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Supertech Deadline Passes: In India’s Real Estate Mess, It’s Buyers Who Suffer

Homebuyers have struggled for long due to lack of regulation. However, things are improving now.

Published
Opinion
7 min read
Supertech Deadline Passes: In India’s Real Estate Mess, It’s Buyers Who Suffer
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Three months ago, when the Supreme Court ordered the demolition of the Supertech towers in Noida, people expected something big would happen. Heads would roll, the villains would be on the high road to jail and the towers would come tumbling down. Supertech has instead been playing ducks and drakes by blaming the Noida Authority for not deciding on the names proposed by the promoters for demolishing the structures.

Leave alone three months as directed by the apex court, Supertech says five months are needed. And this even before the work has begun. The NOIDA Authority (New Okhla Industrial Development Authority) says the Developer has submitted no concrete plans to date.

Meanwhile, a gas pipeline running below the building has thrown another spanner in the works, making the possibility of demolition sound hazardous, although no expert opinion on the safety aspect has apparently been cited.
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'A Sea Change Now'

Ritu Maheshwari, the CEO of NOIDA, is held in awe. Under her stewardship, 26 officials of NOIDA, including four directors, the developer and two architects have been named as accused in an FIR that identifies the main culprits in the Supertech scam. In an informal conversation, she told me:

“Group housing sector has been through a tough phase; orders of the Supreme Court have, however, been firm. This has greatly helped us streamline things. Previously, the systems and processes were relatively complex and ran manually. But now, there is a sea change. Registration onwards, everything is on the website and a buyer can satisfy himself that the plot has been allotted, the layout plans and later, the building plans, have the Authority’s approval, that completion certificates are being issued and the investment is safe.”

But NOIDA isn’t India, so I made several calls to people in the know. Here is what I found but that’s after a little lesson in recent history

Urban Development (or Lack of It) In the NCR

As new cities grew in the National Capital Region (NCR), housing became a huge challenge for growing families and a young aspiring middle class. The builders sensed an opportunity and quickly moved to satisfy the surge in demand; by brokering flats in apartment complexes and sale and resale of developed plots. Using their social links with people in power they built networks inside the town planning, land and housing offices of the development authorities.

Until the 1980s, housing in Delhi and the NCR had been almost entirely managed by authorities like the Delhi Development Authority (DDA), NOIDA, Greater NOIDA, the Ghaziabad Development Authority, and Haryana Urban Development Authority (HUDA). They either built modest but functional flats for high- and middle-income buyers, or developed plots that were allotted to housebuilding cooperative societies whose members had some shared interests.

But now a new window of private development was opening and the message top-down was to facilitate the growth.

In terms of regulation this entry of big, real estate developers was never planned for.The capacity to do so was never built, leave alone notifying regulations that protected the concerns of buyers.By then developed land was in short supply, and for most people, the alternative of owning a flat in a gated colony became appealing.

Lured by photographs of green grass, lovely interiors and amenities like tennis courts and even walkways and swimming pools, an aspiring middle class, as well as retired people – professionals, government servants, defence personnel – invested in these apartments.

They mostly checked nothing and allowed themselves to get swayed by assurances and the names of people who the agents told them had made similar investments.

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How an Aspirant Middle Class Got Hooked

As time wore on, there was no building activity that justified the investments made. The promised last dates for crossing the milestones were pushed by years, with little or no building activity visible. Hapless buyers came to know that their investments had been diverted to pay for other lucrative ventures, undertaken for commercial benefit. Those projects – hospitals, hotels, malls and racecourses – were built with the hard-earned savings of people of modest means. Even when work on the promised housing projects started finally , the developers skirted many mandatory building regulations.Astonishingly the town planners, development authorities and key officials in charge of urban development turned a Nelson’s eye.

A felonious web of land developers, politicians and corrupt bureaucrats cast its net far and wide, even as famous people became brand ambassadors hawking the properties. An aspirant middle class -young or old parted hands with their hard earned savings or took big loans -only to find themselves duped.

In the fulness of time, the Supreme Court stepped in, and since then, many unscrupulous builders (or ‘real estate developers’, as they call themselves) have been facing investigations, NCLT proceedings and auction of their prime properties. Some are on bail, and a few even in jail.

Stressed asset funding and banking channels have been deployed to raise money for completing delayed or abandoned projects. But this has been done on a case-to-case basis, only after matters went to court. But what about thousands of smaller projects where buyers have been left in the lurch and lack the resources to fight in court?

Then, the Regulation of Real Estate Began

When scam upon scam was unearthed, governments finally woke up. The Real Estate (Regulation and Development) Bill was introduced in Parliament in 2013 to overcome the problems faced by buyers and hold builders down to their promises. The Bill became law in 2016 (now referred to as RERA countrywide). Its jurisdiction included commercial and residential projects, including plotted development covering projects measuring more than 500 sq. metres, or eight units. Fortunately, projects that had no Completion Certificate before the commencement of the Act have also been covered. The Act also requires that a minimum of 70% of the buyers’ money be kept in a separate account to be released to the builders only for construction of that particular complex. Diversion of funds has been effectively stopped.

The covered area has also been defined and excluded the super built areas – removing a subterfuge used by builders to pad up the carpet area.Builders also cannot modify the original plans without the buyers’ consent and in cases of delay, the money needs to be refunded to the buyer. Importantly, without registering the project, advertising, selling, or even booking plots and apartments is not permissible.

What, Then, Has RERA Achieved?

Ministry of Housing and Urban Affairs (MoHUA’s) RERA tracker states that by late November 2021, practically all states and Union Territories have notified the rules under the Act and set up the Real Estate Regulatory Authorities (except in West Bengal). Most have established Tribunals and have operating websites. By now, more than 72,000 real estate projects have been registered throughout India. Uttar Pradesh’s RERA has disposed of a whopping 32,000 cases to date.

“That's not surprising,” says Rajive Kumar the Chairman of Uttar Pradesh’s RERA. “After all,” says Kumar, “40% of all India complaints are filed in UP and of these 80 % fall in NCR.” Giving hard data of actual outcomes Kumar told me:

“In 65 % cases the date of compliance has been crossed and by now some Rs 300 crores have been recovered or settled. The District Magistrates have recovered some Rs 180 crores as arrears of Land revenue. E- courts which came as an outcome of Covid, have resulted in quicker disposal and much of UP RERA’s success is due to allowing single members to adjudicate independently which speeded things up and has been upheld legally.”
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'Public Awareness is Low'

Amarjit Singh, Chairman, Gujarat RERA, which has disposed of over 3,000 cases, says, “Nearly 10,000 projects with an investment potential of Rs 2.65 lakh crore have been registered – next only to Maharashtra – in terms of value.” He adds, “The compliance rate of online submissions is 95%, and the returns filed by the architect, the civil engineer and the CA are verified for consistency. This has ensured the timely completion of 85 per cent of projects. 85 per cent of the grievances of the stakeholders- mainly buyers have been redressed already.”

In Delhi, the RERA Chairman, Anand Kumar, laments that despite the Act, public awareness is pitiably low. Even educated people who have themselves occupied positions of some authority remain gullible. “We are planning to hold awareness drives at the district level in Delhi,” he says.

His predecessor, Vijay Madan, who has seen Delhi’s urban complexities for decades, says:

“RERA is applicable only in planned areas. So, unauthorised colonies (population 70 lakhs), or the ‘Lal Dora’areas (identified by an ever enlarging perimeter ) houses some 140 urban villages and both segments fall outside RERA’s ambit. RERA’s jurisdiction over the new land-pooled areas has still to be tested. All such spaces are, however, potentially lucrative pastures for the property business to grow and thrive with no oversight.”

It's Time for Real Estate to Face Regulation

My conclusion is this: clearly, things are improving and like the corporate sector that has seen tightening,the real estate sector’s time has come to face regulation. With RERA in force, brokers can no longer entice buyers with false promises and lure them with fancy amenities and add-ons. Since everything has to be included in the documents at the time of registration and provided to the buyers at the time of booking, it is not possible to take the consumer for a ride.

RERA will probably be successful in weeding out unprofessional, fly-by-night operators, as now unscrupulous brokers can face hefty penalties or jail, or both.

To add to the feeling of security, only last month, the Supreme Court upheld the retroactive application of RERA .

With the use of technology, a strong focus on quickly redressing grievances India’s real estate sector may get streamlined sooner than later, or, as Ritu Maheshwari says, “even within the next two-three years”.

But for now, justice must be done and seen to be done. The country awaits the Supreme Court’s obiter dicta on the Supertech case.

(Shailaja Chandra (IAS retd) has over 45 years of experience in public administration focusing on governance, health management, population stabilisation and women’s empowerment. She was Secretary in the Ministry of Health and later Chief Secretary, Delhi. She tweets at @over2shailaja. This is an opinion piece and the views expressed are the author’s own. The Quint neither endorses nor is responsible for them.)

(At The Quint, we are answerable only to our audience. Play an active role in shaping our journalism by becoming a member. Because the truth is worth it.)

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