Greater Noida authority plans to take over stuck projects of bankrupt realty firms

GREATER NOIDA: In a move that can benefit thousands of aggrieved homebuyers, the Greater Noida authority has decided to take over control of some stuck projects

GREATER NOIDA: In a move that can benefit thousands of aggrieved homebuyers, the Greater Noida authority has decided to take over control of some stuck projects of bankrupt realty firms through proper channel, and ensure their timely completion.

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The authority aims to take over such projects by participating in a process underway at the National Company Law Tribunal (NCLT), officials said.

According to the Greater Noida authority’s estimate, there are at least 36 realty firms which are facing trial at NCLT.

“We will submit our resolution plan in order to take over defaulted realty project with an aim to deliver the same and benefit homebuyers. We have got information that some companies are being taken over at very low valuation causing loss to homebuyers. To protect their interests, we will step in those cases, where the valuation of a defaulted company is less than the market rates,” said Narendra Bhooshan, chief executive officer, Greater Noida authority.

Bhooshan further said that if, for example, a defaulted company is getting a rate of ₹100 per square metres when the rate should be ₹500 per square metres, then the authority will come forward to protect the interest of homebuyers and the government.

Under section 7 of the Insolvency and Bankruptcy Code (IBC), 2016, financial creditors can drag debt-ridden real estate companies to NCLT. Subsequently, NCLT appoints an interim resolution professional (IRP), who then invites resolution plans from interested companies, including the government agency, in order to revive the defaulted company. All stakeholders, including homebuyers and banks, vote for a new company who have better resolution plan to take over the bankrupt realty firm.

“If a realty firm is not valued properly by participating bidders, then it affects our interests as well as homebuyers. Therefore, it is better that we take it over through the process and develop it,” said Bhooshan.

Homebuyers have been demanding that the government entities must take over the defaulted realty projects.

“We have written to the UP government and the UP Real Estate Regulatory Authority (UP-Rera) to make sure the government bodies come forward to take over defaulted projects through IBC provisions because the private firms are not valuing such projects as per the market rates and the interest of homebuyers is not safe,” said Abhishek Kumar, president of Noida Extension Flat Owners Welfare Association.

The Greater Noida authority is also keen to take over the defaulted projects because it is struggling to recover around ₹7,000 crore financial dues from the realtors, who have defaulted on payment of land cost amid the slowdown in the realty market, the officials said.

UP-Rera also feels that it will be a landmark decision for the real estate sector if the authority comes forward to take over the stuck projects of defaulted realty firms.

“It is a major policy decision, and will certainly benefit the sector as a whole and also of course the homebuyers,” said Balvinder Kumar, member of UP-Rera, a government body formed to safeguard the rights of homebuyers and the real estate sector.

Sunil Kumar Mishra, a senior lawyer, said, “In the past cases on trial in NCLT, we have observed that very few companies turn up to take over the defaulted firms. And those which turn up value the defaulted group at a low price thereby affecting the investment of all those, who have stake in the debt-ridden company. But if the government bodies participate in bidding, then it will start a healthy eco-system and help in safeguarding the rights of homebuyers.”