UP govt reduces interest rate for builders on housing land dues

The UP government directive came after repeated demands made by the developers to provide them with relief in view of the huge business losses incurred due to the Covid-19 pandemic.

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 Covid-19 pandemic. The state government has also asked the three industrial authorities to shift and defer the payments that have to be made by the property allottees, including allottees of 600 housing projects, factory owners, industrial and individual plot allottees, said officials. The decision was taken by the state government after consultation with the CEOs of the three authorities.

Labourers at work in a building near Gaur Chowk in Noida. (Virendra Singh Gosain/HT File Photo)

The UP government directive came after repeated demands made by the developers to provide them with relief in view of the huge business losses incurred due to the Covid-19 pandemic. The Noida, Greater Noida and Yeida (Yamuna Expressway Industrial Development Authority) needs to recover at least Rs 35,000 crore in land dues from 600 housing projects and other property defaulters. As the construction was shut down during the period of the national lockdown, real estate developers suffered huge losses and requested the state government to provide them with relief. They said that if interest rates were not reduced and payments were not postponed then they might not be able to survive the crisis.

“The interest rates now have to be reduced for all Noida properties as per the state government directive. The penal interest on the authority dues also needs to be deferred as per the state government order,” said Ritu Maheshwari chief executive officer(CEO) of the Noida authority.

Alok Kumar principal secretary with the UP infrastructure and industrial development department has directed the CEOs of all industrial bodies including Noida, Greater Noida and Yeida to follow the directive to give relief to property allottees, said officials.

Presently, some of the defaulter builders pay penal interest on financial dues up to 20%, thereby 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 June 30 provided they clear their dues by June 30, 2020. And if anyone pays 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 defaulted amount, said officials.

“We welcome the move of the state government. The government has decided to reduce interest rate and decided to charge up to 8% unlike earlier when penal interest would consistently go up. Most of the developers will be able to restructure their dues and clear them. It will help the homebuyers, investors, developers and the real estate sector as a whole. We hope that the government will soon take a decision on our other demands to revive the realty sector,” said RK Arora Uttar Pradesh president of National Real Estate Development Council (NAREDCO), a developers’ body.

When asked about the other demands of the real estate developers, Arun Vir Singh CEO of the Yeida said, “The developers can send their request via email to us and we will process their request as per the decision taken by the state government.”