In a move to bring home-buyers and banks in the real estate sector at par, the ASSOCHAM urged the government, National Company Law Tribunal (NCLT) and the Insolvency and Bankruptcy Board of India to chalk out a separate carve-out for those stuck in the incomplete construction and introduce a presidential ordinance to eradicate legal hurdles immediately, if any.
"Should a need arise, we request the government to mull over issuing a Presidential Ordinance and amend the Insolvency and Bankruptcy Code (IBC) and protect the rights and interest of home buyers in log- jammed projects at all costs. After all, the entire real estate sector which is the largest generator of employment is based on the trust of the consumers/home buyers, which is at an all-time low now," ASSOCHAM Secretary General D S Rawat said in a statement.
"Under no circumstances, this trust be shattered further and all out efforts should be made to revive the J P Infra project which has 32,000 buyers or at least one lakh family members, most of whom are middle and lower middle class salary earners," he added.
The statement comes in the backdrop of the situation arising out of the JP Infra stalled housing projects. Although, such a situation may not have been envisaged and thought over at the time of drafting of the IBC law, there is a need to bring home buyers in real estate projects at par, if not above banks in the pecking order.
The business to consumer companies with wide base of stakeholders involves a very large public interest which, if not handled well, can have cascading effect on the entire business and market sentiment. Once shattered, it would take years to re-build the confidence at a huge economic cost.
"It cannot a case of only protecting the lenders (secured creditors), going by the book. Little do a wider section of the banks realise that if a real estate project fails, the secured banker may have protected its interest, but the banks which have extended home loans to thousands of buyers in the same project, also face risk of EMI default. Let us not have a law following only the letter and not the spirit. The definition of the non-performing assets (NPAs) be widened to include not only the NPAs of the banks but also of the home buyers", the chamber Secretary General said.
The realty sector has been worst hit by a high level corporate debt and has been a victim of the worst kind of unethical practices at the state and local levels. Besides, the decisions like protecting bird sanctuaries in densely populated and metro cities like the Delhi NCR are totally out of sync with the ground reality and have damaged the cause of consumers and the industry.
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"Hopefully, the Real Estate Regulatory Authority (RERA) Bill would help, but the big problem lies with the projects which are halted because of liquidity problem. The government needs to step in by way of easing Floor Area Ratio, the tough lien conditions on land lease and the state regulatory authorities should work closely with the stalled projects. New equity investors should be encouraged by relaxing the merger and acquisition norms, speeding up the legal requirements and so on," the statement read.
If the housing-for-all target has to be achieved, a pragmatic approach is needed to resolve the present crisis in the real estate sector, the chamber further said.