Lapsed building projects haunt Mumbai homebuyers

March 5, 2023
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Lapsed building projects haunt Mumbai homebuyers

MUMBAI: For a home buyer, a deep discount offered in an under-construction project is very tempting in the city’s overheated real estate market. But is waiting for a project to be completed and get an occupation certificate before opting for a flat at a slightly higher price more prudent?

Especially since the city has innumerable tragic stories of families who paid tens of lakhs or even crores to book flats but have been unable to take possession of their homes for years.

A businessman who paid Rs 30 crore for a luxury apartment in 2016 in a central Mumbai tower is still waiting after the project got embroiled in FSI violations and litigations.

A prominent builder, whose company has now split into several factions, took money from buyers promising them completed flats in Kandivli within three years. Fourteen years later, the project stands abandoned with the skeleton of 13 of the 37 floors approved. Those who paid huge amounts for the flats moved court and got a receiver appointed. With the built area deteriorating with time, “they are now raising funds to get their flats built from scratch. The court permitted them to build up to 27 floors for now”, said housing activist Chandrashekhar Prabhu.

Data collated by the Maharashtra Real Estate Regulatory Authority (MahaRERA) shows that in Mumbai itself 988 projects have lapsed till January 2023. A project is deemed lapsed when the builder is unable to complete it within deadline and has not applied to the regulatory authority for an extension.

Pankaj Kapoor, founder and MD of Liases Foras, said out of 12,92,795 units’ inventory across 60 cities in India, 28% (3,67,266 units) is stalled. And the Mumbai Metropolitan Region (MMR) contributes 23% of the stalled supply.

MahaRera chairman Ajoy Mehta said they are cracking down on errant builders by closely monitoring their projects and looking at their accounts to check whether 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 stops midway because of various factors. Either the builder has run out of funds and needs more finance or it could be because of some regulatory issues over which the builder has no control. The most difficult cases are those where the builder has abandoned the project,” said Mehta.

“What is the regulator doing to ensure timely completion of projects? MahaRERA adopted a soft approach towards builders right from the beginning. In its anxiety to ensure completion of projects and homebuyers getting possession, it soft-peddled so much that it even went to the extent of denying or deferring the rightful interest to the homebuyers,” said Shirish Deshpande, chairman of Mumbai Grahak Panchayat.

“On May 1, MahaRERA will complete six years of its operations. Unfortunately, during the last five-and-a-half years, the number of projects that are delayed or just stuck is on the increase. Reasons for such delays can be many, including the two years of the pandemic and the cash crunch faced by builders,” he added.

Kapoor of Liases Foras holds a different view. About 75% of the stalled inventory was launched before 2017, he said. “After the RERA Act came into force in 2016, there was a drastic reduction in the addition of stalled projects. RERA brought discipline and accountability to the real estate sector. Developers are more financially prudent now,” he added.

Lawyer Aditya Pratap pointed out Rera orders in favour of flat buyers are seldom implemented. “The orders are good, but the execution is lacking,” he said. One of his clients had booked six flats for Rs 8.5 crore and paid 95% of the amount. “Possession was due in 2016, but he got them only in 2022,” he said.

“MahaRERA ruled in our favour in December 2020, but the builder has still not paid the money for the delay. In February 2021, we filed an execution application for enforcement of the order. For one year we did not get a listing in Rera for the recovery warrant. It has been two years, but the application has still not come up for hearing,” said Pratap.

Lawyer Anil Harish, an expert on property laws, said in the 1970s and 80s, builders never gave any timeline about project completion. “Yet buyers would chase the developers to invest in their projects because they knew property prices would go up,” he said.

“The real problems began in the mid-1990s when prices went down rapidly all over Mumbai. Builders began to feel the crunch. Demand slowed, and builders were unable to complete the projects,’’ said Harish.

“But when the prices went up again, builders kept on buying new land with the money procured from earlier projects,” he said, adding that after Rera came into force, many projects are getting completed on time. “Builders are conscious of their own obligations,” said Harish.

Boman Irani, president CREDAI MCHI, said 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 based on reasons for delay, identifying the root cause and proposing a solution to the problem. We are also appointing senior conciliators to take the lead on this.” According to Irani, CREDAI-MCHI and MahaRERA will collaborate to create a revival plan that addresses the 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, negotiating financial arrangements, and exploring alternate funding options. Besides this, there will be guidance provided to complete projects in time,” he said.

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