LUCKNOW: In a major reprieve to the real estate industry, the Uttar Pradesh government on Tuesday asked the Noida, Greater Noida and Yamuna Expressway industrial development authorities to reduce the interest rates on land dues for builders and other allottees in view of raging Covid-19 pandemic.
The three industrial authorities have also been directed to shift and defer the payments that have to be made by the property allottees, including those of 600 housing projects, factory owners, industrial and individual plot owners, said the official sources.
The decision was taken by the state government after consultation with the CEOs of the three authorities, days after developers’ association Naredco promised jobs at construction sites for 2.5 lakh migrant workers.
The UP government directive came in response to repeated demands of relief by the developers in view of the huge business losses incurred due to the pandemic during which the construction activity had come to a standstill.
As per the sources, Noida, Greater Noida, and Yeida (Yamuna Expressway Industrial Development Authority) need to recover at least Rs 35,000 crore in land dues from 600 housing projects and other property defaulters. This move will benefit nearly 400 Noida-based developers who dominate the real estate industry in UP.
As per the officials, Uttar Pradesh is the first state in the country to offer relief to developers in order to help them tide over the economic crisis caused by the Covid-induced lockdown. Credai, the other major developers’ association, said it would write to chief ministers of other states to extend similar relief.
Several Noida-based developers have projects in other states.
As per a senior official of Noida Authority, the interest rates for all the Noida properties would come after the state government’s directives. So far, the annual interest rate on regular payments being charged by Noida and Greater Noida was 11%, which would increase to 14% in case of default. The amount was compounded bi-annually. For the Yamuna Expressway authority, the rates were 10.5% and 13.5%.
Presently, some of the defaulter builders pay penal interest on financial dues up to 20%, thus increasing the total default amount. The state government has, therefore, asked authorities to levy simple interest on financial dues as per the marginal cost of funds based lending rate (MCLR) revised by the Reserve Bank of India, said officials.
Now the authorities shall levy simple interest of 8% on financial dues unlike earlier, said officials. Further, the authorities will not impose any ‘interest on default’ on payments by the developers from March 22 to September 30 provided they clear their dues by September 30, 2020. And if anyone pays the defaulted amount that was payable from March 22 to June 30 by September 30, 2020, then simple interest will be imposed unlike earlier when penal interest was to be recovered.
If the defaulter does not pay the defaulted amount by September 30, 2020, then interest will be imposed on the defaulted amount, said, officials.
According to RK Arora, UP president of the National Real Estate Development Council (NAREDCO), with the state government’s move, most of the developers would be able to restructure their dues and clear them. It will help the homebuyers, investors, developers, and the real estate sector as a whole.