Do amnesty schemes benefit the builders and home buyers?

Contrary to the general perception that the business environment is getting tougher for the builders, due to activism from home buyers and the media and judicial intervention, there have been many instances of amnesty to the developers, in the last few years.

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When the home buyers of Amrapali in Delhi-NCR announced a massive protest, the Noida administration immediately intervened, to deny permission for the protest under Section 144 and instead, asked the buyers to negotiate with the builder.
The authorities of Noida, Greater Noida and Yamuna Expressway that allotted the land parcels to developers on deferred payment, have repeatedly rescheduled the repayments, when the builders have defaulted.
In the wake of non-payment to the banks, the builders have on many occasions, been allowed to restructure the payment.
In some instances, even the courts have granted extra time to developers, to complete their projects, with a strict warning or some penalty.
Supertech’s Emerald Court project also received a stay by the Supreme Court, on the High Court’s order of demolition of extra towers.

Amnesty to builders not favourable, according to home buyers

The underlying philosophy behind providing such amnesty to builders, seems to be that any punitive action against the developers, will ultimately hurt the delivery timelines and hence, the buyers’ cause. Home buyers, however, allege that such amnesty does not help their cause and instead, gives the developer an escape route.

Gaurav Gupta, a home buyer in Paras Tierea, Sector 137, Noida, is extremely critical of such amnesty to the builders. According to him, the policy makers are setting a bad precedent, by offering amnesty to builders who fail to fulfill their business commitment.

“To the best of my knowledge, a majority of the builders in Uttar Pradesh and Haryana, who were offered amnesty, have failed to take advantage of it and correct their wrongdoings. Unfortunately, there is no amnesty for buyers, if they default,” says Gupta.

The argument in favour of amnesty schemes

Vineet Relia, managing director of SARE Homes, maintains that some amnesty measures may be necessary, considering that the real estate sector is facing a slowdown in the wake of weak demand. Some development authorities like Greater Noida, have restructured their payment plans to help allottees, while the restructuring of debt by banks, is a move to tackle mounting bad loans in the banking system. “While the recent judgments of the National Consumer Disputes Redressal Commission (NCDRC), do place a higher financial burden on developers, the move will only help improve efficiency and transparency in the sector. While these measures are welcome, the realty sector is yet to come out of the slump, which can only happen when demand picks up,” explains Relia.

Amnesty scheme beneficial to buyers and the realty industry

Parth Mehta, managing director of Paradigm Realty, feels that policy adaptations are necessary, in the real estate sector. The turnaround time for a project’s delivery, is generally three to four years and when the business cycle changes, it generally hurts the project’s execution.

“In my view, such amnesty helps buyers to get the possession of the flat or regularisation of the flat. Consequently, even though there may be some delay, the buyer receives the possession or occupation of the flat,” says Mehta.

Does the industry and end-user benefit from amnesty schemes?

A majority of the builders, who are the beneficiary of various amnesty schemes, have failed to reverse their fiscal mismanagement or delays in delivery.
Amnesty to builders, lends a perception that builders who have compromised with the buyers’ interest, can get away without being penalised.
There is no mechanism, to verify whether the builder has defaulted on purpose or due to market dynamics.

(The writer is CEO, Track2Realty)

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Ravi Sinha

Ravi Sinha is a journalist with nearly two decades of cross-discipline media exposure. He is the CEO of real estate think-tank group Track2Realty. He has been writing extensively on the real estate sector for nearly a decade. Evaluation of real estate brand performance is his expertise and he has immense insight into consumers’ psychograph in the property market.

Twitter: https://twitter.com/ravitrack2media