Explainer: How zero-period policy will help real estate sector in Noida, Greater Noida
Yogi Adityanath government has reintroduced the zero-period policy in order to deal with stalled real estate projects in the area. Read on to know what exactly ‘Zero-period’ policy is...Updated: Dec 04, 2019 15:31 IST
Builders located in Noida, Greater Noida and Yamuna Expressway can breathe a sigh of relief as the Uttar Pradesh government has reintroduced the zero-period policy in order to deal with stalled real estate projects in the area.
Under the policy, the Yogi Adityanath government has decided to waive off penal interest and other dues on builders for the period during which their projects were stalled due to litigation over land acquisition issues. However, the benefit will only apply to builders who give a written assurance that they would complete their projects by June 2021.
The benefits will ultimately trickle down to homebuyers. Not only will the policy ensure speedy delivery of housing projects that are stuck for years, builders are also likely to pass on the interest benefit for the zero period to buyers. If you have invested in a project in Noida, Greater Noida and Yamuna Expressway, read below to understand what exactly is the zero-period policy and how will it benefit you.
What is a zero-period policy?
To put in laymen terms, during a ‘zero period’, no interest is levied on land allotment charges. Developers in Uttar Pradesh generally buy group housing land by paying 10% of the total land cost and the rest 90% is paid in instalments. This money has to be repaid at a certain rate of interest. If the project gets stuck and the builder defaults on payments due to liquidity crunch or lack of funds, then additional penal interest is levied on the instalments delayed.
The zero-period policy specifies that if a housing project was stalled due to a stay order by any court or the National Green Tribunal (NGT), or if the Real Estate Regularity Authority (RERA) delayed possession of deed execution, then the affected period would be considered as ‘zero’.
The policy also takes into account a situation wherein a developer could not begin the project construction due to the absence of an approach road or the authority’s failure to acquire land at the time of handover. In such situations, real estate developers are exempted from penal interest and dues, albeit with some conditions.
Under the scheme, a developer reportedly cannot charge interest from buyers for the zero-period benefit granted by the government.
When was it first introduced?
The zero-period policy was first introduced in 2011-12 in Greater Noida to help the developers whose projects were affected owing to the farmers’ agitation. Then, in Noida, after the National Green Tribunal’s ban on construction in August 2013, the work on projects came to a standstill for over two months. The Noida Authority later waived off the interest for developers for that duration of time, calling it a zero period.
How will it benefit the real estate sector?
The zero-period policy is likely to revive projects of many builders who have been categorised as defaulters due to the pile up of interest. Entering the defaulter category means a builder cannot get fresh construction loan from banks, which affects completion and delivery of housing projects. Under the zero-period policy, the penal interest will be waived off and builders will be able to restructure their finances.
It is also likely to help more projects become net worth positive to qualify for the Rs 25,000 crore alternative investment fund announced by the central government recently.