxury apartment in a central Mumbai tower in 2016 is still waiting after the project got embroiled in FSI violations and lawsuits.
A prominent builder, whose company is now divided into several factions, extorted money from buyers by promising to complete flats in Kandivali within three years. Fourteen years later, the project was abandoned with only the skeleton of 13 of the approved 37 floors. Those who paid huge amounts for the flats moved the court and appointed a receiver. The built-up area is deteriorating with time, “Now they are raising funds to build their flats from scratch. Housing activist Chandrasekhar Prabhu said the court has allowed them to build up to 27 floors for now.
Data compiled by the Maharashtra Real Estate Regulatory Authority (Maharera) shows that in Mumbai itself, 988 projects have lapsed till January 2023. A project is considered lapsed when the builder is unable to complete it within the time limit and does not apply to the regulatory authority for extension.
Pankaj Kapur, Founder and MD, Licenses Forum, said that 28% (3,67,266 units) of the inventory of 12,92,795 units across 60 cities in India is stalled. And the Mumbai Metropolitan Region (MMR) contributes to 23% of the stalled supply.
MahaRERA chairman Ajoy Mehta said they are cracking down on errant builders by closely monitoring their projects and going through their accounts to find out if funds are being diverted. “However, our focus is to reduce disputes between developers and flat buyers,” he said.
“Lapsed projects are those where no work has been done or the construction has stopped midway due to various factors. Either the builder has run out of money and needs more finance or it could be due to some regulatory issues over which the builder has no control. The toughest cases are those where the builder has abandoned the project,” said Mehta.
“What is the regulator doing to ensure timely completion of projects? MahaRERA has taken a soft approach towards the builders from the very beginning. In its concern to complete projects and ensure possession to homebuyers, it has gone so soft that it has gone to the extent of negating or sidestepping the rightful interest of homebuyers, said Shirish Deshpande, president of the Mumbai Grahak Panchayat.
“On May 1, MahaRERA will complete six years of its operation. Unfortunately, during the last five and a half years, the number of delayed or stuck projects has been increasing. There could be several reasons for such delay, including two years of pandemic and cash crunch faced by the builders.”
Kapoor of Liaises Foras has a different opinion. He added that around 75% of the stalled inventory was launched before 2017. “After the RERA Act came into force in 2016, there was a huge reduction in the addition of stalled projects. RERA has brought discipline and accountability in the real estate sector. Developers are now more prudent financially,” he said.
Advocate Aditya Pratap pointed out that RERA orders are rarely implemented in favor of flat buyers. “The orders are good, but the implementation is lacking,” he said. One of his clients had booked six flats for Rs 8.5 crore and paid 95% of the amount. “The possession was to be given in 2016, but they got it only in 2022,” he said.
“MAHARERA ruled in our favor in December 2020, but the builder has still not paid the money for the delay. In February 2021, we filed an execution application to enforce the order. List was not found in RERA for recovery warrant since one year. It has been two years, but the application is yet to come up for hearing,” said Pratap.
Advocate Anil Harish, an expert in property laws, said that in the 1970s and 80s, builders never gave any time frame for the completion of the project. “Yet buyers would chase developers to invest in their projects because they knew property prices would go up,” he said.
“The real problems started in the mid-1990s when prices across Mumbai went down sharply. Builders started feeling the crunch. Demand slowed down, and builders were unable to complete projects,” said Harish.
“But when prices shot up again, builders continued to buy new land with the money they received from old projects,” he said, adding that after RERA was implemented, many projects were being completed on time. “Builders are conscious of their own responsibilities,” said Harish.
CREDAI-MCHI Chairman Boman Irani said that CREDAI-MCHI is working with MahaRERA to revive lapsed projects through a strategic approach that combines financial and legal measures. “MAHARERA and CREDAI-MCHI are assessing lapsed projects, categorizing them on the basis of reasons for delay, identifying the root cause and proposing solutions to the problem. We are also appointing a senior conciliator to lead on this. According to Irani, CREDAI-MCHI and MahaRERA will collaborate to create a revival plan that will address legal, financial and operational challenges faced by lapsed projects, such as resolving legal issues and securing necessary approvals. “We plan to assist project promoters and home buyers in getting the required resources, negotiate financial arrangements and explore alternative funding options. In addition, guidance will be provided for timely completion of projects,” They said.
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