Report on Stalled Real Estate Projects

August 23, 2023

A 14-member committee led by former NITI Aayog CEO Amitabh Kant submitted its report to Housing and Urban Affairs Minister Hardeep Puri on August 21, 2023. The committee was established to investigate stalled real estate projects and propose solutions for their completion.

The report revealed that 60% of these projects, representing a capital commitment of Rs. 1.9 lakh crore, had been purchased. It emphasized that the primary cause of project distress was a lack of financial viability, resulting in cost overruns and delays. The committee suggested enhancing project Internal Rate of Return to attract funding and proposed a rehabilitation package for stalled projects, including a “Zero Period” and provisions for completion certificates. The report’s implementation largely falls under state governments’ jurisdiction, with Noida and Greater Noida already considering the model package.

Why were the majority of stalled real estate projects considered “stressed”?

The primary reason for project stress was inadequate financial viability, leading to cost overruns and delays. About 4.12 lakh dwelling units with a value of Rs. 4.08 lakh crore were “stressed”, and 44% of these were in the National Capital Region, according to the Indian Banks’ Association.

What role did the Real Estate (Regulation and Development) Act, 2016, play in the committee’s recommendations?

The committee recommended enforcing the Act’s provisions, which mandate that projects exceeding 500 sq. meters or eight apartments be registered with state Real Estate Regulatory Authorities (RERAs). Registration would enhance transparency and accountability.

How did the committee propose addressing the issue of stalled projects?

The committee suggested a rehabilitation package, requiring developers to commit to completing projects within three years. The package included provisions like a “Zero Period” to waive interest and penalties, and the option for developers to collaborate with co-developers.

What challenges might state governments face in implementing the committee’s recommendations?

The recommendations mainly fall under state jurisdiction. Challenges include aligning policies, financial implications of the proposed rehabilitation package, and collaboration among stakeholders.

How might the proposed “partial surrender policy” benefit developers and authorities?

The policy would allow developers to return unused land to authorities, exchanging it for a waiver on dues for that land. This could aid developers’ financial positions and encourage progress on stalled projects.

What role does the Special Window for Affordable and Mid-Income Housing (SWAMIH) Fund play in the committee’s recommendations?

The committee urged using the SWAMIH Fund to proactively finance stalled projects. It suggested revisiting the fund’s requirements for Internal Rate of Return and first charge and proposed permitting banks to finance new buyers of unsold inventory.

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