Noida grabbed headlines in the real estate space in 2022 with the much-talked-about demolition of Supertech’s twin towers in August, a year after the Supreme Court had ordered their razing as the structures were built in violation of norms.
The twin towers’ demolition are a pan-India case study of what a developer should not do given the sheer magnitude and value of the asset being destroyed, said real estate experts.
The demolition sends out a signal that if you are in the wrong, you will have to pay for it through your nose. Noida Authority CEO Ritu Maheshwari said the demolition had boosted the image of the city.
Also Read: Why the Noida Supertech twin towers were razed
Demolition meant to send a tough message to developers
The demolition was meant to send a tough message to the builders and the authorities. The apex court made it clear in its order that, “The illegal construction of T-16 and T-17 has been achieved through acts of collusion between the officers of Noida and the appellant’s (Supertech) management,” and said that flat buyers had suffered due to the nexus between builders and planners.
“Their quality of life is affected the most. Yet, confronted with the economic might of developers and the might of the legal authority wielded by planning bodies, the few who raise their voice have to pursue a long and expensive battle for rights with little certainty of an outcome,” the court had said.
Most developers Moneycontrol spoke to said that such illegal constructions were a hangover of the pre-RERA days, and felt that with these demolitions, such violations would become a thing of the past.
``Developers are adhering to all guidelines laid down by the authorities. This will act as a good reminder for those who do not,’’ said CREDAI (National Confederation of Real Estate Developers’ Association of India) President Harsh Vardhan Patodia.
“The judgment sent out a message that there was no room for complacency and that any illegal structure can be demolished. Approvals by authorities are not necessarily legal, and the Supreme Court can go into the legality of the process,” said Abhay Upadhyay, President, Forum for People's Collective Efforts (FPCE), which works to protect the rights of homebuyers.
The razing of the twin towers also sent out a cautionary message to financial institutions.
“This demolition sends out a clear signal of zero tolerance from the judiciary as well as the regulatory authorities for anything that is illegitimate and has not been sanctioned,” said Amit Goenka, CEO, Nisus Finance (NiFCO), which manages a real estate debt fund.
There is no gainsaying that financial institutions have been exercising increased caution in funding real estate projects. A project management company is set up in most cases to monitor the development. There is a cost control mechanism in place and external agencies validate whether construction is taking place as per norms.
``Lenders are insisting on a comprehensive all-risk (CAR) policy for the entire value of the works in favour of the financier. In today’s market, barely 30 percent of developers get institutional finance,’’ Goenka explained.
``Projects were financed at an average lease rental interest rate of under 7 percent, but that is now close to 8 percent, while construction finance, which was at 10 percent, has now increased to 12 percent or more for Grade A developers. There has been an increase of 200-300 basis points in the cost of capital for most real estate players,’’ Goenka added.
``Builders who will get easy access to finance going forward will be those who have strong balance sheets and credibility in the market,’’ said Goenka.
He added that investors were active in the commercial belt coming up along the Yamuna Expressway, due to its proximity to the upcoming Jewar airport.
Cleaning up Noida real estate
No exit, and full payment in 90 days: per the new Land Allotment Policy, developers forming consortiums to buy land for projects will not be able to exit the scheme until they obtain an occupation certificate (OC) and the project is delivered in all respects. Earlier, they could exit the consortium midway, leaving buyers and investors in the lurch. Nor can builders exit a project unless it is completed.
Full payment within 90 days: developers have to deposit the entire amount within 90 days of allotment of a plot. ``This reaffirms Noida’s place as a serious and a clean investment destination,’’ said Maheshwari. Payment terms have been made stringent with the focus on the ‘real’ person who needs the land.
Online approval: all approvals have been made online — maps, completion certificates (CC), mutation, transfers, etc. All allotments are now through an auction. Earlier they were through a draw.
Land Allotment policy: unlike today’s mandatory 100 percent payment within 90 days, earlier, developers could pay only 10 percent on allotment of land, and the rest over five to seven years. Thanks to that policy, developers have not paid crores of Rupees due to the authority, because of which occupancy certificates (OC) have not been issued and lakhs of buyers are waiting to get their homes registered.
Following this move, only financially sound players will come forward to launch projects.
Not surprising, then, that no Noida-based realtor took part in the bidding process for land allotments in November 2022, which required the payment to be made within 90 days.
Gurgaon-based M3M Group forayed into the Noida market by securing a 13-acre land parcel at an e-auction. It also bagged a 52,000 square metre plot in Noida’s Sector 94 at an e-auction conducted by the Noida Authority. It plans to invest approximately ₹2,700 crore to develop mixed-use projects.
The same month, at an e-auction, Godrej Properties acquired two land parcels for a residential project along the Noida-Greater Noida Expressway for Rs 377 crore.
Half a dozen other plots on the block fetched the authority around ₹2,700 crore.
Sub-division of plots not allowed: The Authority also disallowed the sub-division of plots before the project is completed. This way, builders will only take the land on which they want to build the project, and will have to ensure the project is completed on time.
Even for allotments for industrial and institutional plots, and residential lands, payment terms have been reduced to one to two years, from five to six years earlier.
Return vacant plot if no development: per new guidelines, if no development has been undertaken on the land parcel allotted in five years, the land will have to be returned. The Authority used to grant numerous extensions for institutional, industrial, IT and ITeS plots earlier, but now, if the plot has been lying vacant and has not been made functional, the allotment will stand cancelled.
International firms ramp up investments in Noida and Greater Noida
The razing of the towers and various regulatory steps taken by the Noida Authority to clean up the real estate market has bolstered Noida’s perception and will encourage potential investors, said Anckur Srivasttava of GenReal Advisers.
Many big players have invested in the twin cities of Noida and Greater Noida. The Tatas, Godrej, and Ikea have set up shop. Lulu signed a Memorandum of Understanding (MoU) with the Uttar Pradesh (UP) government this month to set up six shopping malls and one hotel in the state. These malls and hypermarkets are expected to come up in Noida, Varanasi, Gorakhpur, Ayodhya, Kanpur, and Prayagraj, with a total investment of Rs 4,500 crore. The shopping mall project in Sector 108, Noida, will also have a five-star hotel.
The Adani Group has two land parcels and is purchasing more, and even Microsoft has purchased land here. The Aditya Birla Group is also keen to enter Noida.
Eight teams of the UP government travelled to 16 countries and held road shows between December 9-19, 2022, ahead of the Global Investors Summit scheduled to be held in Lucknow in February. They received investment proposals worth over ₹7.12 lakh crore, the state government has said in a statement.
The largest share of proposals, worth ₹4 lakh crore, were received from the UK and the US. According to data provided by the state government, 149 MoUs were signed during these visits, which hold the potential of generating over 7,02,415 jobs, per government estimates.
The state government has set a target of attracting ₹10 lakh crore of investment at the summit scheduled to be held between February 10-12, 2023.
Land dues and the property registrations
In a setback to real estate developers in Noida and Greater Noida, the Supreme Court on November 7 recalled its June 2020 order that had directed the authorities to cap the rate of interest at 8 percent for delays in the payment of land dues by real estate firms. This means that builders would have to pay dues at an increased rate set by the Authorities.
More than a lakh homebuyers have been unable to get their homes registered in Noida and Greater Noida because of this issue.
“The apex court has accepted our plea and vindicated the stand taken by the authorities that the dues are correct and should be paid. It is a big victory. Almost Rs 10,000 crore is due from developers,” said Maheshwari.
The authorities were waiting for this order for the last two years and could not demand dues per their calculations. “Henceforth, stringent action will be taken against developers who do not pay their dues. Registrations were not stopped per se, they are linked to the payment of dues and adherence to construction and other norms. Wherever total dues or flat-wise dues are being paid, registrations are taking place,” she added.
What more needs to be done
While terms like resilience, transparency, and professionalism have finally found a place in the narrative around NCR’s real estate market, largely on account of the entry of large listed and corporate developers such as Tata, Godrej, and Hiranandani, the biggest task is to restore faith among buyers.
Although RERA has imposed checks and balances on the real estate market, property cases pending in courts and other forums need to be resolved. Projects that are incomplete should be completed by bringing in a third party.
Amit Modi, Director, ABA Corp., and president-elect of the western UP chapter of the Confederation of Real Estate Associations of India, said that the market can improve only after all legacy issues pertaining to stuck projects are resolved.
“There are several projects that are stuck at the NCLT (National Company Law Tribunal) and other courts. Going forward, 75 percent of the new launches will comprise old projects that are 25-50 percent complete and have been taken over by new developers,’’ said Modi.
Over the past decade, the Delhi-NCR property market, one of the biggest in India, has been hit a number of developers defaulting on their projects. Jaypee Infratech, Unitech, Amrapali, and The 3C Company are some of the big companies whose projects are stalled.
There are many other builders who have defaulted on the timely delivery of their projects to customers who have paid up nearly the full price, and are also paying their home loan EMIs on top of that.
Homebuyers have approached various courts as well as the NCLT against the defaulting builders. Jaypee Infratech went into the Corporate Insolvency Resolution Process (CIRP) in August 2017. In June 2021, Mumbai-based Suraksha group received the approval of financial creditors and homebuyers to take over JIL. Suraksha group is yet to get approval on its resolution plan from the NCLT.
The NCLT has reserved its order on the Suraksha group's bid to acquire Jaypee and complete more than 20,000 flats for homebuyers who have been waiting for almost a decade.
On December 9, 2022, the Supreme Court agreed to list the Amrapali case in January, after the National Buildings Construction Corporation (NBCC) informed it that the construction of 46,000 flats of Amrapali was stalled due to a serious cash crunch. The NBCC told the court that the cash raise could be expedited by selling unused Floor Area Ratio (FAR) in select Amrapali projects in Noida and Greater Noida.
The NBCC took over the Amrapali projects after the Amrapali Group’s licence under the Real Estate (Regulation and Development) Act was cancelled by the Supreme Court in July 2019, as the company’s management had siphoned off the money paid by homebuyers.
In case of Unitech, the Supreme Court in January 2020 allowed the union government to take management control of the company and appoint a new board of nominee directors. This decision was aimed at bringing respite to over 12,000 hassled homebuyers of Unitech, but they are still waiting for the possession of their apartments.
Noida and Greater Noida authorities’ board meeting on December 28, 2022
The reschedulement policy for defaulting builders, and the dog policy (for Greater Noida), as also the approval of new plot schemes, are expected to come up for discussion at the board meetings of the Noida Authority and GNIDA slated for December 28.
Builders altogether owe over Rs 39,500 crore to the two authorities — Rs 26,000 crore to Noida, and Rs 13,500 crore to GNIDA.
The reschedulement / amnesty policy is aimed at providing relief to defaulting builders who have expressed their inability to pay such huge sums. As many as 135 of 197 projects in Greater Noida have outstanding dues. In Noida, about 100 out of 116 projects fall in the defaulting category.