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Double whammy for buyers

Increased compensation to farmers means property buyers in Noida and Greater Noida may have to pay more

realestate Updated: Mar 01, 2014 20:01 IST

There’s bad news for those who have been allotted properties in Noida and Greater Noida that include group housing, plots, schools, institutional and industrial units. They might have to pay extra for their assets as the development authorities are now planning to recover `1,800 crore from the developers for increased compensation to farmers whose land has been acquired for building projects.

The authority has already distributed `1,800 crore as hiked 64% land compensation to villagers of 39 villages following an Allahabad High Court dated October 21, 2011. It will recover the amount from the builders, who in turn will in all likelihood pass it on to buyers. While builders have said that the charge is “inevitable”, buyers say that they will not “pay a penny more” to developers. Legal experts also question whether it is fair on the part of builders to demand an additional amount in the name of compensation from buyers as they’ve already been compensated “well-enough” by the authority in the form of extra floor area ratio (FAR) allowing them to build more units and sell them to recover the extra amount that they may have had to pay.

All allottees of properties in Noida and Greater Noida, both old and new (those given possession and others awaiting delivery), may have to pay this additional cost due to hiked land compensation. “We, at CREDAI, are trying to work out a mechanism by which a buyer may have to pay the proportionate amount due to the buyer, directly to the authority. This could be in the form of a demand draft in favour of the authority,” says Manoj Gaur, president CREDAI (western UP) and MD of Gaursons.

“Everybody will have to pay this additional amount because of the HC order. And it is unavoidable,” he says, “A buyer will have to pay `70 to `100 per sq m in Greater Noida. Noida rates are yet to be finalised. The apartment owner of a 1000 sq ft area house in Greater Noida will have to pay `50,000 to `60, 000 more on possession.”

Should buyers pay more?

If your builder-buyer agreement has a separate clause that clearly states that ”the buyer agrees to pay any such amount which will be additionally demanded by the state government or the development authority to pay additional compensation to the landowners by virtue of a court decision or any settlement,” you may have to pay extra to the developer. Many builders post the Allahabad High Court judgment have included this new clause in the builder-buyer agreement.

Every builder-buyer agreement has a clause pertaining to escalation cost built into it. “It is a standard thing in any agreement. This is largely to do with the rise in prices of construction material such as cement, bricks, or a new tax that is levied during construction of the project. If there is only a reference to the escalation clause and no separate clause with regard to whether the buyer is bound to pay extra in case there is an additional demand by authorities, the buyer is insulated from making such a payment,” says S K Pal, advocate.

According to Gaur, all buyer-builder agreements have a specific clause stating that all extra levies, taxes or additional amounts to be paid on account of a court order or increased farmers’ compensation have to be proportionately borne by the buyer at the time of possession. If this specific clause exists in the agreement, the buyer may have to shell out more money.

The question here is that if the development authority has already provided builders with additional or compensatory FAR to pay additional compensation to farmers and have been allowed to construct more properties, they should not be demanding an additional amount from old allottees, says Pal.

The government, development authorities, the district magistrate, should all ensure that the amount collected from buyers as compensation is not done at the cost of cheating people. The amount collected by them may be far more than what the builder may actually be paying to the authority, Pal adds. Gaur refutes this by saying that the zero period or interest waiver promised to developers following the Noida Extension fiasco, has not been granted. “Even the additional FAR given to us had to be purchased,” he claims.