In a major relief to lakhs of aggrieved buyers who are forced
to wait for possession of their homes for years, the Uttar Pradesh Real
Estate Regulatory Authority (UP-RERA) has decided to
auction unsold flats of defaulting builders to pay back investors seeking
refund in delayed housing projects.
While RERA benches have taken several steps against
defaulting builders across the country, this is perhaps the first time that
such a move has been announced in India under the new real estate law.
Officials said UP-RERA will soon float a portal for the
global e-auction of unsold properties of cash-strapped builders who have been
issued recovery notes. A recovery note is a notice sent by Rera that seeks a
refund of money owed by homebuyers.
“When a buyer approaches UP-RERA to seek a refund on their
investment, we issue an order for a refund and the district administration is
sent a recovery note to collect the money from the defaulting builder. But
because most of the builders are cash-strapped, the notes are not honoured,”
Balwinder Kumar, member of UP-RERA, told TOI.
“None of the 660 recovery notes sent to the builders through
the district administration in Gautam Budh Nagar has been honoured by the
defaulters. So, we have now decided to auction unsold inventories of such
builders to return the money to the aggrieved buyers stuck in delayed projects,
should they want it back,” he added. With this move, all builders against whom
buyers have moved UP-RERA stand to lose their unsold inventory for refunding
buyers who want to exit the delayed projects.
“There are two kinds of refunds — one where a builder has not
been able to deliver the flat and the buyer wants to exit the project. The
other one is where the builder has promised penalties for delay but has not
paid any late fine to buyers. In both the cases, the money accrued from the
auction will be used,” Kumar said.
Homebuyers have welcomed the decision by UP-RERA. “This would
prove hugely beneficial for such buyers who do not want to stay invested in a
delayed project,” said Abhishek Kumar, president, Noida Extension Flat Owners
Welfare Association (Nefowa).
However, lawyer Kumar Mihir said, “Though UP-RERA has full
authority to initiate such an auction, the auction of these unsold flats will
only be successful if the reserved price is lower than the market price listed
by the builder.”
“Secondly, the auction method can destabilise the market
prices of apartments in the vicinity and the builders may object to this order.
The reserve price can only be set after UP-RERA appoints a valuer for these
unsold inventories. Anyway, the auction will not affect banks as banks fund
full projects and buyers get bank loans for individual units.”
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