After the Supreme Court recalled its earlier order, which had capped the rate of interest at 8 percent on the dues for land given on lease to different builders by Noida and Greater Noida Authorities, real estate developers’ body Credai-NCR has suggested a one-time settlement scheme for builders to help them to clear their liabilities and keep the projects viable.
The apex court on November 7 quashed the 2020 order and directed builders to pay land dues as per the terms and conditions entered between them and the authorities.
Manoj Gaur, president of Credai-NCR and CMD of Gaur Group, said the Supreme Court's recall of the order had removed ambiguity, and the subsequent stalemate, on the key issue of interest rates. "But the authority must rethink the interest rate and the way it is levied on outstanding dues of developers," he said.
It's not just high interest rates but also penal interest that's compounding monthly that have affected the viability of real estate projects in UP's main economic city.
“A continuing regime of stiff interest and penal interest rates would send many more projects to the National Company Law Tribunal under the insolvency and bankruptcy code. Also, we developers, and the authorities have a common objective of delivering homes to the buyers. In view of the Supreme Court judgement, we hope the authority will bring the one-time settlement scheme for balance dues which will ultimately help buyers get their homes and also help the authority get the dues on time,” Gaur said.
RK Arora, chairman of Supertech Group and president of NAREDCO, observed that the state governments like Haryana and Rajasthan have voluntarily reduced the interest rate up to 75 percent to revive stalled real estate projects and the UP government should also consider allowing similar relief keeping in view of various interruptions in construction like stay order due to land acquisition disputes, suspension of construction by NGT as also the impact of Covid-19.
The Supreme Court on November 7 had made it clear that its order passed in 2020 capping the rate of interest at 8 percent is only applicable for the Amrapali case and that all other builders would have to pay land cost dues to the authorities as per the agreement between them. A bench of Justice UU Lalit who demitted office yesterday and Justice Bela M Trivedi said that “appeals filed by Noida and Greater Noida are allowed and the order passed by us on June 10, 2020, August 19 and August 20 are recalled”.
Homebuyers said that their main concern was getting their homes registered. “All buyers have paid up their dues. In case of delay in payment, builders charge us 18-24 percent as delay penalty. They have imposed levies such as farmers’ compensation, escalation charges. Builders should also similarly be made to pay up. Authorities should cancel their lease if they do not pay up,” Arora said.
Abhishek Kumar, Noida Extension Flat Owners’ Welfare Association (NEFOWA), said that this step is necessary lest builders start filing pleas in the insolvency courts and declare themselves bankrupt.
Lakhs of apartments in Noida, Greater Noida and the Yamuna Expressway regions have been handed over to homebuyers but are yet to be registered on account of this issue. It should be noted that the interest rate order is in response to the review petition filed by Noida and Greater Noida Authorities three years ago.
Ritu Maheshwari, CEO, Noida Authority who also holds the additional portfolio of Greater Noida CEO, told Moneycontrol that it is a ‘big victory.’ “The apex court has accepted our plea and vindicated the stand taken by authorities that the dues are correct and that they should be paid. It is a big victory. Almost Rs 10,000 crore is due from developers, if we exclude matters in the Supreme Court and around Rs 19,000 crore if we include Amrapali and Unitech cases. These would have been lost had the review been rejected,” she said.
The authorities were awaiting this order for the last two years and could not ask for dues as per their calculation. “Henceforth, stringent action will be taken against developers who do not pay up their dues. We also have the authority to cancel their lease. Registries were not stopped per say, they are linked to the payment of dues and construction and adherence to norms. Wherever total dues or flat wise dues are being paid, registries are taking place,” she said.
Maheshwari pointed out that if the developer still does not pay, “we can reschedule, we can ask them to pay in installments within two years. All these schemes are available". A builder can also pay dues flat wise against which proportionate occupancy certificates can be issued. Builders were not coming forward for the past two years saying that the dues cited by us were incorrect but now they have to pay up.
Asked what the authority will do in case there were a spate of insolvencies going forward, she said that “we will be taking coercive action cancellation. Having said that, we cannot close the doors of the court for them but we need to make our enforcement mechanism stronger”.
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