Gurugram: Banks, financial institutions to be treated as promoters of realty projects in case of takeover, rules H-ReraUpdated: Sep 18, 2020, 23:45 IST
Gurugram: In an important decision, the Haryana Real Estate Regulatory Authority (H-Rera), Gurugram, on Friday said that banks and other financial institutions that take over real estate projects due to non-payment of loans by developers would be treated as promoters. The authority also held that the interests of the homebuyers who have invested in such projects should not be considered subservient to that of other stakeholders.
The decision was taken by the real estate regulator after hearing a petition filed by a homebuyer who had bought an apartment in Supertech Hues project and approached the authority against the takeover and e-auction of the project by PNB Housing Finance Ltd (PNBHFL).
“A bank or financial institution, which takes over a real estate project, will be treated as an assignee of a promoter and the institution will have to secure the interest of the homebuyers. In a number of cases, it has emerged that developers mortgage the project land, structure and receivables to get bank loans. But when this money is not paid back, the banks take over these projects and directly auction these properties by invoking the Sarfaesi Act, 2002. The result of these actions is that large investments made by homebuyers are not acknowledged,” said KK Khandelwal, chairman, H-Rera, Gurugram.
The authority also held that in case a developer fails to repay loans to a financial institution and if this institution intends to auction the mortgaged property, then it would have to seek prior written approval from H-Rera. “If the financial institution/lender subsequently wants to auction or sell the defaulting project to a third party, then they would have to seek permission from H-Rera. These steps are being taken to ensure that hard earned money invested by allottees and their interests are safeguarded in such deals,” said Khandelwal.
Subsequently, if the financial institutions/banks/creditors intend to transfer the real estate project to any third party to realize their loan amounts, then in that situation too such financial institutions, who are promoters for the limited purpose of mediating the transfer of property, shall also seek prior written approval of the authority, the H-Rera chairman said.
In the case of Supertech Hues project, H-Rera said that Supertech was neither licensee nor collaborator but taken loan from PNBHFL and the developer failed to repay it. The financier put the project on e-auction, but the authority stayed the process on the petition of a homebuyer as it held that interests of 950 homebuyers could be jeopardised by this action.
The authority also clarified by this judgement that the Securitisation and Reconstruction of Financial Assets and Enforcement of Securities Interest (Sarfaesi) Act, 2002 has to be read harmoniously with the Rera Act, 2016.
“If it is found that any lending financial institution engages in auctioning the real estate projects without the approval of the Authority, the same shall be deemed seriously and penal proceedings shall be initiated against the debtor promoter and the lending institutions/individuals,” the authority said.
When asked about the matter, Venket Rao, counsel for PNB Housing Finance, said that holding a financial institution as a promoter is not contemplated in H-Rera Act and the authority in this matter has gone beyond its reach. “This decision will impact the flow of credit to the real estate sector, and the banks in any case are not stripping the rights of license holders and buyers. This is definitely an appealable matter,” he said.
However, the developer in the case has welcomed the ruling of H-Rera. RK Arora, chairman and managing director of Supertech, said that banks and financial institutions need to support the stressed promoters and in the matter of Supertech Hues, the e-auction was not the right thing to do. “Supertech is committed to complete the project and deliver it to homebuyers. The decision of H-Rera is a step in the right direction and we have already started work on the project,” said Arora.
A representative of PNBHFL did not respond to phone calls and messages seeking a response in this matter.