Are you a homebuyer who has paid more than R1 lakh to your builder for ‘external development charge (EDC)?’ If yes, then you could be among thousands of homebuyers in the Greater Faridabad area, who have paid more than what they were supposed to... And this ‘extraction’ could total a whopping R1600 crore.
In what could turn out to be the biggest case of cheating of the vulnerable middle-class homebuyer, some alert consumers have discovered that they could have been forced to pay extra money to their builders – anything between R1 lakh and a whopping R5lakh – for EDC, which is levied on the builders by the government for connecting their projects to sewage, water supply systems – anything which is considered to be ‘external development’.
“When a satellite township is launched, development work such as water supply, sewerage, drains etc are undertaken. So state governments, while issuing licences to developers to start group housing projects, decide on an amount to be charged from the developers as EDC. The developers in turn pass this extra cost to homebuyers – and in most cases overcharge them, and ensure huge profit margins for themselves,” says Umesh Prabhakar, general secretary of the Greater Faridabad Welfare Association (GFWA).Calculating the EDC of a particular project is complicated, says Prabhakar. While the government charges EDC on an acre, some developers break it into smaller units, ie, per square foot, adding extra costs as they like. For instance, in 1994, the Haryana Urban Development Authority (HUDA), had fixed R30.45 lakh per acre EDC for Faridabad, subject to an increase of 10% per annum on compoundable basis. This meant costs had gone up by Rs.104.44 lakh per acre in 2007.
“So, a developer, who had applied for a licence in 2007, was supposed to pay R104.44 lakh for each acre of land to the government in that year. If we convert this amount on a per-square-foot basis, it comes to R137. The developers, however, charged between R150 and R160 per sq ft from homebuyers. We discovered these ‘manipulations’ one-and-a-half years ago and now have reasons to believe that the builders have made profits of hundreds of crores,” says Narendra Chabra, president of GFWA.
What aggravated the problems of the homebuyers was the EDC hike by HUDA in 2011. Not only that, these steeply hiked rates were made effective from 2006.
“This complicated EDC calculation and gave more opportunities to the developers to get money out of the homebuyers. Thankfully, just last month, the Punjab and Haryana High Court stayed the implementation of the new notification of the increased EDC. However, by that time the homebuyers had already paid a huge amount to the developers,” says Ashish Kaul, an interior designer who has invested in one of the group housing projects.
When the case was being heard, the homebuyers had apprised the director general, town and country planning (DGTCP), Haryana, of the matter. An audit committee, set up by him to investigate the issue, had said in its report that no uniform method was being adopted by the developers to fix EDC rates.
“There is no provision/ standard formula in the rules regarding charging of EDC from the buyers and no uniform policy has so far been framed by the government, due to which the colonisers are adopting different methods of calculation of the rates of EDC by loading total payment on account of EDC, interest etc,” the report states.
“Therefore, if agreed, a uniform policy for the whole state may kindly be framed after obtaining the opinion of the association of colonisers and buyers to make the matter more transparent and justified,” the report adds.
Nothing has been done yet. “What can we expect from the government? Today, developers collect money for EDC but don’t deposit it with the government and the latter is unable to do anything about it. How can we expect help from the government? Now we
want to take this matter to the court,” says Kaul.
When contacted on the issue, a senior DGTCP official said on condition of anonymity that the director general was likely to take up the matter with the developers in the area at a meeting next month.