Earlier this week, the Supreme Court dismissed intervention applications filed by real estate developers against its November 7 order.
That order recalled a 2020 direction to the Noida and Greater Noida authorities to cap the rate of interest at 8 percent for delays in payment of land dues by real estate companies. The court made it clear that the 8 percent ceiling would apply only to the Amrapali projects as a special case.
This meant that builders would now have to pay dues at a higher rate of interest and this may include the penal interest that has accumulated over the years. According to reports, builders owe almost Rs 40,000 crore to the authorities – Rs 26,000 crore to the Noida Authority and almost Rs 14,000 crore to the Greater Noida Authority.
How does the order impact homebuyers?
As many as 100,000 buyers are suffering because their homes cannot be registered until the builders of their projects clear their dues. Several buyers have taken possession as they are unable to pay both rent and equated monthly instalments and have signed a fit-out possession agreement without the occupancy certificate.
The fit-out possession letter typically says that the builder has applied for an occupation certificate and that the buyers can take possession for interior work or fit-outs as they are called. Most of these buyers have paid up the entire amount to the builder and by signing such a letter they are responsible for their safety as well. The letter doesn’t provide a timeline for getting a completion certificate from the authorities.
An unregistered apartment also means that buyers cannot sell their flats, gift them to their children or shift their home loan to a new lender offering them a lower rate of interest. Several buyers had taken loans at 18 percent from NBFCs and are unable to shift to nationalised banks due to the absence of a completion certificate.
Homebuyers are stuck for no fault of theirs and have got a raw deal in the process.
“Most of us have paid up 100 percent amount to the builder. We want registries to begin. Why are we being punished due to the fight between the builder and the authorities? We don’t want to get into their fight, we just want our homes. The authorities should try and recover the amount by selling unused land of builders where no construction has begun,” said Abhishek Kumar, president of the Noida Extension Flat Owners Welfare Association.
Homebuyers plan to file a public interest litigation in the Allahabad High Court soon.
“We had held bike rallies and dharnas for the last 14 weeks on the issue but to no avail,” he said.
Kumar Mihir, an advocate who represented the Amrapali homebuyers, said the government must take a policy decision and give some respite to the builders so that homebuyers can get their flats registered.
Steps taken by the Authority so far
After the November 7 order last year, the Noida Authority introduced a “reschedulement policy” for builders open from January 1 to March 31, 2023. Under the scheme, the developer can pay up to 20 percent of the dues upfront and the remainder within a two-year period. They would be allowed to register housing units based on the quantum of dues paid.
Noida Authority’s officer on special duty Prasun Dwivedi told Moneycontrol that only six developers had come forward so far to make payments under this policy. He was hopeful that following the SC order, “more would come forward in the next few days.”
The Authority had issued notices to 56 developers for dues of Rs 9,000 crore but has so far collected only Rs 350 crore.
The Authority also introduced a flat-wise registry scheme under which an occupancy certificate can be given to a builder flat-wise if the proportionate dues are cleared. Only 19 builders have so far come forward under this scheme, of which only six have deposited their applications. Only one entity has made the payment, said Dwivedi.
Next steps - coercive action
The authorities are considering taking coercive measures against developers if they do not pay up their dues.
These may include sealing of unsold housing units, builders’ office premises and taking over of vacant land and under-construction buildings, officials said.
A ‘name and shame’ strategy is also in the works. The Authority is considering uploading details of the dues that developers owe.
“The list is almost ready and will go online in a few days. It would contain all details with regard to outstanding dues, date when occupancy certificate and complete certificate were issued, number of registries done, number of towers sanctioned to a builder, number of towers constructed. All these details would go live to ensure that homebuyers do not fall into a trap going forward,” said Dwivedi.
Asked why buyers got caught in the quagmire between the authorities and the builders, he explained that the buyers, the authorities and the builder signed the tripartite lease deed agreement at the time of purchase and that’s why they find themselves in this situation.
He said he was hopeful that the issue would be sorted and more developers would pay their dues because there was no recourse available to them anymore. He also said there were several challenges with regard to the sealing of vacant land.
“Most of these allotments are from 2008-2012 and in the last 10 years more than 80 percent construction has already taken place. There is no consolidated land parcel left,” he said.
Also, more often than not, even though only three towers of eight have come up, a full basement has already been constructed, an expert said.
“This cannot be termed as an unused land parcel because plans that have been sanctioned are for an integrated land parcel. Approval has been given for a common electricity panel and for fire tenders. In such a situation the Authority cannot take over the remaining land parcel,” explained the expert.
It also becomes difficult for the authority to identify unsold units as the information has to be provided by the developer. In most cases, third party rights have already been created by the developer.
Some real estate developers say this could lead to several projects landing up in insolvency courts. It should be noted that several developers diverted money collected from allottees before the Real Estate (Regulation and Development) Act, 2016.
Builders said that after the Supreme Court’s order this week, individual developers have to decide on the amount of dues they can pay upfront.
“It would now be an individual developer’s choice,” said Manoj Gaur, president of the Confederation of Real Estate Developers' Associations of India in the National Capital Region.
He said the authorities should have discussions on a one-time settlement scheme.
“We are also planning to meet senior government officials in Lucknow,” he said.
As a recent development, on March 3, a seven-member delegation of homebuyers met Uttar Pradesh Chief Minister, Yogi Adityanath, who assured them that the issue of registries would be sorted soon.
Jewar MLA Dhirendra Singh facilitated the meeting. He quoted Yogi Adityanath as saying, "I know the pain of the homebuyers and after our government came into power, efforts have been made for them and are continuing even today. Some cases got delayed due to legal hurdles, but the government is serious and we are making all efforts to provide complete solution to the problems of the homebuyers."