Home Uncategorized [Real estate developers] Supreme Court issues notice to Centre, RBI on plea seeking relief policy for real estate developers

[Real estate developers] Supreme Court issues notice to Centre, RBI on plea seeking relief policy for real estate developers

by Muskan
Real Estate developers
Supreme Court on Friday issued notice in a plea filed by the Maharashtra wing of an association for real estate developers, CREDAI, seeking direction to the Centre and RBI to formulate a relief package for its members in the form of interest waiver. (CREDAI MCHI vs Union of India)

The Bench comprising of Justices Ashok Bhushan and V Ramasubramanian issued notice in CREDAI MCHI’s plea which also sought a declaration that the RBI’s circular as regards moratorium on payment on loan instalments should be made mandatory in nature.

Justice ashok bhushan
Justice Ashok Bhushan
Real estate developers
Justice  V Ramasubramanian
Justice  V Ramasubramanian

It sought that the moratorium policy should be mandatorily implemented by all lending institutions including banks/financial institutions/NBFCs so that the benefit can be extended to all the loan accounts without any discretion.

The petitioner association submitted before the Court that the real estate industry is going through a tough time in background of the prevalent conditions due to the pandemic. The industry depends heavily on the debt financing and these debts raised from lending institutions are serviced through instalments received from purchasers. These instalments directly depend on the progress of construction which, in the presentcircumstances is slow.

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The plea states that while the lockdown imposed due to COVID-19 pandemic has brought the industry to a standstill,the real estate developers struggled immensely to make ends meet in wake of the centre’s direction to mandatorily pay all salaries and wages to employees.

However, the Centre has failed in giving relief the members of the association and the industry of real estate developers as a whole as the central government failed to provide any adequate relief in loan repayments despite a provision under the Disaster Management Act for the same. The RBI’s circulars only gave discretion to the Banks to allow for a moratorium on repayment of installments.

The circular itself did not help the industry as the interest component itself proved to be a substantial burden on the rest real estate developers, the petition submits,

“…purported reliefs is only illusory and grants no affective reliefs at all. Even the discretion conferred on lending institutions to grant a moratorium is exercised in a discriminatory manner at the whims of the lending institutions. In any case, in the absence of any waiver of interest, the moratorium is hardly of any help.”

Due to the difficulties faced, the association has thus prayed for a direction to the Respondents, to evolve an effective relief package for real estate developers arguing that if the authorities do not come to the aide of the industry, its survival will be in a huge risk. The petition adds,

“If, adequate relief is not granted as set out hereinafter all stake holders would be completely prejudiced and the consequence will be an effect not just on the real estate developers but to the country, its citizens and economy as a whole.”

The Court, while agreeing to hear the plea on the same, has tagged it along with the petition challenging the interest component of the RBI’s circular in the case of Gajendra Sharma vs Union of India.

The petitioner association was represented by Senior Counsel Kapil Sibal along with Advocate Kunal Vajani. The petition was filed through DSK Legal and is drawn by Advocates Samit Shukla, Manhar Singh Saini, and Saloni Shah.

In the previous hearing in the Gajendra Sharma case, the Court had directed the Centre and RBI to review the situation as regards moratorium and levying of interest and had also asked the Indian Banking Association (IBA) to consider coming up with guidelines on the issue.

On the issue of the interest component, the RBI had earlier made its position clear while submitting an affidavit stating that it would not be appropriate to go for forced waiver of interest keeping in view the financial health of banks as well as the interest of the depositors.

In a separate petition related to the circular, an association of real estate developers, CREDAI HR, had moved the Supreme Court seeking clarification on whether the circular extended to Non-Banking Finance Companies (NBFCs) and Housing Finance Companies (HFCs).

Filing a response on this plea for real estate developers , the Securities Exchange Board of India (SEBI) had questioned the locus of the association, terming the petition a “proxy litigation”.

Read the petition here:

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