Buyers in Amrapali Group see light at end of tunnel

29 Jul 2019, 11:11 PM IST
Ashwini Kumar Sharma

More than 40,000 homebuyers stuck in under-construction projects of Amrapali Group, some for nearly a decade, have finally found a light at the end of the tunnel. In a landmark judgment last week, the Supreme Court cancelled the registration of Amrapali Group of companies, a Noida-based real estate developer, under the Real Estate (Regulation and Development) Act, 2016 (RERA), and appointed NBCC (India) Ltd, formerly known as National Buildings Construction Corp. Ltd, a government of India Navratna enterprise, to complete the various under-construction projects. The apex court has asked the developer to hand over the possession of apartments after completing the project at a profit margin of 8% that it can charge from the homebuyers. “Which is a great bargain on the side of the buyers,” said Gulam Zia, executive director, valuation and advisory, retail and hospitality, Knight Frank India, real estate consultants.

“At least we now have the hope that we will get our houses,” said Amit Gupta, 38, an HR professional with an IT firm in Gurugram, Haryana, who booked a two-bedroom apartment in Centurian Park, one of Amrapali’s project in Greater Noida, in 2011. The project was to be delivered by 2013 and Gupta paid about 90% of the value—approximately ₹25 lakh—by 2013.

Significantly, this also means that banks and other lenders can’t touch homeowners flats or the land on which they have been fully or partially constructed to recover their money, and homeowners have the first right over the asset.

We tell you more about the verdict and what it means for the homebuyers.

Rap to authorities…

In its order, SC made it clear that the developer is not the only culprit, and held government authorities and banks equally responsible for the mess. It said that the Noida and Greater Noida authorities were grossly negligent in reviewing and monitoring the progress of the projects, while banks failed to ensure that the money was used properly. “Noida and Greater Noida authorities shall have no right to sell the flats of the homebuyers or the land leased out for the realization of their dues. Their dues shall have to be recovered from the sale of other properties which have been attached. The direction holds good for the recovery of the dues of the various banks also.”

This means that the Noida and Greater Noida authorities and banks will not be able to make any claim on apartments sold by the Amrapali Group. “SC has relied upon Public Trust Doctrine and has deplored the no affirmative action by government agencies like Noida and Greater Noida and have held them responsible together with banks,” said Rajesh Narain Gupta, managing partner, SNG & Partners, a law firm.

“SC has clarified that banks shall have no right to sell the flats or the land leased out for realization of their dues. So the homebuyers should not have any concerns with the outcome of the insolvency proceedings filed against Amrapali,” said Atul Pandey, partner, Khaitan & Co., a law firm.

Based on the report submitted by the forensic team, SC also warned and asked all those who are involved in defrauding the homebuyers of Amrapali Group to deposit the money defrauded by them within one month in the court’s bank account. If they fail to do so, appropriate action will be taken against them.

In its report, the forensic team disclosed the wrongdoings of various executives of the Amrapali group, chartered accountant appointed for audit, other companies and persons. SC directed the Enforcement Directorate and concerned authorities to investigate and fix liability of persons responsible and submit the progress report to the court.

The governing body of chartered accountant, Institute of Chartered Accountants of India, has been asked to take necessary action against the chartered accountant involved in the fraud.

…in favour of buyers

The order give homebuyers the first claim of rights over the apartments in Amrapali Group projects. “Flat buyers get a clean sweep and their rights are protected over and above government, financial and operational creditors. This case is being held as exceptional and peculiar,” said Gupta, who is a lawyer.

The apex court has also set up a mechanism to make funds available to NBCC in order to execute the remaining construction work.

Homebuyers have been directed to deposit the outstanding amount that they are still to pay within three months from the date of the verdict in a court-administered bank account. The amount deposited by the buyers will be disbursed as per the SC order and in accordance to phase-wise completion of the projects or work by NBCC.

However, homebuyer Gupta is sceptical about whether or not NBCC will be able to manage the deficit of funds required to complete the several projects.

Spreading the vibe

Besides homebuyers of Amrapali group, the SC judgment also gave hope to buyers of other stalled projects across India.

The court advised the concerned Union ministry, state governments and the secretary of housing and urban development to ensure that appropriate action is taken against leaseholders of similar projects in not only Noida and Greater Noida, but also other cities in various states where projects have not been completed. They have been further directed to ensure that projects are completed in a time-bound manner as contemplated in RERA and homebuyers are not defrauded.

According to a research report by ANAROCK Property Consultants Pvt. Ltd, as many as 220 projects with 174,000 homes, are completely stalled in the top seven cities alone. Most of these projects were either launched in 2013 or before. The overall value of all stalled units is estimated to be more than ₹1.77 trillion. Moreover, “almost 66% of these stalled units (approximately 115,000 homes) have already been sold to buyers who have been left in the lurch—at the mercy of either the concerned developers or the law of the land. The net estimated value of these sold units is approximately ₹1,111 billion,” stated ANAROCK’s research. National Capital Region (NCR) has the largest pile-up of stalled units with 118,000 homes (68% of the total stuck stock) spread over 67 projects, followed by Mumbai Metropolitan Region (MMR) with nearly 38,060 stalled units.

The SC judgment in the Amrapali case has set a precedent and brought clarity on various aspects, which will strengthen homebuyers rights going forward. However, it may be difficult to come up with similar solutions for all delayed projects. “The order can’t be taken as a template for all such resolutions since each case would have issues like cost, pending collections from homebuyers, and government charges,” said Zia.

Only time will tell whether or not NBCC matches up to this challenging task.