With the Supreme Court’s July 10 order directing the Noida and Greater Noida authorities to reduce interest rates on land dues levied on developers to 8.5% from 20% (or even higher, on case to case basis) will benefit developers, homebuyers are now demanding that they too be given a slice of the pie.
On July 10, 2020 the Supreme Court, while hearing petitions in a matter regarding the Amrapali Group, directed the two authorities to only charge an interest rate of 8.5%, as per the marginal cost of funds-based lending rate (MCLR) on land cost, fixed by the reserve bank of India, on land dues of developers.
The Amrapali Group, a realty major with projects in Noida and Greater Noida, has failed to finish and deliver around 42,000 units. Its buyers petitioned the apex court in September 2017. In its July 10 order, the apex court clubbed the plea in the Amrapali case as a plea regarding the ACE Group, on high rates of interest in Noida.
According to the two authorities, the move would benefit around 500 developers.
A homebuyers’ association has now demanded that the financial benefit the developers would receive should be passed onto them as well.
“If developers are going to benefit and they need not pay penal interest on financial dues in a group housing project, then we, the homebuyers, should also get a part of that financial gain. The developers have imposed a penalty calculated on 18% interest on buyers if they fail to make payments on time. Thousands of homebuyers have paid the penalty to developers in the past,” said Abhishek Kumar, president of Noida Extension flat owners’ welfare association (NEFOWA), which is also a petitioner in the Amrapali case in the apex court.
The Supreme Court has said that developers should immediately start making payments to the authorities as per the new reduced rates, and deposit 25% of total dues in three months. Also, total land dues are to be paid within one year, from the date of the order, if they want to avail benefits of the apex court’s order. If they fail to pay the 25% in three months and total dues in one year from July 10, then they will not be able to avail of the benefits, as per SC order delivered on July 10.
“We are planning to approach the Supreme Court for justice and if need be, we will stage protests in Delhi in the future,” Kumar added.
The order is effective on dues from January 1, 2010.
The order came after Noida-based developer ACE Group, through a plea, demanded that the “unreasonable” interest rate on group housing land should be looked into. ACE Group’s plea was clubbed with the Amrapali case.
The two authorities have a policy to charge 11% interest rate from developers, who pay for housing land in instalments. On defaulting on instalments, the authorities impose a penal interest.
The interest keeps increasing with each non-payment, depending upon the number of times the payment was not made. The Noida authority has around Rs 25,000 crore land dues to recover while the Greater Noida authority has around Rs 7,000 crore land dues to recover from developers, as per the old interest rates. However, now these amounts will be reduced as the interest is reduced, said officials.
“We have formed a committee consisting of additional CEO, financial controller, legal officer and officer on special duty to study the court order and furnish a report so that we can take an appropriate decision. We may also need guidance from the UP government on this,” said Narendra Bhooshan, chief executive officer of the Greater Noida authority.
The Noida authority’s CEO Ritu Maheshwari said, “We are examining the Supreme court order to take appropriate action. We may adjust the amount of a developer if the dues are reduced due to the new interest.”
The developers, meanwhile, said they hoped the move will benefit homebuyers as well.
“The two authorities were charging unreasonable interest rates. As a result, housing projects had become economically unviable. This was also affecting the homebuyers’ interests as many developers were not able to deliver flats. Now many developers will be able to exit the ‘defaulter’ list, arrange funds and deliver flats to buyers, thus benefiting them. Buyers should welcome this order because it will bring positivity in the sector and the projects will be delivered,” said Prashant Tiwari, president of the west UP chapter of the confederation of real estate developers association of India (CREDAI), a developers’ body.
On homebuyers’ demand, Tiwari said: “Homebuyers will indirectly be benefited from this July 10 order as developers will be able to deliver housing projects with reduced financial dues.”