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As many as 542 ongoing real estate projects are facing uncertainty with the Real Estate Regulatory Authority Karnataka (RERA-K) issuing a notification prohibiting projects with provisional approval from doing business.

The notification, which came into effect on April 1, 2018, mandates that builders get permanent approval before advertising projects, entering into agreement with customers and accepting advance money from them.

Following the move, RERA-K authorities have started issuing permanent registration numbers to approved projects. The notification, however, has cast a shadow on projects which are under the process of approval. Most of them are in Bengaluru.

“Due to the notification’s ambiguity, hundreds of ongoing projects are in limbo. We request RERA authorities to provide more clarity so that both builders and customers feel safe about the money spent on projects,” said Shyam Mareddy, vice-president of Builders and Real Estate Developers Association of India (BREDAI).

Since the Real Estate Regulatory Authority Act came into effect on July 10, 2017, RERA-K had adopted a process of issuing a provisional approval number to applicants, allowing them to do business. So far, the authority has processed 2,056 applications, of which 1,466 have been approved. As many as 385 projects are under consideration, 157 are under query and 52 have been rejected. All these were operational on the basis of provisional approval and in many of them, more than half the work has been completed. With permanent approval becoming compulsory, these projects have virtually been rendered illegal.

“The biggest issue is that builders have collected money from customers and invested it in the projects. It was legitimate till RERA-K issued the notification. Who will take responsibility for the chaos as both builders and customers are worried about their investments,” said Vinay Thyagaraj, a RERA consultant.

P Sunil Kumar, secretary of RERA-K, clarified that builders are at fault as they were not supposed to take money from customers and do business based on the provisional approval number given to them. “Section 3 of the RERA Act clearly says that no promoter shall advertise, market or sell the product until the project is permanently approved. The provisional approval number is an acknowledgement of sorts and has no legitimacy. Builders shouldn’t have gone ahead,” said Sunil Kumar.

While the beleaguered real estate industry has hit the panic button, Kapil Mohan, chairman of RERA-K, sought to assuage their worries by saying that the notification comes into effect prospectively. “What we are saying is that builders have to get permanent registration for projects from April 1. If you ask me ‘can ongoing projects with provisional approval continue business’, my answer would be ‘yes’,” he said.

The concern, however, is what if the projects fail to get permanent approval finally. Mohan said the builder has to refund the money to the customer if the application is rejected.

“It’s not going to be easy. How can you expect a builder to give back money when he has already spent it on the project? RERA-K’s latest move will wreak havoc,” said Thyagaraj.

While seeking more clarity, Mareddy said the best possible solution could be expediting the registration process and giving permanent approval to ongoing projects. According to Section 3 of RERA Act, the application is deemed approved if authorities fail to process it within 30 days. Applications have been pending since July 31, 2017. “While they are mandated to process the application within 30 days, the authorities sent queries in the interim just to delay registration,” said a builder on condition of anonymity.

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