Home­buy­ers to bear the brunt

HT Estates - - HT­ES­TATES -

will this de­ci­sion im­pact the fi­nan­cials of the com­pany and then take a fi­nal call. The loss that will arise af­ter paying the com­pen­sa­tion is ap­prox­i­mately

160 per sq ft, which is a mas­sive amount at a macro level.”

“A s i mi­lar s i t ua­tion i n Greater Noida (West) had led to a fall in de­mand and rise in prices. It is ob­vi­ous that if the land ac­qui­si­tion cost goes up, it will add to the to­tal cost of one unit which will have to be borne by the cus­tomers in near fu­ture. With this de­ci­sion be­ing im­ple­mented now, the cost of units in Ya­muna Ex­press­way will def­i­nitely in­crease and will af­fect the de­mand. Unit costs may go up by at least 10% along the Ya­muna Ex­press­way.”

Other devel­op­ers say that they will ab­sorb the ad­di­tional bur­den to some ex­tent, but they will have to in­crease the prices of un­sold in­ven­to­ries marginally to cope with the hike in land prices.

“I n t he i nter­est of our ex­ist­ing buy­ers we will not be in­creas­ing the cost and ab­sorb the ad­di­tional bur­den, but for the new book­ings we are left with no op­tion but to in­crease the prices slightly,” says Vikash Bha­gat, di­rec­tor, Air­wil Group.

YEIDA has fixed ad­di­tional re­cov­ery costs from devel­op­ers and in­dus­trial and in­sti­tu­tional plot own­ers but it has not fixed what money in­di­vid­ual al­lot­tees of group hous­ing projects will have to pay to builders. There is a pos­si­bil­ity that builders may de­mand un­jus­ti­fied amounts from home­buy­ers.

Asked if YEIDA should fix an amount for home­buy­ers, Bha­gat says “It will be in the in­ter­est of all if the YEIDA fixes this amount. At least the buy­ers will have clar­ity on why prices are be­ing in­creased and that the devel­op­ers are not be­hind this. Buy­ers are more aware now and they keep an eye on all the de­vel­op­ments.”

Many devel­op­ers sug­gest t hat t he au­thor­i­ties must think of some more op­tions as this will lead to an over­all neg­a­tive im­pact on the mar­ket. “The cur­rent rates are hov­er­ing around ₹ 2500-3000 per sq ft. Even af­ter the hike, the re­gion will be the most af­ford­able in the NCR, hence there won’t be any ma­jor im­pact on de­mand. The fes­ti­val sea­son may pro­vide the re­quired fil­lip to the realty mar­ket and bal­ance the ef­fect of the hike in prices,” says Pawan Ja­suja, di­rec­tor, Fin­lace Con­sult­ing Pvt Ltd, a pri­vate con­sult­ing firm.

YEIDA’s de­mand for ₹ 1,330 per sq m will put a 300 sq m plot owner back by an ad­di­tional amount of ₹ 3.99 lakh in­creas­ing the cost of the plot from ₹ 15 lakh to ₹ 19 lakh. How­ever, the present mar­ket rate of the plot is around ₹ 32 lakh.

Be­sides these 21,000 plots own­ers, there are hun­dreds of home­buy­ers who have bought apart­ments in var­i­ous group hous­ing projects. They, too, are up­set with the devel­op­ers’ fresh de­mand for ad­di­tional money fol­low­ing YEIDA’s de­ci­sion to ask devel­op­ers to share the ex­tra fi­nan­cial bur­den at the rate of ₹ 1,770 per sq m.

“YEIDA has fixed the amount that it has to raise from the devel­op­ers but it has not de­cided how the devel­op­ers will pass this bur­den on to home­buy­ers. There are am­ple in­stances of how devel­op­ers are arm-twist­ing home­buy­ers and ask­ing for un­jus­ti­fied sums in Greater Noida and Noida Ex­ten­sion un­der the pre­text of en­hanced com­pen­sa­tion,” says a home­buyer who has in­vested in one of the group hous­ing projects along the Ya­muna Ex­press­way.

To t his, PC Gupta, CEO, YEIDA’s re­ac­tion is, “If the plot own­ers feel that our de­mand for ₹ 1,330 per sq m is un­jus­ti­fied, the Au­thor­ity is ready to re­turn all their in­stall­ments and in­ter­est that they have paid till date with a 6% ad­di­tional in­ter­est.”

“Due to en­hanced com­pen­sa­tion, the Au­thor­ity will have to raise an ad­di­tional amount of ₹ 5,245 crore and we have de­cided to raise this money from 21,000 plot al­lot­tees, dev,elop­ers, in­dus­tri­al­ists and in­sti­tu­tional plot own­ers of var­i­ous sec­tors along the Ya­muna Ex­press­way. In 200910, the ex­ter­nal de­vel­op­ment cost that we levied on plot own­ers and other al­lot­tees is mea­gre com­pared to the es­ca­lat­ing cost of con­struc­tion ma­te­rial and labour charges.”

“We couldn’t carry out any de­vel­op­ment work in the area due to protests by farm­ers and court cases in the last five years. Our ex­ter­nal de­vel­op­ment cost (EDC) will go up many fold now. The Au­thor­ity is al­ready un­der fi­nan­cial bur­den of ₹ 3,000 crore. This is the best pos­si­ble so­lu­tion for the peace­ful and fast de­vel­op­ment of this area and it’s a win-win for all the stake­hold­ers,” adds Gupta.

Buy­ers in Noida Ex­ten­sion have also been asked to pay an ad­di­tional “ac­qui­si­tion charge” by the Greater Noida Au­thor­ity which they say is an “un­fair de­mand.”

Thou­sands of home­buy­ers have de­cided to move court against the al­leged mis­use of dom­i­nant po­si­tion by the builders.

“The Al­la­habad High Court had en­hanced farm­ers’ com­pen­sa­tion by 64.7% in 2011 and when the Greater Noida De­vel­op­ment Au­thor­ity raised the en­hanced com­pen­sa­tion amount from the devel­op­ers, the lat­ter had, promised not to pass on any fi­nan­cial bur­den on us. In lieu of that, they asked us to avail ad­di­tional FAR (floor area ra­tio) from 2.75 to 3.5 which meant that they would con­struct more flats in the same area so that they could re­cover the ad­di­tional money. Un­for­tu­nately, we had faith in them and didn’t take any writ­ten prom­ise. Now most of the devel­op­ers seem to have backed out from their prom­ise,” says In­dr­ish Gupta, found­ing pres­i­dent of Noida Ex­ten­sion Flat Own­ers’ As­so­ci­a­tion.

Ac­cord­ing to Gupta, re­cently a re­puted de­vel­oper has asked its al­lot­tees to pay ₹ 50 per sq ft ad­di­tional cost at the time of pos­ses­sion. The de­vel­oper’s logic is that it has paid money to the Au­thor­ity for en­hanced com­pen­sa­tion to the farm­ers.

“We h a v e d e c i d e d to move Al­la­habad High Court against this un­fair prac­tice,” says Gupta. Be­sides Noida Ex­ten­sion, many devel­op­ers have raised sim­i­lar un­jus­ti­fied de­mands in Greater Noida on the pre­text of hav­ing to pay the Au­thor­ity ex­tra money for en­hanced com­pen­sa­tion to the farm­ers.

“I paid ₹ 6 lakh to the de­vel- oper be­cause he threat­ened to can­cel my al­lot­ment. When I re­quested him to give me the de­tails as to how he has ar­rived at a par­tic­u­lar fig­ure, he re­fused to share any in­for­ma­tion. When I com­plained to the Au­thor­ity, it re­fused to in­ter­vene, say­ing that it was not a party to the agree­ment signed be­tween the builder and the buyer at the time of book­ing,” says Ekta Sharma, a home­buyer.

Many home­buy­ers say that as con­struc­tion pro­gresses and the project nears com­ple­tion, the prices of the flats go up and buy­ers stand to gain a pre­mium. But the devel­op­ers be­come greedy and start de­mand­ing more money on the pre­text of one thing or the other.

“In many ar­eas where the is­sue of en­hanced com­pen­sa­tion does not arise, devel­op­ers have re­sorted to other tac­tics. For in­stance, at the time of pos­ses­sion they may claim that the su­per area of the flat has gone up by 10% and home­buy­ers are then forced to pay 10% more of the to­tal cost of the apart­ment. Su­per area is also such a vague con­cept that even a realty ex­pert fails to mea­sure it cor­rectly,” adds Sharma.

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