Govt panel wants RBI to relax norms to help stalled housing projects in Noida, Greater Noida

To provide relief to homebuyers in Noida, Greater Noida and Yamuna Expressway — who are yet to get possession of their flats — a high level government panel has recommended that the Reserve Bank of India (RBI) relax its February 12 guidelines for the real estate and construction sector and allow banks to consider additional funding to complete the projects.

Though the RBI circular on “Revised Framework for Resolution of Stressed Assets” provides certain conditions to the banks for additional funding in stalled projects, presently they are wary to come forward as these loans get classified as NPAs (Non Performing Assets).

Relaxing RBI guidelines is one among a slew of measures suggested by the 11-member panel headed by Union housing secretary DS Mishra. The panel was constituted in June by the Uttar Pradesh government to redress problems faced by around three lakh homebuyers who have been affected by the non-delivery of flats that they have booked in these stalled projects despite making substantial payment.

“…. It is recommended that specific guidelines be issued by RBI, for the real estate and construction sector, in order to enable banks to consider funding to the projects under implementation,” the report states.

The panel, which submitted its report last month, has also recommended that last mile funding of stalled projects may be permitted on the Last-In First-Out model, where the investor who puts in his money at the last stage to complete the project gets to exit first.

Currently, an investor is wary of putting money in projects where only minor construction work is pending as there is no clarity on return of their invested money. “Allowing such financier to exit first after the project is completed will help in the present scenario,” a senior government official said.

“We have recommended that the Department of Financial Services under the Union finance ministry should take necessary action in this matter,” said a member of the panel.

The Supreme Court is already hearing a clutch of petitions filed by homebuyers and banks against developers such as Amrapali, Jaypee and Unitech that are at various stages of adjudication. In such cases, the committee has said that its recommendations should be implemented with the court’s permission.

To resolve the long pending issue of stalled projects and help home buyers, the committee has also recommended that the UP government may reintroduce the 2016 project settlement policy (PSP) to address delays without causing any loss to the authorities.

PSP could include waiving off the penal interest on a developer had been stalled because of issues such as litigation or delay in land acquisition by the authorities. The panel has recommended that PSP may be made valid for six months only. “The developer has to give an undertaking to complete the project within three years, failing which the benefits given should be taken back,” the report states.

The panel has also batted for establishing one more real estate regulatory authority (RERA) for Noida and Greater Noida to help redress the issue of homebuyers in the region.

Presently, there is only one RERA in the state of UP, which it was felt was inadequate to handle the large number of homebuyers’ complaints in the region.