Talking Shop: Sinking Fund

"Don't wait to buy real estate.

Buy real estate and wait."

— Will Rogers, Actor Debonair

I heard Will Rogers over a decade back, took his advice and booked a flat, paying the money upfront. Today, 12 years later, I am all but ready to throw in the towel and write my own Final Will and Testament, an unpalatable yet lamentable twist in my dwindling years. Unwittingly, Rogers let me down, as have some others that I trusted my future and meagre finances with. (P)luckily, I am not alone; with me are 19,000 others in Delhi-NCR alone, waiting for over a decade and more for their homes, many having spent all of their lifetime savings, some now unemployed, others retired and a few dead. Yes, while many are waiting, some are gone—bam and damn. The End. They never even saw the flats they paid for.

Pray as we may, things are getting worse in India's real estate sector. No matter which turn a home-buyer takes, the going is inexorably uphill, even scary. Just a decade back, India was on a high as the economy surged and ready liquidity catalysed aspirations for swanky cars and fancy flats. 'Mera Ghar' was then a clarion call. That call has since dropped and a ghastly reality confronts us, for the soil beneath our feet itself is now squelching, and doped-out dreams of millions cooking on LPG gas cylinders in brand-new flats have gone up in smoke. There's a twist in this ageing tiger's tail too—as thousands pray for flats they paid for years back, the few actually getting possession are being asked to fund the others who haven't paid. This is irony at its harshest and the powers that be are calling this new invention a 'Sinking Fund'.

What 'Sinking Fund'?

Well, even I had never heard of this 'S(t)inking Fund' till it bit into my own finances and nuttier parts. I quote this as per the authorities' declaration: "A Sinking-cum-Reserve Fund shall be created to make provision of shortfall in construction and interest cost, if any. All the home-buyers (across) shall be asked to deposit a sum calculated @ Rs 200 per sq ft for booked units in that fund, with the condition that such funds, if not-utilized, shall be refunded back to them on overall completion of the projects. In case of part-utilization of the amount, the proportionate amount shall be refunded to all home-buyers out of the unutilized money."

I hate legalese. Basically, this means that anyone lucky enough to get his/her flat after waiting for 12 years or more will have to pay an additional Rs 3-4 lakhs to ensure that the others who have not paid their dues (and 'dummy-buyers') get their flats completed with this money. Here are two pointers for your vigilance. Yes, I am being sarcastic. One, the dummy-buyers who were allotted flats at half-rate or less were all politicians or people in other areas of power. Yet, they haven't paid their dues. Who will pay now? That brings me to my 'Two', to the thousands who have waited for over a decade and are not receiving their due financial penalty for late delivery of flats. Cackle at this. This penalty is many, many times more than the Sinking Fund's ambit, for it has to be calculated @ Rs 10 per sq ft per month. Multiply that by eight to nine years of extra waiting and you will get the drift. In most cases, that alone is half the price of another new flat.

Ab kya hoga?

'Kuchch nahin hoga' (nothing will happen). Don't blame me for mixing and nixing languages, my Hindi and their English. Today, they are both mine and can help make a stressful point, especially when I bellow, bawl and brawl. I am in that mood. What will happen, as has already been kick-started with projects of Amrapali, is that desperate home-buyers will be forced to cough up lakhs of rupees each to get possession of their flats just so that dummy-buyers who haven't paid can get theirs too for a song. Sure, the simpletons will appeal before courts and, unless justice prevails, will sell off whatever they can to get the key to their dreams. That's because banks, despite court orders, will not finance this new payment.

What is the larger impact? Simply put, unless curtailed, the 'Sinking Fund' melodrama will find more takers and we have enough builder companies that have frittered away buyer funds and sunk to their knees, leaving home-buyers in the lurch. To name a few, this will impact buyers in Unitech, BPTP, Jaypee, Parsvnath, Amrapali and others, and I am only talking of Delhi-NCR, since I live here. Manifest this across the country and we can say whew. What is going wrong? Why is no one stepping up?

What makes matters worse is that as the global economy staggers back to its knees—it is far from standing up, forget tall—central banks worldwide are being forced to harden interest rates to rein in runaway inflation amid the still prevalent COVID-19 pandemic. Sure, life has to go on, but higher interest rates mean escalated monthly instalments on loans. For home-buyers waiting for possession, this is a death-knell as they continue to pay rent, higher instalments on loans and now stare a demon in the face. The 'Sinking Fund'.

What's the recourse?

This is relevant to India, so I can but say that the authorities have to shrug off their temerity, lethargy and act. It is high time that they give long-waiting buyers and newer ones a boost and stir confidence into the real estate sector. They should smash to smithereens the 'Sinking Fund' and balance the registry fee against due late-delivery penalties. Not only will this provide relief to people waiting for years for their homes, this will also get newer people into the buyers' bracket, more assured that their investments and hopes will find succour without any more ado.

Importantly, our beleaguered real estate sector may also wake up with this move, creating jobs and fulfilling dreams. The loss in revenues to state governments vide these waivers can be made up with just a 10 paisa excise increase per litre on diesel and petrol, which the Government is now fond of and people are prepared for.

We started with a quote and shall end with one. "We shape our buildings; thereafter, they shape us," said Sir Winston Churchill in his speech in the House of Lords in October 1943, requesting that the House of Commons bombed in World War II be rebuilt just as before. Most of India's home-buyers don't know any before. Let's give them the after, at least before their afterlife.

The writer is a veteran journalist and communications specialist. He can be reached on [email protected]. Views expressed are personal