The mess in India's housing sector only seems to be getting deeper. Reliable sources from both industry bodies NAREDCO and CREDAI have confirmed to CNBC-TV18 that the number of builders arrested, in jail, and out on bail has crossed 150 across India.
Monty Chadha, the promoter of Wave Group was arrested from the Delhi Airport last night by the Economic Offenses Wing — in connection with a cheating case and making false promises of giving flats to buyers.
The Chandra brothers of Unitech are in Jail. So are Amrapali directors and there's a warrant out for Pranav and Sushil Ansal, of Ansal API. These are just some of the high profile builders whose names have hit the headlines but the list is a long one. While most of these cases are from Delhi NCR, there are several Mumbai builders in the list as well.
But even more frightening part of crisis is that despite arrests none of the stuck projects have any likelihood of completion. In fact, Propequity data over the last one quarter shows that the number of delayed projects with no sight of completion across India have increased, the value of projects which are delayed for more than 55 months has crossed Rs 3 lakh crore. The number of units now delayed have crossed 4.5 lakh, the average delay in projects, despite Real Estate (Regulation and Development) Act, 2016 (RERA), monitoring has gone up to 55 months. There are 2.71 lakh home buyers who have no sight of when their homes will be delivered.
Instead of the number coming down, with the real estate regulator in place, this number has gone up. In fact, the latest increase in stuck units is also a fallout of funding for developers drying up from the non-banking financial companies (NBFCs). As less money comes in the housing mess is likely to get deeper, experts say.
To discuss the crisis in the housing sector, CNBC-TV18 spoke to Abhay Upadhyay president of Forum for People's Collective Effort (FPCE), Vivek Kohli senior partner and co-founder of Zeus Law Associates, Aditya Gutgutia, a Jaypee Infratech homebuyer, Vivek Tyagi president, Unitech Anthea Homebuyers Association, and Sunil Oswald, a Mantri Webcity homebuyer.
Upadhyay said: "The government has to take a comprehensive solution for this problem which is now lingering for the last so many years. RERA also we need to sit down and see because RERA's orders with regards to possession or with regards to refunds are not getting executed. In Karnataka RERA there are more than 800 projects for which registration has expired. So, if the authorities are not monitoring, you have already given timeline which was supposed to be completed in 2016 and now you have given 2020 and then even in 2020 it is not complete and you ask for extension and RERA is just giving extension without hefty penalties, without checking what was the reason and why they have not completed. So, you need to work on it. The biggest problem in real estate industry is diversion of funds. What are RERA authorities doing? Are they checking whether the 70 percent money is being deposited in the separate account? If not what action is being taken? RERA authorities have to be proactive."
Kohli said: "My question is, what is the priority? Priority is to fix responsibility or the priority is to make sure that a complete home with an occupation certificate which is a safe habitat should be provided to the families which paid the money? So you can go for the regulation which is the RERA authority to make sure that the project is run properly which I am sure will happen in the future or you can go to courts to fix accountability."
Tyagi said: "We want court to recognise three things — first culprit is license issuing authorities like Directorate of Town and Country Planning (DTCP) in Haryana and Noida Authority. They issued the license to builders without charging external development charge (EDC) and internal development charge (IDC) charges. After issuing the license in two months they changed the status of projects from approved to non-approved but still they did not issue any public notice in the newspapers that these projects are not approved.
"Second are the banks. Banks are the biggest culprits. They are huge beneficiaries of this scam. They financed all the unapproved projects and they earned huge money out of those EMIs. They are still earning that money but nobody is recognising the fact that these banks are the main culprits along with builders. Builders were allowed to collect money against unapproved projects, they did that but not alone. Where is Reserve Bank of India (RBI)? All the banks are regulated by the RBI and the RBI is nowhere in picture.
"Third is all the builders have siphoned of all the money. Money is reflecting in their balance sheets lying in 32 shell companies, I am talking about Unitech. Right now, in 32 shell companies money is reflecting, Rs 4500 crore is lying in 32 shell companies in Cyprus and in India but nobody is talking about that money and why that money is not being recovered."