Modi Govt. Sets Rules for Real Estate Sector Disputes
In order to infuse liquidity into the stressed construction sector and help create more jobs, the Cabinet asked government agencies and public bodies to pay 75% of the money to the contractors in cases of any dispute.
NEW DELHI: “Today, there are a large number of projects where payments have not been made and consequently the contractors have not been able to pay the banks. Therefore, it has adversely impacted the balance sheet of both the companies and the banks as a result of which the projects have come to a halt,” finance minister Arun Jaitley informed media.
Jaitley said this is one of many steps the government is taking to improve the functioning of the construction sector.
The Cabinet also decided that whenever there are disputes pending between public bodies and construction contractors under the old arbitration Act, which was time consuming, there will be an option to shift them to the new arbitration procedure which is cheaper and faster.
Jaitley said in all new contracts relating to construction, there will be a conciliation board provision which will consist of independent subject experts. “This is done because when commercial circumstances change and public servants are reluctant to participate in the renegotiation, there will be a contractual mechanism under which those terms could be renegotiated without bringing the projects to a standstill,” he added.
Jaitley said in contracts which are entered into by public bodies, item rate contracts will be replaced by turn key contracts. “A model draft turn key contract proposal will be circulated,” he added.
The Cabinet also asked the Department of Financial Services and the Reserve Bank of India to try prepare a policy on how to deal with those companies which have got a lot of stressed assets in the real estate sector. “We hope a series of these decisions will pump in a lot of liquidity in to the sector, activate real estate and infrastructure projects which have been strangled for sometime and support the entire process of dispute resolution in this sector. “These steps are taken because construction is a very large contributor to GDP. It will take care of the future need of more housing, more urbanization and more commercial places,” he added.