With the Supreme court’s 2020 order being recalled on Monday, real estate developers in Noida and Greater Noida face another lash for not clearing the remaining land dues on time.
The apex court back in June 2020, capped the rate of interest in line with SBI’s marginal cost of lending rates (MCLR) for delayed payment of land dues by builders in the region at 8 percent instead of the interest rates mentioned in the lease documents which was about 15-23 per cent.
With the recent order, the way has been unlocked for the government authorities to get the land dues worth Rs 40,000 crore from the defaulters which were pending for years.
However, developers who were expecting the order in their favour, expressed their disappointment as this will delay the delivery of projects due to the financial strain that they were already facing, a huge financial pressure in Noida and Greater Noida.
“The worry with the move is that it will be very difficult to get the dues clear from the developers at higher rates of interest as they were not able to pay it even at 8 per cent,” said Niranjan Hiranandani, vice-chairman of NAREDCO.
The state government should come as a helping hand for the developers, either the projects can be overtaken or some time should be given for the projects' completion so that the consumers get their properties registered as it would impact them the most, Hiranandani told Business Standard.
Realty experts also highlighted the worry of delays in project deliveries.
"The move will primarily result in the accumulation of stalled projects. As a result, bigger players will be benefitted and the prices will go up as Noida is crowded with tier 1 and tier 2 developers and the tier 2 developers will suffer the most," said Ritesh Mehta, Senior Director & Head - West, Residential Services & Developer Initiatives, India, JLL.
There will be ambiguity for 6 to 9 months as developers are going to suffer and this might lead to insolvency for many developers, especially smaller tier 2 and tier 3 developers," Mehta told Business Standard.
“The move will do no good to the homebuyers, authorities will get their money but homebuyers will get nothing. It's the customers who face the double whammy of paying the EMI and rent yet not getting the property possession,” said Ramesh Singh(name changed on request), ex-employee with Amrapali.
Singh has also been the victim of the tussle between the Noida authorities and developers. He lives in a 2BHK apartment in greater Noida on rent but also pays the EMI for the apartment that he purchased back in 2013.
The decision drew varied opinions from realty experts. Homebuyers who expressed their concerns about getting their registrations done who have already booked their properties.
“More than 1 lakh home buyers are stuck in the Noida extension and the most wretched sector is the Tech zone here,” said one of the realty dealers in NCR.
He also said that around 107 projects were under construction back in 2010, out of which, 30 projects have been completed by the developers so far, rest are yet to be completed.
“Over the last few years, it has been a tough ride for the sector requiring additional help from the government and authorities. There is a long list of unmet demands over the years leaving the sector at the mercy of market forces; the top amongst the demands being the industry status,” said Prashant Tiwari, CMD-Prateek Group.
Sector experts also opined that the government should facilitate the lending and provide the funding to the developers to complete it as they will also face the loss. The state government should come up with amnesty schemes for the developers. It should also allow them to monetize the unsold inventory.
“The Supreme Court’s decision to recall the 2020 order for developers seems to put a massive financial burden on the developers in the NCR,” said Prashant Thakur, Sr. Director & Head – Research, ANAROCK Group.
However, one must also consider the fact that the Supreme Court had given two years to the developers to clear dues, with improving sales, the developers are better placed today to honour dues to the authorities, he added.
The housing demand in the NCR region has significantly improved during the past two years. As per ANAROCK research, in 2020, 23,200 units were sold in NCR, which increased to 40,000 units in 2021, and in the first nine months of 2022, the region has already sold more than 49,000 units.
“Penalising the developers will not help the economy to grow, it will delay the projects further and will also impact the job creation for the labourers. Government should come up with a feasible solution for both parties,” said one of the experts who wishes not to be named.
"This is not a good move for the already struggling Real Estate Industry of Noida. The verdict will have a cascading effect. The cash-strapped developers saddled with unsold inventory will find it extremely difficult to fund this additional obligation," said V. P. Lobo, Managing Partner, Reboot Realty.
Government must view this situation sympathetically to provide relief to the Developers, irrespective of Court order, he added.