Providing relief to real estate developers, the Uttar Pradesh government on June 9 permitted Noida, Greater Noida Industrial Development Authority and Yamuna Expressway Industrial Development Area Authorities to slash interest rates on land dues pending from builders.
It allowed authorities to charge interest on the balance outstanding at Marginal Cost of Funds based Lending Rate (MCLR) plus 1 percent. This is expected to help builders deliver pending projects faster, realtors told Moneycontrol.
“This comes in as a major relief. The high interest amount, which is to be paid to authorities by developers, can now be utilised to complete projects,” RK Arora, President of NAREDCO UP Chapter, said.
Realtors had been demanding that interest be charged at State Bank of India's (SBI) MCLR rate and an additional 1 percent.
Manoj Gaur, MD, Gaurs Group and Chairman, Affordable Housing Committee, CREDAI National, welcomed the move. “It is much needed and will reduce the burden on developers, the ultimate beneficiary will be homebuyers.”
Interest on land premium is usually charged at the rate of 12 percent plus 3 percent, which works out to be between 22 percent and 24 percent if compounded annually.
To tide over the COVID-19 crisis and the subsequent dip in sales, developers in Uttar Pradesh had asked Satish Mahana, Cabinet minister, Department of Infrastructure and Industrial Development, Government of Uttar Pradesh, and Alok Tandon, Infrastructure and Industrial Development Commissioner, Government of Uttar Pradesh, to reduce circle rates, waive stamp duties and also called for reduction in interest rates.
“The interest rate should be equal to MCLR plus 1 percent,” Arora had told Mahana on April 29 during a webinar organised by NAREDCO.