Interview: Abhay Upadhyay-The Man Who First Suggested Rs 10,000 Cr Stress Fund For Stuck Realty Projects

The government has announced setting up of a stress fund in which government will put in Rs 10,000 crore for helping the housing projects that are stuck in the country. Last month, Abhay Upadhyay, a home buyer, had suggested in a letter to the Prime Minister that such a fund should be set up.  In an exclusive interview to, Upadhyay talks about how such a fund should be operationalized, what changes in RERA should be made and what safeguards should be put in place to protect the interest of the home buyers across the country. Here are the excerpts:   

Ques: You were the first to suggest setting up of Rs 10,000 crore stress fund for stuck realty projects. Now that the government is setting it, how do you want it to function and on which criteria should projects be selected that are to be benefitted by the fund?

Ans: This is a big step announced by the government towards resolving the issue of delayed projects.  I hope that this is not one of the cases of allocation of such funds rather the government has long term plans to complete all stuck projects in next five years.

It is good decision to begin with,legally non-complicated cases andhas chosen the first beneficiary as those who are at the bottom of pyramid.With regard to its functioning and selection criteria my views are as under:

1) Professional body should not have any member who is a builder as there may exist serious conflict of interest. 

2) It should be ensured that funds are equally disbursed in all five zones i.e North, South, East, West and Central India which meets the pre-set criteria. 

3) Funds should not be disbursed to promoters of stuck projects directly rather disbursal should be made to contractors entrusted to complete the work after scrutinizing the progress made by the committee of home buyers of that project. 

4) Projects selection should be done by a task force constituted by the Housing Ministry which should follow broad guideline that only ongoing projects nearing completion and/or projects delayed beyond five years should be completed first while new projects launched after RERA coming into force should not be considered.

Ques: How do you see the problem of stuck projects in Delhi NCR getting solved where most projects/developers are NPAs/NCLT cases?

Ans: We all need to understand that the fund is for pan India and not dedicated to any particular geographical location. Also, creation of this fund is just the beginning in the right direction and not the end. Furthermore, the magnitude of the mess created by builders over years cannot be resolved in one stroke. 

As of now nearly 44,000 real estate projects are registered with RERA across India out of which nearly 420 realty projects are before NCLT which is less than 1percent of total realty projects without considering significant number of non-registered projects. Regarding projects which are NPA, we don’t have ready data available but it can be safely assumed that there is more of a liquidity issue than solvency issue. 

Therefore there will be a sufficient number of cases benefitting from this fund even in NCR region. With regard to solution for projects which are under NCLT proceedings or have turned NPA, I am confident that the Government will find ways going forward in the next round as it now will get time to work out legally valid solution including for big three distress projects in NCR. 

Ques: This new fund announced by government will help only affordable and mid-income projects. What measures do you suggest for other categories like luxury projects that are stuck? 

Ans: As I said, the objective of the Government should be to complete all stuck real estate projects within next 5 years which would ultimately cover luxury projects as well. We also need to understand that this fund is basically debt fund and going forward The government may need to give budgetary support to all those projects where there is a solvency issue.

Having seen that developers have diverted funds and also siphoned funds abroad more as a rule rather than as an exception, it is also necessary that the government simultaneously initiates work on attachment and seizure of all personal and companies assets of defaulting promoters which should be used for completion of projects. To enable this, extra power should be given to agencies entrusted to do the job.

It is only then that the government may extend budgetary support going forward which may be for all such projects facing solvency issues including luxury projects which obviously should be taken up last being at the top of the pyramid.

Ques: What are your suggestions improving/strengthening RERA laws in the country. 

Ans: RERA is one of the paramount reforms carried out by the Government. It is finely drafted and balanced legislation taking care of almost all aspects of real estate industry. However the Regulators who are entrusted with the job to enforce RERA have failed us as they have become law onto themselves. They are reluctant to penalize developers for not completing their projects within stipulated time and for not obeying their orders.

Recovery warrantsare neither promptly issued nor executed. The recovery process can be made more structured by respective State Governments by invoking power under Section-40 but Regulators never bothered. They have deliberately failed in acting against erring developers and found good escape route by finding faults with the Act itself. It is high time that Government appoints serving bureaucrats rather than retired one as members/Chairman of Regulatory Authorities.

No study is being conducted to check if state RERA web sitesare fulfilling its purpose of transparency and disclosure? In none of the web site, one can find reason of giving extension to a project and if any penalty has been levied?  In this context, it is important to mention that Ministry of Housing and Urban affairs being pilot ministry for RERA cannot be absolved of its responsibility for effective implementation of RERA.

Ques: What other measure do you demand from the government to improve the working of the realty sector, especially those that impact home buyers? What safeguards should be built into the system?  

Ans: For long term prosperity of the sector, the first most important step the Government need to take is to act on the directions given by the Supreme Court in Amrapali Judgment. In the said Judgment both State and Central Government have been directed to take appropriate steps to ensure that every home buyers gets its dream home.

The Nation has lost confidence in builders. This is the only industry which has become a drag on the economy as not only there is a huge gap in their promise versus performance but also they have failed in their obligations towards the Authorities and banks.

This has a spiraling effect on the entire economy and the current economic slow-down can also be attributed to these factors.

It is high time that The Government realizes that no well-informed citizen is willing to risk their entire life savings just to take advantage of few lakhs of tax incentives. Also no one wants to deal with such privileged class of people called builders who are above laws, who have political patronage and getting justice against whom is next to impossible.

Hence, to restore confidence and bring vibrancy in the sector, the Government needs to concentrate on two things a) Take steps to clear the present stalemate of about 5 lakh undelivered houses pan India and b) Effective implementation of RERA in letter and spirit with a clear message that there will be zero tolerance for breaches in timelines, quality and commitment by builders.