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One year of RERA: Tardy implementation restricts gains



Photo Credit: Aparna Constructions

By Vinod Behl

Two years after the Centre notified the Real Estate Regulation and Development Act (RERA) of 2016 to empower and protect property consumers and make property transactions fair and transparent by regulating the sector, the sluggish and flawed implementation of the progressive act, has put a big question mark on the gains of RERA.

RERA was passed by both the houses of Parliament in March 2016 and on May 1, 2016 a majority of the sections of the Act came into force. Under this model Act, every state was required to set up its regulatory authority within a year (by May 1, 2017). And in the next one year, the states were mandated to make their RERA websites operational for the benefit of home buyers. Other sections were notified in April 2017 and on May 1, 2017 the full act became operational.

Today, two years after RERA became an Act, only 20 states have notified rules. What’s more, except for the states of Maharashtra, Punjab and Madhya Pradesh, which have permanent regulators, all other states are making do with interim regulators.

Under RERA, all developers need to register to launch projects, which get registered only after all necessary permissions and land for the project are in place. They are required to provide all the mandatory information to be up on the official website of RERA to help buyers take an informed decision about buying property.

RERA’s performance on this front is also dismal as 15 states are without an operational RERA website. Even on the functional websites, the projects information is either incomplete or questionable, with no way to check its authenticity. As a result of the weak and faulty implementation of RERA, home buyers are deprived of the gains and protection guaranteed under the Act.

Notwithstanding the criticism about flawed and slow implementation of RERA, this progressive regulation has helped in project execution and delivery, boosting demand and sales, in turn contributing to the revival of residential real estate, though the gains are limited.

As RERA takes root — along with low interest rates, stable property prices and the government’s loan subsidy for affordable housing — its positive impact is already visible. There has been an eight per cent hike in housing demand in Q1, 2018, compared to Q4, 2017. Home sales registered a 33 per cent rise in the top nine cities during this period. In fact, housing sales exceeded new supply by five per cent during the last two years.

It’s another matter that buyers have so far not developed complete confidence and prefer ready homes to avoid development risks. The preventive and penal provisions of RERA have made developers focus on deliveries, readying a good pipeline of completed homes for sale.

Besides various other factors, fund constraint has been the prime reason for large-scale delivery defaults. But RERA, aided by other key reforms like GST, FDI liberalisation, ease of doing business and demonetisation, have brought in much-needed transparency, fair play and financial discipline by regulating realty, in turn giving a boost to the confidence of global investors.

Statistics speak for themselves. PE investments witnessed 52 percent rise since 2014. PE investments grew 17 percent in 2017 to Rs 42,800 crore, as against Rs 36,590 crore last year, with residential realty attracting highest investment of Rs 15,600 crore.

RERA, besides empowering and protecting consumers, has put grievance-redressal on the fast track. It was following the enactment of RERA that a group of aggrieved home buyers could directly approach the National Consumers Dispute Redressal Commission (NCRDC), thereby bypassing lower consumer courts to ensure fast-track justice. It is also because of RERA that the government, development authorities and the judiciary have become pro-active in coming to the rescue of aggrieved home buyers of stalled projects.

The much publicised cases of Jaypee Infratech and the Amrapali Group are cases in point where developers are facing the ire of about one lakh home buyers. In both cases, the companies are staring at insolvency and the Supreme Court has come down heavily on the errant developers, saying it is committed to safeguard the interests of home buyers in terms of project completion and refunds.

Meanwhile, it is also the result of the pressure created by RERA that home buyers are set to get relief under the Insolvency and Bankruptcy Code (IBC) as the government plans an ordinance to treat home buyers as financial creditors to facilitate refunds.

Considering the pros and cons, RERA needs to cover a lot of ground for its effective implementation, in order to serve its desired purpose. And according to Dr Samantak Das, Chief Economist, Knight Frank India Property Advisory, in the current scenario, the sentiment that drives the purchase of residential property is unlikely to change. He may sound too negative. But one thing is certain: The patchy implementation of RERA has delayed the revival of real estate, especially residential realty.

Gautam Chatterjee, Chairperson of the Maharashtra RERA, the front-runner in the implementation of the Act, believes that this “transition pain of RERA” may last at least a couple of years. And Anuj Puri, Chairman of Anarock Property Consultants, sums up the scenario well, saying that although real estate recovery under RERA will be gradual, yet it will be extremely durable — and based on very sound market dynamics.

(Vinod Behl is Founder & Editor, Ground Real(i)ty Media, a real estate content consultancy. He can be contacted at [email protected])



Every company regardless of size, is important for India: FM Nirmala Sitharaman



Nirmala Sitharaman
Finance Minister Nirmala Sitharaman (File Picture)

New Delhi, Sep 21 : Finance Minister Nirmala Sitharaman on Monday stated in the Lok Sabha that any company whether it is big, small, micro, medium or nano is important for the country.

Saying that “my friends are the companies”, the Minister said under the Companies Act even MSMEs are registered and anybody who is registered under this act and if, unfortunately, comes for a liquidation has to have a solution.

“Your friend, my friend does not matter. All are friends of this country. Unless business is run by small, medium or big that kind of a job which we are talking about will not happen. So, solution is required for everybody,” the Minister said while addressing the Lower House while pushing for the passage of the Insolvency and Bankruptcy Code (Second Amendment) Bill, 2020.

The Bill, which was passed by the Rajya Sabha on Saturday, seeks amendment in the Insolvency and Bankruptcy Code, 2016 and replaces the Insolvency and Bankruptcy Code (Amendment) Ordinance, 2020 which was promulgated by the President on June 5 this year.

The ordinance had prohibited the initiation of insolvency proceedings for defaults arising during the six months from March 25 this year (extendable up to one year).

Simply put, no insolvency proceedings can be initiated by either the corporate debtor or any of its creditors for defaults arising during this six-month period beginning March 25.

The ordinance came in response to the Covid-19 pandemic, which had created uncertainty and stress for businesses for reasons beyond their control. It was also felt that during the Covid-19-induced lockdown, it may be difficult to find an adequate number of resolution applicants to rescue the corporate debtors who may default in discharging their debt.

In parliament registry, Sitharaman said this is among one of those Bills, now an Act, which come very quickly each time when the ground situation requires changes so that this becomes a robust law.

Giving detailed reasons behind amendment in the law, the Minister said the need of such an ordinance has never been contextual in last 100 years. “Such kind of atmosphere cannot be in the coming 100 years too.”

Hinting at the Covid-19 pandemic, the Minister said the dimension and the scale of the pandemic was obvious and therefore the government had to come up with an ordinance which suspended the application of three sections–7,9 and 10– of the Insolvency and Bankruptcy Code.

“We had to prevent any company which is experiencing distress because of Covid being pushed into the insolvency proceedings. And therefore we had to suspend these sections.”

The Minister said the entire approach that the government has taken is to immediately help companies with some relief and then look at the way in which the second phase can go on.

She said this Bill is the part of the second approach. And the third phase, Sitharaman said, could have some kind of resolution mechanism for those who are not able to survive and hand-holding in particular incidences.

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Can RBI ensure banks infuse funds in Amrapali projects, SC asks




Amrapali Group

New Delhi, Sep 21 : The Supreme Court on Monday asked the RBI to file an affidavit whether it can intervene to ensure that banks infuse funds to complete construction of the Amrapali housing projects.

A bench comprising Justices U.U. Lalit and Ashok Bhushan asked the advocate for the central bank to file an affidavit in the matter clarifying the regulatory provisions.

The observation from the top court came after the court-appointed receiver informed that as per the September 1 order, he had sent a letter to the Governor of RBI and CMDs of other banks inviting them to finance Amrapali projects and for release of the loan amounts.

However, the reply received by him is not very clear, he said.

Kumar Mihir, counsel for home-buyers, said: “I hope the RBI takes a regulatory position and removes all constraints in other banks extending project finance to Amrapali. Especially, when the Supreme Court is trying its best to raise funds to continuity in construction of these projects.”

The receiver also informed the court that no money has been received from the SWAMIH Investment Fund so far and the final approval is taking time.

On September 1, the apex court had said the SBI Caps will issue funds to the tune of Rs 625 crore from the SWAMIH Investment Fund for six projects and also directed the court-appointed receiver and SBI Caps to finalise the legal framework to regulate this funding. The bench asked him to inform about the status on the next date of hearing.

The receiver informed the top court that 5-6 banks have executed MoUs with him and they have started disbursing loan amounts, and it seems, by middle of next month, the home loan issue will be sorted with respect to all home-buyers.

The bench directed all home-buyers, who had defaulted in payment of their dues earlier when Amrapali was in management, to clear their dues by October 31, or otherwise the receiver will be permitted to take action, including cancellation of their allotments.

As the Institute of Chartered Accountants sought an extension of six months to finish disciplinary proceedings against Anil Mittal, the statutory auditor of Amrapali, the court asked the institute to file an additional affidavit giving exact dates of proceedings when they require his presence for necessary directions.

The receiver and MSTC informed the bench that to date, five properties of Amrapali have been sold for Rs 12.54 crore, out of which 25 per cent was deposited before the MSTC and rest was to be deposited in the UCO Bank. The court gave a direction to the receiver to file a detailed note on sale of properties by the next date of hearing, which is scheduled on October 5.

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FinCEN files: Big banks let $2tn ‘dirty money’ move around world

There have been a number of big leaks of financial information in recent years, including 2017 Paradise Papers. The 2016 Panama Papers – Leaked documents from the law firm Mossack Fonseca showed more about how wealthy people are using offshore tax regimes, the BBC said.




New Delhi, Sep 21 : The FinCEN files show that the world’s biggest banks have allowed criminals to move “dirty money” around the globe. In total, these reports flagged more than $2 trillion in transactions, according to BuzzFeed News.

The BBC reported that Russian oligarchs used banks to avoid sanctions and moved their money into the West.

It is the latest in a string of leaks over the past five years that have exposed secret deals, money laundering and financial crime, a BBC report said.

The FinCEN files are more than 2,500 documents, most of which were files that banks sent to the US authorities between 2000 and 2017.

These documents are some of the international banking system’s most closely guarded secrets. Banks use them to report suspicious behaviour but they are not proof of wrongdoing or crime.

They were leaked to Buzzfeed News and shared with a group that brings together investigative journalists from around the world, which distributed them to 108 news organisations in 88 countries, including the BBC’s Panorama programme.

FinCEN is the US Financial Crimes Investigation Network. Concerns about transactions made in US dollars need to be sent to FinCEN, even if they took place outside the US.

Suspicious activity reports, or SARs, are an example of how those concerns are recorded. A bank must fill in one of these reports if it is worried one of its clients might be up to no good. The report is sent to the authorities, BBC said.

It has been revealed through these documents that HSBC allowed fraudsters to move millions of dollars even after it learned from US investigators that the scheme was a scam.

JP Morgan allowed a company to move more than $1 billion through a London account without knowing who owned it. The bank later discovered the company might be owned by a mobster on the FBI’s 10 Most Wanted list.

There is also evidence that one of Russian President Vladimir Putin’s closest associates used Barclays Bank in London to avoid sanctions meant to stop him.

Accoridng to BBC, the UK is called a “higher risk jurisdiction” like Cyprus, according to the intelligence Division of FinCEN. That’s because of the number of UK registered companies that appear in the SARs. Over 3,000 UK companies are named in the FinCEN files – more than any other country.

Deutsche Bank moved money launderers’ dirty money for organised crime, terrorists and drug traffickers. Standard Chartered moved cash for Arab Bank for more than a decade after clients’ accounts at the Jordanian bank had been used in funding terrorism.

There have been a number of big leaks of financial information in recent years, including 2017 Paradise Papers. The 2016 Panama Papers – Leaked documents from the law firm Mossack Fonseca showed more about how wealthy people are using offshore tax regimes, the BBC said.

According to BuzzFeed News, some entities have been flagged numerous times in the FinCEN Files. Mayzus Financial Services, an online payment processing company that served clients involved in a bitcoin ring, sets the record, appearing as a subject of 36 SARs.

Second is Kaloti Jewellery International, a Dubai-based precious metals company that was flagged as a subject in 34 separate SARs by eight different banks.

More than 250 SARs reference people with addresses in the US, and more than 120 with addresses in Russia. The UK, China, Germany, the United Arab Emirates, Canada, and Ukraine were also common locations for people, each appearing in at least 20 reports, it said.

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