UP approves Zero Period Policy that allows waiver of interest on housing projects for disputed period
The decision will help revive the real estate sector that has been hit by economic slowdown and acute shortage of funds, officials said, adding that this will also speed the process of handing over housing units to buyers.Updated: Dec 04, 2019 09:53 IST
The Uttar Pradesh government, on Tuesday, approved the zero period policy under which builders will be excused from paying penal interest on outstanding land dues for the number of years their projects were either stuck because of delay on part of the authorities to handover land or in litigation, including the National Green Tribunal (NGT).
Quoting industrial development minister Satish Mahana from Lucknow, PTI said the benefit will apply to builders who are set to provide homes to buyers by Jun 2021. The state government had expected one lakh new housing units to be constructed by that time.
The decision will help revive the real estate sector that has been hit by economic slowdown and acute shortage of funds, officials said, adding that this will also speed the process of handing over housing units to buyers.
While the policy will apply to builders across the state, the biggest benefit is expected be reaped by builders and buyers in the Noida and Great Noida region. According to an estimate by the UP real estate regulatory authority (UPRERA), around 130 housing projects in Noida and Greater Noida could be covered under the zero period policy approved by the state cabinet on December 3 in Lucknow, officials said.
For long, builders have been demanding waiver of interest on dues in cases where construction was disrupted due to authority’s failure to handover housing land on time due to dispute. As the financial dues kept increasing, builders’ names were added to the defaulters’ list and they failed to get construction loan from banks, thereby delaying completion and delivery housing projects affecting homebuyers, officials said. Relief may also be provided to projects which were disputed by court cases, officials said.
As per rules, the authorities of Noida and Greater Noida impose an annual interest of 12%-14 % on land dues. Land dues accumulate as authorities give land to builders on upfront payment of 10% and the remaining 90% is paid in installments over eight years. However, if builders default, the authorities increase interest on these installments to 20% or higher depending on the quantum of delay in payment.
Reacting to Tuesday’s development, vice-president of confederation of real estate developers association of India (CREDAI)’s Western UP wing, Amit Modi, said, “We had been demanding introduction of the zero period policy for last 4-5 years. The UP government’s approval of zero period policy will revive housing projects of many developers’ categorised as defaulters due to pile up of interest. The move is expected to restructure the financial default. Why should we pay interest on housing land dues for the time when we could not get dispute-free land from the government or the authority?”
While CREDAI did not have the exact number of housing projects set to benefit from this announcement, UPRERA data shows there are around 130 housing projects in Noida and Greater Noida that will get relief.
“The state government is taking adequate steps to ensure homebuyers get their apartments on time. Zero period policy will help eligible builders get additional time to construct, pay land dues and deliver the project. We welcome the move and it will certainly have a positive impact on the sector,” UPRERA chairman Rajive Kumar said.
“The move will provide big relief to the real estate sector. We are waiting for the detailed decision,” Noida authority chief executive officer Ritu Maheshwari said.
After Tuesday’s Cabinet approval, the Noida, Greater Noida and Yamuna Expressway industrial development authorities will look into housing projects on a case-to-case basis and provide relief from interest for a period when the construction was affected due to land dispute between farmers and the authority, officials said.
As per a UPRERA estimate, there are around 50 housing projects in Noida and around 80 in Greater Noida where land dispute affected delivery of housing projects.
Implementation of the zero period policy in disputed cases was recommended by an 11-member committee, headed by secretary, ministry of housing and urban affairs, DS Mishra. The committee was formed by UP and Central governments on June 18, 2018.
On August 22, 2017, the UP government had also made a three-minister committee that also recommended the same policy and similarly the UPRERA also recommended waiver on interest for builders facing problems.