The country’s fund-starved real estate developers are likely to benefit from a recent move by the Uttar Pradesh government to relax norms on payment period for land acquisitions, experts say.
The Mayawati-led Uttar Pradesh government had said it is planning to come out with a relief package for acquisition of land to develop integrated townships, and metro cities in the state. The government plans to extend the payment period for acquisition of the land to 10 years as against the prescribed norm of five-seven years.
The relaxation, if approved by the cabinet, will give a breather to cash-strapped developers who are in negotiations with banks and mutual funds to defer repayments and restructure loans. Several of them have also deferred projects following a slump in demand. Land accounts for more than 50 per of the cost of a project.
“By extending the installment duration, the government will be able to ensure completion of the project,” said, Sanjay Verma, executive MD, South Asia, Cushman and Wakefield, a real estate services firm.
The Uttar Pradesh government also plans to waive the nominal penal interest (about 2 per cent) for delayed installments on land. Also, in case a developer is not able to pay the instalment, the government will avoid cancelling the land deal. “Allottees to have defaulted on payment of 95 per cent of the total cost of the land will be affected,” says the proposed policy document.
Apart from the relaxations, the UP government has also extended the 50 per cent waiver on stamp duty and registration of properties by another six months, or till September 30, 2009 to ease the hardship. The earlier exemption was to expire on March 31, 2009. The developers availing themselves of the facilities of the relief package will have to submit their revised applications by June 30.
Earlier, the Uttar Pradesh government had granted permission to 10 companies for construction of hi-tech townships in seven cities. The Shara and Ansal groups were given permission for the facilities in Lucknow, while in Ghaziabad Uppal Chaddha Group and Suncity were given the licences.
The Uttam Group won the permission for building a hi-tech city in Dadri.
Unitech won a bid to build a hi-tech city each in Varanasi and Agra and has also completed land acquisitions. The Uppal Chaddha group has also completed the process of acquiring land in Ghaziabad.
DLF, the country’s biggest real estate developer, has also won an approval to acquire 220 acres on Sultanpur Road in Lucknow.
In the past, the government had faced problems in acquiring land from the farmers. Keeping this in mind, the government will ask the developers to make payment only for the land being provided by the government.
“Most developers are not in a position to buy the whole land won in the bid due to liquidity crunch. Developers would be happy to get away with whatever land they have paid for till now,” said an analyst requesting anonymity.
