At their respective board meetings on December 28, the Noida Authority and the Greater Noida Industrial Development Authority (GNIDA) approved a policy to re-schedule the payment of builders’ dues, and also relaxed the time-extension charges.
According to officials of both these authorities, the move is aimed at providing relief to developers, making it easier for them to clear their dues. They said the decision will also benefit homebuyers.
Developers had earlier requested the authorities to help address the woes of the real estate sector and relax the terms for the payment of dues.
Real estate experts had mixed feelings about the decision. Some said the policy would help some developers shed their defaulter tag and help start stalled registrations, which will be beneficial for homebuyers.
However, developers said the scheme will not help as many builders are unable to pay the initial 20 percent of the outstanding. Instead, developers demanded a one-time settlement scheme to clear their dues.
Homebuyers were also not much enthused by the move as they said that they would benefit only if registrations started.
The policy
According to the policy, builders will have to submit 20 percent of the outstanding within one month of the release of the letter of re-schedulement. They can then clear the rest in four instalments over two years.
The re-schedulement will be applicable on the total outstanding amount, which includes the initial instalment, additional compensation (penalties, charges, etc.), and the lease rental payable.
If the allottee fails to pay two instalments, then the authorities will cancel the allotment without any notice, officials privy to the development said.
The window to avail of the re-schedulement policy will be open from January 1 to March 31, 2023.
The authorities have also decided to relax the time-extension charges. This charge is levied on builders when their project is delayed and the builder seeks more time to complete the same.
The authorities have decided not to impose time extension charges on the completed buildings in a project. Delay in completion for up to seven years carries no consequences. But in the eighth year, a time-extension charge of 1 percent of the land value is applicable. This rises to 2 percent in the 9th year, and so on, going up to 8 percent in the 15th year. Thereafter, if the project is still incomplete, the allotment will be cancelled.
The developers’ take
Manoj Gaur, President, NCR chapter of the Confederation of Real Estate Developers' Associations of India (CREDAI), and CMD, Gaur group, said the re-schedulement policy would not make any difference to the current situation. He said that instead of a re-schedulement policy, the authorities should have come up with a one-time settlement scheme.
“The real estate sector in the region expects a one-time settlement scheme (OTS). We feel that the outstanding principal and interest should be broken into two parts and a rebate should be provided,” Gaur said in a statement.
He said that 75 percent rebate should be provided if a developer was paying back the amount in one shot. If a developer was paying back in two instalments, a 50 percent rebate should be offered.
“A scheme along similar lines, called Samadhan se Vikas, was offered by the Haryana government. This hugely helped all stakeholders as it sorted out the issue and increased the government’s revenue. The current measure is only adding all the dues and then rescheduling for the payment over two years in chunks of 20 percent, which the developers won't be able to pay," said Gaur.
Impact on developers and homebuyers
Real estate experts said the re-schedulement policy would help developers shed their defaulter tag and the start registration of properties, which will help homebuyers. Relaxation in time-extension charges will help the completion of pending projects.
A senior Noida Authority official said that earlier if the builder of a project, which was 50 percent complete, requested time-extension for the incomplete portion of the project, then the authority used to levy time-extension charges on the entire project.
The cascading effect of this was visible as in many cases the developers used to realise this money from homebuyers through direct or indirect means.
“But now, time-extension charges will apply only on the incomplete portion of the project. This will ensure faster completion of projects and help homebuyers. This will benefit builders who have applied for an OC,” he added.
“This will expedite the delivery of more than 1,50,000 homes throughout Noida and Greater Noida. In addition, once overdue payments are made, the rate at which apartments are registered may increase. This will provide relief not just to developers but also to homeowners, since construction timelines may improve,” said Shashank Vashishtha, Executive Director, eXp India, an online realty listings site.
Also Read: Builders may have to pay land dues to Noida, Greater Noida Authorities at a higher rate
Balwinder Kumar, retired IAS officer and former member, Uttar Pradesh Real Estate Regulatory Authority (UPRERA), said the scheme was good but it would yield desired results only if builders came forward to clear their dues.
“It is a good initiative towards ending the stalemate, but its success depends on developers paying at least 20 percent and starting registrations. But very few builders will be able to deposit the 20 percent as most of them do not have funds. It will be interesting to see how many builders pay the 20 percent and make efforts to clear their dues,” Kumar told Moneycontrol.
Homebuyers take
Rajiva Singh, President, Noida Federation of Apartment Owners Association (NOFAA), said the re-schedulement will help home buyers to a limited extent only.
Also Read: Noida Authority starts issuing notices to developers to clear their dues
“It is unlikely to benefit homebuyers. They will benefit only when registrations start happening. The registrations should not stop as most of the homebuyers have already made their payments. It is the builder’s fault that their dues are pending,” said Abhishek Kumar, President, Noida Extension Flat Owners Welfare Association (NEFOWA).
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