Moneycontrol PRO
Upcoming Webinar:Watch a panel of experts discuss: Challenges of continuously evolving regulation for Cryptocurrency, on 7th July at 3pm. Register Now

CAG report highlights nexus between Noida builders and officials, unchecked violation of rules by Authority

Three builders named Wave, Three C and Logix Group cornered 80% of commercial projects between 2005 and 2018. Up to 63% of housing projects allotted by Noida authority were incomplete or partially completed, national auditor finds in scathing report.

Representative image

Representative image

There were a raft of ‘irregularities’ in the way land was allotted and development was approved due to the nexus between builders and officials of the New Okhla Industrial Development Authority (NOIDA), causing severe ‘distress’ to homebuyers, according to a new report of the Comptroller and Auditor General (CAG).

Noida, a city located in the Gautam Budh Nagar district of Uttar Pradesh, is a booming real estate hub but is also an exemplar of delayed residential and commercial projects. Now, the report by the national auditor has put the spotlight on the reasons for this urban paradox.

Authorities in Noida diluted and tweaked rules to suit real estate developers even as the interest of homebuyers who had invested their life savings was ignored. The irregularities took a toll on the authority's finances as well—dues from builders have touched Rs 18,633 crore against an allotment value of Rs 14,000 crore, and no action was taken against the defaulters.

Nearly 80% of the total allotments of plots in the commercial category between 2005-2018 were secured by three real estate firms named Wave, Three C and Logix Group. Despite repeated violations by these companies in terms of outstanding dues that accumulated to Rs 14,958.45 crore, the authority failed to take any action against them, CAG noted.

Hundreds of buyers of projects launched by the three companies have not yet received their homes even after a decade since booking the properties. All the three companies are facing a number of cases in courts.

Close

Homebuyers left in the lurch

The CAG noted that 63% of the group housing projects allotted by the Noida authority were either incomplete or partially completed. It observed that during the audit period 2005-06 to 2017-18, NOIDA allotted 67 group housing plots measuring 71.03 lakh sqm which were sub-divided into 113 plots by the allottees. Of the 113 projects, 71 projects were either incomplete or partially completed, which constituted 63% of the total projects, it noted.

The report also emphasises another distinguishing trait of the Noida real estate industry— the lack of occupancy certificates (OCs) for several residences that are.  Of the 1,30,005 flats, an OC, which is required to register a property, was not issued for 44%.

The Noida authority failed to achieve its main objective of industrialisation, the report said. Only 18% of the land allotted was used for industrial development, causing the exchequer losses worth Rs 52,000 crore, it said.

The audit shines a light on the reasons, constraints and loopholes that have long gnawed the real estate industry in Noida. It highlights a system of allotment riddled with infirmities that “bring out serious lapses of probity, integrity and ethics in governance of the Authority”.

Here is an example. Officials limited the scope of evaluation only to schemes launched simultaneously and “surreptitiously enabled the builders to apply and obtain multiple plots on the back of insufficient net worth”.

“This position of non-completion of projects is evidence that NOIDA has created conditions for bypassing its own stipulations by allowing financially ineligible bidders to garner more plots on the back of insufficient net worth thereby extending undue favours to them," the CAG report said.

The report covers the period from 2005-2006 to 2017-2018. Those were the boom years in Noida when nearly every day one would see a swarm of real estate project launches.

FOR MORE READ: https://cag.gov.in/en/audit-report/details/114909

The CAG report noted that the Noida Authority invoked an ‘urgency’ clause to acquire 80% of the land. It observed that Noida had wrongfully categorised sectors while allotting group housing plots, which led to lower fixation of reserve price and led to subsequent losses of possible revenue worth Rs 798.69 crore.

Nexus between builders and officials

The report noted that the Authority failed to take action against builders with massive dues, saying that “Noida, rather than taking statutory action, made multiple allotments to group companies of Amrapali and Unitech, who were in default of payment of dues for earlier allotments to the tune of Rs 9828.49 crore as of March 31, 2020.”

During 2005-06 to 2017-18, NOIDA also allotted 2,761 properties measuring 188.34 lakh sqm under various categories that included group housing, commercial, sports city, institutional, farm houses and industrial logistics.

With regard to the sports city scheme, the audit found that the scheme was launched without proper approvals and in deviation from its primary mandate of development of an industrial township. The audit found that Noida allotted four plots during 2011-16 for the integrated development of four sports cities with the aim of holding marquee sports events like the National Games, Commonwealth Games and Asiad Games. Three golf courses of nine holes each and one International Cricket Stadium were planned.

Read More: Noida Authority order: Will registration of flats by carpet area benefit homebuyers?

Blatant disregard for rules 

It was later discovered that the 65-acre golf course establishment was not possible, while there were no signs of the cricket stadium. The audit found that instead of sports activities, precedence was given to housing projects in the area, the report noted.

For the allotment of farmhouse plots, it was observed that the Plot Allotment Committee (PAC) did not have any objective or transparent criteria for the interview or assessment of applications.

The report consists of six chapters on general planning, acquisition of land, pricing of properties, allotment of properties and internal control. It states that the Uttar Pradesh government constituted Noida in April 1976 under Section 3 of the UP Industrial Area Development Act, 1976, with the objective of creating a planned, integrated and modern industrial city that is well connected with Delhi.

While the authority is in operation since April 1976, it was only in July 2017 that the UP government entrusted the audit of Noida to CAG. In January, the UP government-appointed CAG as the sole auditor from the year 2005-06 onwards. However, development and allocation of land for industrial purposes did not receive priority and only 23% area was developed for industrial activities. Instead, residential development has been the predominant activity with 52% land allocation as on March 2020.

In a note on the Master Plan, the report said that Noida prepared the Master Plan-2031 without a corresponding regional plan in place. Without addressing the concerns and observations raised by chief town and country planner (CTCP) and National Capital Region Planning Board (NCRPB), the authority proceeded with the implementation of the unapproved master plan, despite the adverse observations by the NCRPB, it observed.

In a note of allotment of industrial plots, it said that the main objective of the Authority was to develop the industrial area. It developed 18.36 percent of land for industrial use, of which only 32.91 percent area could be made functional by March 2020.

Thus, the actual functional industrial area was only five percent of the total area which shows that NOIDA has failed to achieve its main objective of industrialization, the CAG noted.

A similar report for Greater Noida is expected to be tabled soon.

Asked about the CAG's audit, the NOIDA Authority told PTI that it was yet to study the report, which runs around 500 pages and covers years after 2005.

Rajiva Singh, president, Noida Federation of Apartment Owners Associations (NOFAA), said, "the apex court has already pointed out the corrupt practices in the Noida Authority processes. The CAG report further endorses the fact that the system needs cleaning up. Accountability needs to be fixed. Digitalisation of processes on a war footing is the need of the hour. Homebuyers have suffered enormously and should be compensated as part of this corrective exercise.”

Also Read:  “You are reeking with corruption right from your eyes and nose”. Why did SC so tell Noida Authority?
Vandana Ramnani
Sections
ISO 27001 - BSI Assurance Mark