Nearly five lakh houses are stuck in stalled projects in just top seven cities. Find out how some gutsy homebuyers took on builders to get their houses.
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Get your dream house now! Fantastic facilities and amazing amenities amid an exciting environment!” This is how most developers woo prospective buyers to invest in their property. But what happens when your dream gets shattered because the realty project gets stuck for years and years? It’s a double whammy for many people. Not only are lakhs of rupees stuck, they end up paying home loan EMIs as well as the rent, while bearing the loss of opportunity cost. Had they invested the same money elsewhere, they would have earned better returns over the years. Yet, many homebuyers are stuck in this perilous situation for more than a decade.
A report released by property consultant Anarock in June last year stated that construction work of nearly 4.8 lakh homes worth Rs.4.48 lakh crore were stuck or significantly delayed across seven major cities.
The first step
The formation of the Real Estate Regulatory Authority in 2016 was seen almost as a godsend by lakhs of homebuyers. It was constituted to eradicate existing discrepancies and problems within the real estate sector by setting up rules for developers, such as a standardisation of carpet area and that builders would have to put in 70% of the money they collect from homebuyers into a separate bank account that can be used only for construction purpose. Under the RERA Act, homebuyers are entitled to payments against delay at a monthly interest rate prescribed by the Authority or a refund, along with interest, if a buyer opts for it instead of possession of their house. A landmark judgment by the Supreme Court in a case in November 2021 also clarified that the RERA Act is retroactive and that ongoing projects are those where a completion certificate has not been obtained prior to 1May 2017.
The RERA is supposed to dispose of complaints within 60 days of being filed, though additional time may be taken in some special situations. After an order is passed, the developer is supposed to implement it within 45 days. If this is not done, the RERA can impose a fine of up to 5% of the evaluated cost of the property or imprisonment of up to three years for noncompliance of orders. It can also cancel approval of the promoter’s other projects. The RERA’s order can be challenged either by the buyer or the developer at the Real Estate Appellate Tribunal (REAT), which can either uphold the order or overturn it. The orders passed by REAT can further be contested in the High Court.
“The benefit of RERA is that you can file a case individually or as a group, and you don’t require an advocate for it. However, RERA being a quasi-judicial body can only pass judgment. The execution of orders is still dependent on the local administration,” says Prashant Thakur, Senior Director and Head of Research, Anarock. The non-implementation of RERA orders in a time-bound manner is one of its biggest obstacles currently, and the reason why homebuyers have been waiting for months despite favourable orders.
In such cases, many of them have filed writ petitions in their respective High Courts. “The slow progress of RERA’s orders is one of the reasons I advise propsective homebuyers to invest in future projects cautiously. The RERA isn’t an accredition like Agmark. It only promises redressal in case of a problem and doesn’t guarantee that the project is viable. If you’re betting 15 years of your future income, make sure you can take the risk that the project might still get stalled,” says Prakash Natrajan, Director, JN Ventures, a real estate advisory firm. Another step that homebuyers can take simultaneously is to file a case at the consumer courts under the Consumer Protection Act. This puts added pressure on the promoter. “Homebuyers need to be better organised and use every avenue to attack the developer from all sides. Only a blitzkreig of action can deliver positive results,” says Abhay Upadhyay, who fought for more than a decade to get his house.
Buyer’s rights under RERA Here are the various rights that homebuyer’s have under the Real Estate (Regulation and Development) Act, 2016. Right to information A buyer can obtain information and necessary documents regarding sanctions, layout plans, amenities, stagewise completion schedule, and the specifications approved by the competent authority from the developer. Right to possession A homebuyer has the right to claim the possession of the plot or apartment as well as the common areas upon completion of the project, as stated in the agreement of sale. Right to refund If the builder fails to comply with any of the provisions related to RERA, a homebuyer can claim refund of the amount paid, along with interest and compensation for breach of contract. This will also apply if there is a mismatch in terms of what was promised by the builder and what has been delivered. Right in case of defect If there are any structural defects or problems in the quality of the property within fi ve years of possession, the builder will have to rectify these damages within 30 days at no extra cost to the buyer. If there is a defect in the property title, the buyer can also claim compensation under Section 18(2) of the Act, without any law of limitation.
If the developer goes bankrupt After the Insolvency and Bankruptcy Code (IBC) was implemented in 2016, many developers found it an easy way to wash their hands off stuck projects by declaring themselves bankrupt. In such cases, many homebuyers had to move the National Company Law Tribunal. Under IBC laws, 10% of allottees or 100 buyers, whichever is a smaller number, may file a petition to initiate the resolution process. The NCLT will then appoint an interim resolution professional (IRP) to chalk out a plan along with the committee of creditors (CoC), which is a body of monetary creditors. As homebuyers are considered secured or financial creditors, they are part of the CoC and treated at par with the other financial creditors like banks and institutional ones.
In most cases till now, where homebuyers have gone to NCLT, they have opted to continue the construction of the project. Liquidating the real estate company has almost no benefit as the original promoter has no money left to refund and no othe developer is willing to buy the project. After a resolution plan is finalised and approved by the majority of the CoC, it is adopted by the homebuyers. In most cases, they have opted to invest the remainder of the money due to the promoter back into the project and oversee construction themselves.
However, this is feasible only in cases where there is a standing structure and less than 30% of the work is remaining. Also, completing a project on your own is extremely challenging as you have to organise all the equipment, from tiles to elevators. It is also not easy to convince buyers to invest more and some never pay up, which means others have to pay for their share of the common work too. This also requires a lot of volunteers who would be willing to take out the time and effort to oversee the work.
“Buyers in such cases also have to deal with municipal authorities. Developers know how to manage that ecosystem, but for ordinary people, it can be a horrendous experience. For most housing societies, taking this route is an uphill task due to legal and environmental issues,” says Gulam Zia, Executive Director, Knight Frank. Nearly all the homeowners who have taken this avenue have struggled with getting completion and occupancy certificates, mostly because the developer’s dues are still pending with the municipal authorities. This is why the majority of such houses do not have a registration certificate as yet.
“Why are homeowners being penalised for the inaction of authorities or their nexus with developers? In 2009, the Supreme Court had put a stay on a parcel of land in Noida. Despite that, the Noida Authority sold the land to The 3C Company in 2010. When the SC passed its verdict in 2013 that the land be given back to farmers, it was the innocent homebuyers who got stuck,” says Major (Retd) S.S. Rai, who had invested in Lotus 300 in Noida in 2010-11.
Prabhakar Bhardwaj, who has a house in a neighbouring society by the same company, has also had similar struggles. The Noida Authority had imposed a huge penalty on his project for pending dues and to clarify its stance approached the NCLT and the Allahabad High Court. However, a judgment by the Supreme Court clarified that the Authority was an operational creditor and not a financial one, which meant that it would have last right on any accumulated cash being used for construction. So, the first priority would be buyers and only if there was any balance left, it would be given to the Noida Authority.
Getting funds through the SWAMIH Scheme The SWAMIH investment fund, or Special Window for Completion of Affordable and Mid-Income Housing was created by the Central Government in November 2019 to give relief to homebuyers of stalled projects. It is a Category-II AIF (Alternate Investment Fund) debt fund registered with the Securities and Exchange Board of India (Sebi) and the investment manager of the fund is SBICAP Ventures. However, getting funding under this scheme is tough. This is because of stringent conditions that need to be met as the fund is using public, read taxpayers’, money to finance private projects. The first condition is financial viability.
The delayed venture should be able to generate enough revenue either through pending payments or unsold inventory to cover the cost of completion. Not only this, the interest cost on the invested amount by the fund will also need to be covered. This is because no buyer will want to purchase a flat under construction in a delayed project, so money from the unsold inventory will also take a long time to be recovered. The second is compliance viability as the project should meet all necessary technical compliances and local regulations. Also, it must be registered under RERA, which makes it challenging for projects that were launched in the pre-RERA era to qualify for this scheme.
Another issue is with taking over charge from existing lenders. The SWAMIH Fund wants first charge of all funds, which means all property documents must be handed over to it by the current lender. However, for the ongoing lender, this is the only security that it has regarding the project and it may not want to give up control. Also, handing it over means that the bank’s NPA will go up, which will reflect poorly on its performance.
However, if a project meets all these criterion, the SWAMIH Fund will take over the project completely, including bringing in its own team of contractors and auditors. In March 2022, the Fund had announced that it will invest in about 250 projects with sanctioned funds of `24,151 crore to benefit 1,47,378 homebuyers. While 111 projects had been granted final approval, 142 were given preliminary approval till then. The fight of homebuyers till now has neither been easy nor swift. However, there are windows of opportunities that are opening up, with the government taking proactive steps to resolve issues. Also, as the real estate sector revives and demand for housing revs up again, it has once more become feasible for developers to stretch their resources and stay in the game.
Does your project qualify for the SWAMIH Fund? The SWAMIH Scheme requires a stalled project to fulfill certain conditions before it offers extra funding to complete the venture. Affordable housing At least 90% of the available floor area ratio (FAR) is being developed as affordable housing or mid-income housing units. This is defined as a carpet area of less than 200 sq m, and a cost of up to Rs.2 crore for Mumbai Metropolitan Area, up to Rs.1.5 crore for NCR, Chennai, Kolkata, Pune, Hyderabad, Bangalore and Ahmedabad, and Rs.1 crore for the rest of India. Networth positive This means that the value of sold receivables plus unsold inventory is greater than the cost to complete construction and to service the investment by the Fund, which would include the interest on it. Completion stage At least 30% of the construction and development should have already been completed. RERA accreditation The project should be registered under RERA. NOC from existing lenders The Fund requires an NOC for ceding charge from the existing lenders in the project. Each bank has a nodal officer for their projects, which might seek SWAMIH funding.
Ashish Sardana 42, Delhi
PROJECT Godrej Icon (Sector 88) and Vatika (Sector 89), Gurgaon. INVESTED IN Sardana’s parents invested in Icon in 2015 and he invested in Vatika in the same year. THE ISSUE While possession of Icon was handed over in 2020, the developer had included public land as part of the project and also increased the number of apartments. In the case of Vatika, the seller of the land, a farmer, claimed that his signature was forged by the builder in 2011. Also, construction was started in 2015 without any environmental clearance. Sardana approached the National Green Tribunal (NGT) as the construction also differed from the BBA, which led to it being demolished. THE ACTION A case was filed against Icon in RERA in 2018 to claim refund for not complying with the sale agreement. A class action lawsuit has also been filed in Consumer Court for mental agony and harassment. Sardana has filed writ petitions against Vatika in the Punjab and Haryana High Court. While the HC asked RERA to deliver an order in six weeks, RERA did not do so. Sardana has filed a contempt petition against its chairperson.
"To file the cases, I had to collect a lot of information through the RTI. If you’re making an allegation, you need to explain everything in court, and it isn’t easy to do so.”
Ravinder Kumar Bhan 66, Ghaziabad
PROJECT Today Homes King’s Park, Greater Noida INVESTED IN July 2009 THE ISSUE Bhan was supposed to get possession in 2013, but when there was no progress till 2016, he formed an association with other homebuyers and filed a case in the consumer court. However, when the Insolvency and Bankruptcy Code (IBC) was constituted in 2016, the builder declared bankruptcy after claiming a default of Rs.1.25 crore to a contractor. The NCLT declared the company insolvent in 2019. THE ACTION The homebuyer’s then formed a Committee of Creditors (CoC) to start construction by themselves. The developer tried to take over again by investing `3 crore but he was voted out by the buyers’ consortium. The owners then pooled in the remaining amounts they had to pay and hired the same contractor who had been working on the project. CURRENT STATUS About 110 flats were handed over to homeowners from June 2020 to March 2021 on a fit-out basis. But more than 300 flats are still stuck as buyers are wary of putting in more money, especially as the completion certificate and occupancy certificate are still pending.
"The common man’s money is not an NPA for the government as it is in the case of banks, so no one bothers to resolve our issues seriously.”
Feroz Saifee 38, Mumbai
PROJECT Khadija Hitech Tower, Mumbai INVESTED IN A 6+1 storeyed-building was planned to be redveloped in 2008, and increased to 11 floors. THE ISSUE The developer underquoted the rent he was supposed to pay the existing families while he redeveloped the project by offering only Rs.1.8 lakh for a 1-room-kitchen and Rs.1.34 lakh for a 1-BHK for three years. However, there was no construction till 2012. By 2014, the homeowners realised that the developer had sold flats till 24 storeys. THE CHALLENGE Saifee and his friend Dilshad began pressurising the developer in 2013 to increase the rent due to the owners, and managed to get Rs.3.84 lakh raised to Rs.4.18 lakh. But it took three years for all the cheques to be cleared after persistent sit-ins at the developer’s office. CURRENT STATUS To restart construction, Saifee convinced the original 56 families to pool in money in instalments, and completed till 11 storeys. Some of the new buyers invested too, so the building was constructed till 17 storeys. However, buyers who had bought flats in higher storeys have filed an FIR against the developer, who is absconding.
"The biggest difficulty is that you are fighting against the developer and handling conflicts with other homeowners. The only way forward is through persistence.”
Abhay Upadhyay 52, Kolkata
Kolkata West International City, Kolkata INVESTED IN August 2006 THE ISSUE The project was to be handed over in June 2008 but there was no construction till 2011. THE ACTION In 2011, about 40 buyers formed an association and started dharnas in front of the Chief Minister’s office. This grew to 225 homebuyers within a few years, who then filed cases in consumer courts, the Competition Commission of India and the Calcutta High Court. They staged multiple protests in Delhi, met top national political leaders, filed complaints with the RBI, and NRI homebuyers wrote to Indian embassies complaining about their investments. CURRENT STATUS After political pressure, the promoter completed part of the project and handed possession to the 225 homebuyers in 2019, along with a cheque as penalty for delay. However, more than 400 buyers in the same project, who were not part of the association, are still awaiting their homes as well as a refund.
"Homebuyers often fail because they are not organised and they get crippled due to ego issues and personal interests. If you want a solution, you have to attack from all sides.”
Prabhakar Bhardwaj 51, Noida
PROJECT Lotus Boulevard, Noida INVESTED IN 2016 while the project was partly handed over to owners. THE ISSUE When construction of Towers 28, 29 and 30 of the project stopped in 2017, the buyers formed an association and filed a case in the National Consumer Disputes Redressal (NCDRC). Within a year, the consumer court directed the builder to refund the money, but he declared bankruptcy. THE ACTION The homebuyers’ association then approached the National Company Law Tribunal (NCLT), who appointed an Interim Resolution Professional (IRP) in 2018. The homeowners association opted to ‘pool and build’. It applied for a PAN card and opened an account where the buyers could put in more funds. They made teams of accountants, engineers, finance experts, etc, to oversee the construction work, which was handed to the original contractor. CURRENT STATUS Two towers were handed over on a fi t-out basis between 2018 and 2020, while work is still pending on the last one, which will take about another year. However, the final resolution plan is still pending with the NCLT and municipal clearances are on hold because of pending dues. "It took a lot of effort to convince all the buyers to make further payments, We had to create trust by sharing receipts to show that payments were made only after progress.”
The RERA is supposed to dispose of complaints within 60 days of being filed, though additional time may be taken in some special situations. After an order is passed, the developer is supposed to implement it within 45 days. If this is not done, the RERA can impose a fine of up to 5% of the evaluated cost of the property or imprisonment of up to three years for noncompliance of orders. It can also cancel approval of the promoter’s other projects. The RERA’s order can be challenged either by the buyer or the developer at the Real Estate Appellate Tribunal (REAT), which can either uphold the order or overturn it. The orders passed by REAT can further be contested in the High Court. 
