Supreme Court Verdict: A relief for homebuyers or a challenge for NBCC?
Recently, the Supreme Court of India ordered the central government-owned National Building Construction Corp. Ltd (NBCC) to take over the uncompleted projects of Amrapali and Unitech. The two companies are facing severe financial troubles and are unable to complete their projects.
After almost five decades of bank nationalisation, the Supreme Court has again nationalised the real estate in a unique way. This extraordinary step was taken by the apex court to give relief to homebuyers of the Amrapali and Unitech residential projects.
The court in its order revoked the licence of these two real estate groups. The court also held these two companies responsible for syphoning the funds to other projects and for failing to deliver the projects to homebuyers on time after receiving money from them.
Although the order is seen as a big blow to the developers, it is seen as a big relief for the homebuyers. However, many experts are questioning the verdict to complete the projects of these companies by NBCC, given the financial conditions and ability of the NBCC to deliver the incomplete projects in such a large number.
As per several recent reports, there are no signs of recovery in the real state sector. The roots of the real estate crisis can be traced back to the Indian property bubble. As soon as the bubble burst, the condition of the sector started deteriorating.
With the end of the first decade of the twenty-first century, the stockpiling of the residential projects started. The conditioned aggravated over time, with the coming up of Modi government in 2014, and the implementation of demonetization, GST, and RERA, the situation worsened.
It became more critical post demonetization when the bank credit to the real estate slowed down. NBFC crisis left no option for real estate to even survive. Although, with the recent cut down in the repo rates by the RBI by 110 bps, it is expected that bank lending will pick up soon.
The lack of funds is the primary reason behind the stalled projects even today. Developers and investors claim that two reasons – land acquisitions and lack of funds are the main reasons behind the stalled projects.
In this challenging situation for all the stakeholders in the sector, it will be very interesting to see what effect this judgement of the Supreme Court will bring on the real estate. While it is seen as a relief for home buyers, it will be a tough task for NBCC to complete the projects of Amrapali and Unitech.