The Supreme Court judgment in the Amrapali case, where over 50,000 home buyers were cheated, is significant in more than one way. The court-monitored investigation by the Enforcement Directorate and the Central Bureau of Investigation has conclusively established that funds collected by the real estate company were diverted and siphoned off by the promoters. Diversion of some Rs 3,500 crore has been detected so far. The criminal intent to defraud investors by the Amrapali group and its management while the auditors looked the other way has come to light. The arc of the probe by the law enforcing agencies has rightly been widened to cover serious violations in foreign direct investment and foreign exchange management. Amrapali promoters Anil Sharma
and two others have already been put behind bars.

What’s significant is the Supreme Court directive to state-run National Building Construction Corporation (NBCC) to complete the unfinished projects, for 8% commission. Noida and Greater Noida authorities have been asked not to intervene or stop NBCC activities even if the latter’s dues were unpaid. Also, Amrapali’s registration with real estate regulator RERA has been cancelled. NBCC will have to mobilise funds from the sale of promoters’ assets to complete the projects. NBCC may find it difficult to access liquid funds to finish the projects as even banks have burnt their fingers after having lent to promoters who have wilfully defaulted. NBCC is already overworked, chipping in with similar large, unfinished projects of the JayPee group, Unitech, etc.

It’s virtually impossible for NBCC to complete scores of unfinished projects of private real estate companies in different cities. What would be the way to make the SC order work? As per reports, in most cases, the companies have virtually been turned bankrupt while their promoters are flush with funds. As in Amrapali, will the Supreme Court hold promoters, boards of directors and company auditors responsible, seize their personal properties to compensate the hapless flat buyers? Over nine lakh flats in the high-end segment alone remain unfinished, while buyers have sunk all their savings into housing projects. Even if NBCC or other state agencies had the manpower and wherewithal to finish the projects and hand them over, where would the liquid funds come from? Should banks take additional risk on these projects, where they already have an exposure of Rs 4.5 lakh crore? Given that real estate is a state subject, what’s the responsibility of state and city governments? Why is it that in several states, real estate regulators are not fully functional or operative? As demanded by the industry, should the government provide a dedicated revolving fund to bail out the companies and flat buyers? These are some of the questions that do not have easy answers.