Maharashtra was one of the first States to establish a Real Estate Regulatory Authority in 2017 in a bid to ensure projects are completed on time and disputes between builders and home buyers are resolved amicably. Two years on, MahaRERA has been able to make a huge impact on both these aspects but even then, Maharashtra has one of the highest unsold inventories in the country, with close to 48 per cent houses lying unsold. Gautam Chatterjee , Chairman of MahaRERA, spoke to BusinessLine about the challenges and how the regulator is trying to ensure projects are completed on time even when builders are left with no money to finish the project. Excerpts:

What are the key challenges before RERA?

The transition from legacy problems to moving towards a cleaner professional environment will take longer than I expected. The macro situation over liquidity and stress in the financial sector has added a new pain point. We are aware of instances where the money deposited by home buyers is being taken away by the financier to meet debt requirements instead of putting the money into completing the project.

We also have a highly unsustainable 48 per cent unsold inventory. In the 13,000 ongoing projects, if half of them are unsold, it’s a major crisis. If the product is as per the requirements of the people, then people book flats and developers don’t have to look for institutional investors. Today, at the rate at which we are going, the unsold inventory will take at least two years to get utilised. So far, half the money in the sector was coming from investors and that has gone away now. Most buyers are still in a wait-and-watch state, hoping for prices to drop further, putting more pressure on the sector.

Has this squeezed new projects?

Interestingly, we are seeing 1,000 new projects or 100,000 homes getting registered per quarter despite the liquidity situation. This audacity of developers to go ahead in spite of such unsustainable level of unsold inventory is a little puzzling to me. Most of these projects are from developers with existing large parcels of land and who are using them to build affordable housing. Our sense is that the new projects are fulfilling the actual needs of home buyers while the earlier projects, now lying unsold, were targeted at investors. We could be seeing a correction in demand and supply.

Are projects getting done on time?

When we analyse the 13,000 old projects, about 8,000 at the time of RERA registration were projects that had time over-run already. Other 5,000 were ongoing. All these 13,000 had the option to come up with a new project completion time line. Some of them came up with a weird timeline of 2025, not realising that all this information is in the public domain. We have created a website which gives such details of projects across Maharashtra so buyers know when a project will complete and which ones are delayed. Some builders understood and revised the time line to 2023. We have also seen about 2,000 projects asking for an extension of one year. Even after the extension, there are problems with several projects.

RERA has ordered 253 projects to be auctioned to recover investor money. How long will this take?

These were 253 projects wherein the developers are in financial trouble. In all these projects, it is the case of 2-3 buyers trying to stall the project by asking for a refund of their money. There is a situation now that prices of apartments are falling and the RERA Act allows buyers to walk out of a project with interest if the project is delayed. If everybody tries to take advantage of the price arbitrage and try to exit the project with interest, the project will come to a halt. Once we pass the order to collect the money from the developer, it goes to the collector who has to auction the property to recover the money to give it to the buyer. An auction will never fetch you the right amount. In these 253 cases, two collectors have started the auction process by locking down the project. Now because of some five people who wanted to exit the project, 500 buyers are stuck because they can’t get their apartments and will be forced to take a haircut.

How will you solve this situation?

We have to work out a blueprint to see how the project can get completed, where the money will come from and where is the gap. Once we get the blueprint, we try to tell the buyers that ‘ultimately, you have to meet that gap.’ We tell them to first focus on getting the home by meeting that funding gap, and then whatever extra money they spent. RERA will look at whether there are unsold flats in the project that can be auctioned through the collector and the money paid to the buyers. We have created resolution panels under MahaRERA, which is unique to Maharashtra. This panel has a consumer representative and a developer representative. This panel will interact with all stakeholders— banks, home buyers and builders who could potentially take over the project to complete it on time.