Real Estate Sector which is one of the largest employment generating and revenue producing sectors to the Government in the country, is ailing due to which Government is deprieved of its revenue needed for welfare activities, the flat buyers are not getting their allotted Flats and the Authorities suffering due to non payment of land dues and other revenues. The crisis in real estate sector is cascaded with increasing unemployment in direct employment and employment through Contractors and supporting small & medium scale industries.
The present crisis in real estate sector is due to multiple factors such as delays due to prolonged land disputes in different Courts and the implications of various long-term beneficial measures implemented by the Government such as Demonetizations, GST and RERA and the resultant uncertainties.
Banks/Financial Institutions on the basis of RBI Circular dated February 12, 2018, stopped more or less lending to the Housing Sector including the un-disbursed amounts committed by them for the project completion. Further, in case of overdues, Banks are unwilling to re-schedule /defer the loan and interest and are compelling to submit the resolution plan under the above cited RBI circular, which is very onerous to comply with.
The tool has become threatening mode as the forensic auditors have mandate to prove the promoter as willful defaulter so as to rule out any resolution and straight away move to NCLT or similar forum. Further, the recent happenings in the financial market has severely accentuated the problem of liquidity as the NBFCs have also stopped lending into this sector including the undisbursed amount. The resources of the promoter thus shifts from running the enterprise to saving the company and stop work at the sites.
Realising the gravity of the situation, some of the State Governments like U.P. Government, constituted Committees followed by constitution of High Level Committee on 18.06.2018, under the Chairmanship of Secretary, Ministry of Housing & Urban Affairs(MoHUA) to study the issues and submit recommendations to salvage these Housing Projects. These Committees on finding that there have been valid reasons for the crisis in the real estate industry and if remedial measures can be implemented these projects are potent of revival. These Committees have recommended various measures including allowing Zero period on land payments due to Development Authorities for the period the project land remained under land acquisition litigation, modification of the RBI Circular suitably enabling Banks and Financial Institutions to enhance funding on stalled projects with adequate precautions for timely repayment by the Developers. Mr. Nitin Gadkari, Union Minister for Road Transportation, Highways & Shipping has also in a recent interview, has endorsed the need for taking a realistic view on the crisis and for taking up revival measures which will meet the interests of all stakeholders.