24 Aug Amitabh Kant Committee Report on Real Estate Projects
This article covers “Daily Current Affairs” and the topic details “Amitabh Kant Committee Report on Real Estate Projects”. The topic “Amitabh Kant Committee Report on Real Estate Projects” has relevance in the “Economy” section of the UPSC CSE exam.
What is the Amitabh Kant Committee Report on Real Estate Projects?
Real Estate (Regulation and Development) Act, 2016 (RERA)
Why in the news?
Recently, on August 21, a committee led by Amitabh Kant, former CEO of NITI Aayog and India’s G20 Sherpa, submitted its findings.
Amitabh Kant Committee on Real Estate Projects
- The 14-member committee was instituted as per a directive issued by the Ministry of Housing and Urban Affairs on March 31.
- This initiative stemmed from the decision made by the Central Advisory Council (CAC) established under the Real Estate (Regulation and Development) Act, 2016 (RERA) in April 2022.
- The CAC, presided over by the Union Minister for Urban Affairs, played a pivotal role in shaping this course of action.
Timeline and Scope:
- The committee is entrusted with the responsibility of delivering its report within a span of six months from the date of its inaugural meeting.
- The primary objective of the committee revolves around addressing the legacy challenges associated with stalled projects and devising solutions that expedite their successful handover to homebuyers within stipulated timelines.
- Its composition not only includes representatives from the Union Finance Ministry but also officials from the state governments of Uttar Pradesh and Haryana, as well as stakeholders like the Insolvency and Bankruptcy Board of India, the National Housing Bank, and the Real Estate Regulatory Authority (RERA) of Haryana and Uttar Pradesh.
Major Findings of the Amitabh Kant Committee Report on Real Estate Projects:
- The committee’s initial focus was on identifying the number and locations of legacy stalled projects.
- The Indian Banks’ Association informed the committee that 60% of the stalled projects were already purchased, involving a capital commitment of Rs. 1.9 lakh crore.
- According to the committee’s report, the Indian Banks’ Association estimated that around 4.12 lakh dwelling units, worth Rs. 4.08 lakh crore, were considered “stressed“.
- Of these, 44% were located in the National Capital Region, and 21% were situated in the Mumbai Metropolitan Region.
- The committee’s analysis identified the primary cause of stress in these projects as the lack of financial viability, leading to increased costs and project delays.
- To address this issue, the committee recommended enhancing the Internal Rate of Return of the projects to attract funding, viewing judicial actions like using the Insolvency and Bankruptcy Code as a final measure.
- The committee proposed that for the projects to regain viability, all involved parties including developers, financiers, and land authorities would need to accept reduced payments, often referred to as a “haircut,” instead of demanding their full dues.
Major Recommendations of the Amitabh Kant Committee Report on Real Estate Projects:
- Mandating Registration for Transparency:
- The committee emphasises the significance of the Real Estate (Regulation and Development) Act, 2016.
- This law necessitates the registration of projects exceeding 500 square metres of land or involving the construction of more than eight apartments with the state’s respective Real Estate Regulatory Authority (RERA).
- The committee stressed the importance of strict enforcement of this requirement, asserting that project registration would bolster transparency in the sector.
- Decoupling Registration from Dues:
- A notable proposal from the committee involved decoupling the grant of registration or sub-lease by land authorities to homebuyers from developers’ due repayments.
- This recommendation aimed to benefit approximately 1 lakh homebuyers.
- Overcoming Administrative Hurdles:
- The committee highlighted a prevalent issue wherein many substantially completed projects faced delays in obtaining no-objection and completion certificates due to administrative obstacles.
- To address this, the committee advised Real Estate Regulatory Authorities (RERAs) to identify such projects and accelerate the certification process, irrespective of developers’ dues settlement with authorities.
- State-Level Rehabilitation Package:
- Under this proposition, developers participating in the program commit to completing projects within three years.
- The committee provided an illustrative model package for Noida and Greater Noida.
- Elements of the Model Package:
- The model package encompassed a “Zero Period” spanning two years from the onset of the COVID-19 pandemic in 2020. During this period, authorities would waive interest and penalties on developers. Developers could also engage a “co-developer” to aid in project completion.
- Additionally, the committee proposed a “partial surrender policy,” allowing developers to return unused land to authorities in exchange for dues waivers pertaining to that land.
About Real Estate (Regulation and Development) Act (RERA), 2016
- The Real Estate (Regulation and Development) Act (RERA), enacted by the Indian Parliament in 2016 and fully implemented from May 1, 2017.
- It serves a dual purpose of safeguarding home-buyers’ interests and fostering investment in real estate.
- The act strives to bring transparency and efficiency to real estate transactions.
Key Provisions of RERA:
- State-Level Regulatory Authority (RERA): The Act mandates that each state establishes a Real Estate Regulatory Authority (RERA) with responsibilities such as maintaining a public database of real estate projects, safeguarding the interests of promoters, buyers, and agents, promoting sustainable and affordable housing, advising the government, and ensuring compliance.
- Real Estate Appellate Tribunal: The Act establishes Real Estate Appellate Tribunals to hear appeals against decisions made by RERAs.
- Mandatory Registration: All projects with a minimum plot size of 500 sq.mt or containing at least eight apartments must be registered with the Regulatory Authorities.
- Escrow Account Requirement: Developers are required to deposit 70% of the funds collected from buyers into a separate escrow bank account designated solely for the construction of that specific project.
- Structural Defect Liability: Developers are held liable for repairing structural defects within a period of five years.
- Penal Interest for Default: In cases of default, both developers and buyers are subject to paying equal rates of interest as penalties.
- Cap on Advance Payments: Developers cannot accept more than 10% of the cost of a plot, apartment, or building as advance payment or application fee before entering into a sale agreement.
- Definition of Carpet Area: The Act defines the carpet area as the net usable floor area of a flat, with buyers being billed based on this measurement rather than the super built-up area.
- Punishments: The Act prescribes imprisonment of up to three years for developers and up to one year for agents and buyers in case of violations of orders issued by the Appellate Tribunals and Regulatory Authorities.
Q1. With reference to “Committee on Stalled Real Estate Projects” recently seen in news, consider the following statements:
- The committee’s main goal is to address challenges related to stalled projects and find solutions for their timely completion.
- The Central Advisory Council (CAC) under the Ministry of Finance initiated the establishment of the committee.
- The committee recommended the use of the Insolvency and Bankruptcy Code as the primary solution to the stalled projects.
Which of the statements given above is/are NOT correct?
(a) 1 and 2 only
(b) 2 and 3 only
(c) 3 only
Q2. Consider the following :
- Real Estate Regulatory Authority (RERA) is a national authority tasked with safeguarding homebuyers’ interests and fostering investment in real estate.
- The RERA is established at the central level under the Real Estate (Regulation and Development) Act, 2016.
- All real estate projects with a minimum plot size of 500 sq.mt or containing at least eight apartments are required to be registered with the Regulatory Authorities.
How many of the abovementioned statements are correct ?
(a) Only one
(b) Only two
(c) All three
Q3. Discuss the primary objectives of the Real Estate (Regulation and Development) Act, 2016, and elaborate on how it addresses the challenges faced by the real estate sector in India.