Sick (of) real estate projects, what about Association of Allottees taking over stalled projects from Promoter?
Incomplete projects are though cynical, still a common occurrence in the ever-growing real estate industry which we all form part of. Many a times, genuine promoters find themselves in a bad industrial shape which makes it difficult for them to complete the construction of projects even after making consistent efforts. In such situations, not just private realtor houses can contribute by accepting transfer of sick projects to them but, even the Association of Allottees is empowered to play a role in carrying out the remaining development works by virtue of The Real Estate (Regulation and Development) Act, 2016.
Under the said Act, upon lapse of registration or on revocation of the registration of a project as required, the Authority may take such action as it may deem fit including issuing of directions to the Association of Allottees to carry out the remaining development works.
The question that arises in such an event is, whether the role of these Associations is restricted solely to completing the construction of sick projects? The answer is NO. The role of the Association extends beyond that, to protect the interest of not just existing and prospective Allottees but also financial institutions who have an interest in such projects. Such an Association on taking over the project becomes the promoter as defined under Section 2(zk) of the Act. The Maharashtra Real Estate Regulatory Authority while adjudging a Complaint filed by a Society where the latter has taken over the project after a previous Development Agreement entered between the Promoter and the Society was terminated, has laid down certain directions as follows:
1. The Society while appointing future developers must conduct proper due diligence of the development agreement being entered into and during the course of execution of the said Project, exercise supervision and monitor its progress diligently to ensure that the purpose of appointing the new developer is achieved in a timely manner and all bona fide liabilities created in the process are fulfilled;
2. Society to safeguard and protect the interest of all aforesaid new flat Purchasers of the said Project by adopting a course of redevelopment either by itself or by developer for the said project;
3. Society to ensure that all the liabilities as accruing on date including the liability of paying interest on delayed possession, all the transactions as on date and all the duties cum responsibilities as on date are clearly enumerated;
4. Society will carry the preliminary responsibility to safeguard the interest of all present Allotees and new Purchasers, if any in the said Project and in no manner jeopardize their interest in terms of their individual rights and interest in the said Project, as enumerated in the said Act.
Thus, Associations intending to takeover an incomplete project must conduct a check of their financial and risk tolerance capacity. Not just that, the Associations are required to come up with a modus operando to complete the project keeping in mind all their strengths and limitations. This would be helpful for them to achieve not just completion of the project at halt but also to satisfy the liabilities of other stakeholders and pay the outgoings from the project, as if the Association itself is the Promoter.