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CAG report reveals India’s Wild West in real estate: Noida

Its report, which was recently tabled in the UP Assembly, is depressing. It reveals how every rule that could be bent, was.

Sympathisers of Noida real-estate say that the real estate era prior to RERA was lawless across several cities – Noida just pushed the envelope further. (Representational image; Source: Shutterstock)

Sympathisers of Noida real-estate say that the real estate era prior to RERA was lawless across several cities – Noida just pushed the envelope further. (Representational image; Source: Shutterstock)


I had the opportunity to spend some time in Noida in August 2021. Interacting with people in that area is a surreal experience. Everyone appears knowledgeable about the property market and developers. If a topic on the property market emerges in a discussion – it doesn’t end.

These are not enthusiasts. These are wounded home buyers or relatives of home buyers who have developed knowledge by being involved in a stalled project. And no location in India has stalled projects the way Noida has.

Property market watchers and commentators have written extensively about the causes of the crisis in Noida real estate. Given the ability to source extensive bits of data, the Comptroller and Auditor General (CAG) has taken a few notches further. It has stitched a persuasive and structured report on the bizarre land allotment policy of Noida.

The audit of Noida had previously remained out of the purview of CAG. It was only in July 2017 that the government entrusted the audit to CAG.

The contents of the report are depressing. Every rule that could be manipulated, was. It’s hard to specifically pinpoint the manipulation that caused the maximum damage because, at every step, there was a deviation that created the mess today. 

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At the heart of the entire saga is unmatched greed by builders and authorities, and brutal (literally) disdain for home-buyer interests.

Read also: CAG's Noida report highlights urgent need for city audits to check massive corruption in land allotment.

These are just a few examples in the lackadaisical manner that land allotment was done by Noida.

1)      Net-worth criteria abuse: Net worth of a builder is an important factor while allotting land. It is a rather elementary and a basic data point, and is commonly used. Noida too used it. But they made a change–an applicant’s net worth was evaluated on a case-wise basis for allotment, instead of evaluating the net worth in aggregate in case of multiple land allotments to the same company.


Simply put–a builder acquires one plot by showing his net worth. Then uses that same net worth to acquire another plot with Noida, disregarding the fact that the net worth was already used in the first plot. This is similar to taking loans from multiple banks backed by the same collateral. This nefarious practice was conducted between 2007 and 2010. 42% of the sanctioned units in those allotments remain incomplete even until March 2020.  


2)      Minimal upfront commitment: From requiring builders to pay 40% of the land premium in 2007, Noida diluted the requirement to only 10% by 2010. The purpose was to wade through the post-Lehman bankruptcy crisis. The purpose appeared legitimate but led to a rush in acquiring large plots by developers who didn’t have the wherewithal to execute such major plots.


The outcome is clear a decade later: builders have defaulted to Noida in their payments and have let buyers down. 


3)      Consortium exit: A consortium of multiple partners bags an allotment. Thereafter a key member of the consortium who provided the eligibility in the first place exits the consortium and project.


Noida permitted such exits. That left the land in the hands of companies who on their own standing were incapable of qualifying for allotment. The result: 40% of the apartments in six projects with this feature are incomplete till March 2020.  


4)      Subdivision of plots: If a builder was unable to meet even these meagre conditions, there were ways he/she could participate–through the subdivision of plots. That is, an allottee would break the large land parcel into plots, then sub-lease these plots to smaller builders.


This move revealed an allottee to be a trader and not a developer, and it placed the land in the hands of smaller builders who may not have adequate net worth to complete a project.


Sixty seven allotments made by Noida during 2005-17 were subdivided into 113 properties. While this option had been initially provided by the government only up to March 2011 and only for existing allottees facing challenges, authorities in Noida extended this to every allotment till March 2020. CAG found that in 24 of the 32 cases, the sub-lessee garnered a plot that was higher than his net worth.


In eight cases–the net worth of the sub-lessee was less than even Rs 1 crore but were permitted sub-lease of plots aggregating worth over Rs 500 crore.


I have often wondered why Noida was so brazen in its manipulation of policies. Sympathisers of Noida real-estate say that the real estate era prior to RERA was lawless across several cities – Noida just pushed the envelope further.

Political watchers say that a former chief minister treated Noida real estate as a personal fiefdom and coalition politics ensured that investigative agencies looked the other way. According to Nimish Gupta, Founder of Qonqests Technical Solutions, “As an impoverished state, Uttar Pradesh had not seen wealth creation for decades. Noida’s development along with its proximity to Delhi – made it a den for real-estate players and ruling regimes to abuse the sector. First by favouring the select choice of developers and then by facilitation of their combined personal benefits in the sector.”

All the arguments probably have some merit. The response from new customers has been to ignore under-construction projects or opt only for select credible developers who have a track record in delivery. That’s hurt shady developers as well as the finances of the Noida authorities.

It's only fair. The two institutions that treated home buyers with disdain are getting their payback. But the conversations among residents with regards to Noida real estate will not end soon.
Vishal Bhargava is a real estate enthusiast who views and reviews new projects, when not busy with his newstoon platform Snapnews. The views are personal.
first published: Dec 22, 2021 04:10 pm
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