Jaypee Infratech bankruptcy: How Modi and Yogi have failed lakhs of flat owners

For the last three years, Prime Minister Narendra Modi has spoken about housing for all umpteen times. The head of the government has also talked about cracking down on corruption and benami land holders. More so, the issue of the common man's welfare has been the centrepiece of all government messages to the electorate.

But despite having a brute majority in the Lok Sabha and in several state assemblies, the government hasn't done much to clean the mess that is the country's real estate sector.

Even though it came up with the Real Estate (Regulation & Development) Act (RERA) to offer protection to home buyers from unscrupulous developers, it is lacking as it is targeted at future projects.

This means that there is no impact on the lives of lakhs of home buyers who are waiting for the delivery of their dream home for close to a decade.

Buyers at the receiving end

In light of the Jaypee Infratech fiasco, where the developer has declared bankruptcy, a many-pronged problem has presented itself but no one appears to be offering solutions. The banks that had lent money to the developed will be forced to to liquidate the assets attached with the loans of the company, but where does that leave the buyers?

Finance Minister Arun Jaitley has expressed sympathy with the buyers, but even he hasn't offered a single solution to help them recover their losses.

Clear and present danger

A government that came to power on the plank of eradicating corruption from the country is well aware where the money of all the real estate developers is parked and why they are going bankrupt today.

Till a few years ago, the Centre could shun its responsibilities from this seven-year-old problem by saying that real estate is a state subject.

But this cannot be the case anymore, considering all the major states where private realty projects are stalled are governed by the BJP. Therefore, the friction between the state and the Centre can easily be managed - something that we saw in the case of Goods and Services Tax - to ensure revival of these projects.

But there has been more media management than managing of fraudulent practices of real estate developers, who are now looking to escape their responsibility of delivering flats to the customers who have already handed over lakhs of rupees.

The demands of the buyers

The Noida Extension Flat Owners Welfare Association (NEFOWA), that represents more than 2.5 lakh flats owners in Noida, Greater Noida and Greater Noida West, is now demanding exemption from their EMI payments to banks or a time-bound delivery of their flats.

“We met Yogi Adityanathji when he became the Chief Minister of Uttar Pradesh. But after assuring us of action against the builders, he has not done anything over the months. How long can we wait to get our flats? We do not have the capacity to fight in the courts for 10 years. What can we do with the sympathy of the finance minister? If he actually sympathises with us, he should give a moratorium on the loan repayment to all the flat owners in the stalled projects,” said Indrish Gupta, a founder member of NEFOWA.

Govt more concerned about banks, not people

The bankruptcy of real estate developers will open another channel of non-performing assets in the banking sector. Indian banks are already dealing with over Rs 10 lakh crore of stressed assets and the bankruptcy of realty developers will increase the stress in the banking sector. By declaring bankruptcy, the developer gets an an exit by liquidating its assets to repay its banks, but there is no provision for flat owners in the country.

“We have paid more than Rs 3,000 crore of VAT (Value added tax) to the state government when we booked our flats. If the developer puts back even half of that amount into the stalled projects, all those projects would be completed within a year,” adds Gupta.

Unfortunately, there seem to be no such plans on government's table at the moment. The flat owners, after all, belong to a class that has neither the courage to go on hunger strikes, nor does it have the resources to fund political parties.

Therefore, for now, flat owners will have to bear the burden of rent as well as EMI.