The top court's order came on a plea of Ace Group of Companies seeking waiver of the interest component from the dues towards authorities on the ground that precarious conditions are being faced by the real estate companies in the entire Noida and Greater Noida region.
Reeling under slowdown and impact of Covid-19 induced lockdown, the real estate companies in Noida and Greater Noida areas got the much needed relief as the Supreme Court on Wednesday capped the rate of interest at eight per cent to be charged by authorities on the outstanding dues of land against the exorbitant 15 to 23 per cent.
The top court said considering the current state of real estate sector, the projects have come to a standstill and the sector needs to be given impetus mainly considering plight of home buyers. A bench of Justices Arun Mishra and U U Lalit directed the Noida and Greater Noida authorities to restructure the dues of real estate firms considering the current state of sector as out of the 114 plots given in 2005, most of the projects are incomplete.
“We direct that rate of interest on the outstanding premium and other dues to be realized in all such cases at the rate of 8 per cent per annum and let the Noida and Greater Noida Authorities do a restructuring of the repayment schedule so that amount is paid and Noida and Greater Noida Authorities are able to realize the same,” the bench said.
The top court said that in case of failure to pay the outstanding amount, the concession granted shall stand withdrawn but at the same time, the Noida and Greater Noida authorities shall also ensure that not only instalments/money are deposited and all such projects are completed within the stipulated time.
“We have noted in the judgement dated July 23, 2019 the figure given by the Noida and Greater Noida authorities that after 2005, 114 plots had been allotted to various group housing societies. 81 plots were handed over the possession on payment of 10 per cent of the total premium. 29 projects, out of 81 were completed. Out of the other 33 allotted earlier, 11 were completed, and 7 obtained part-completion certificates. Thus, it is apparent that more than 60 per cent of projects have not been able to come up so far,” the bench said.
It said that a large number of home buyers have been waiting now approximately for the last eight to ten years or more for completion of houses and it is not in dispute that the real estate sector has suffered a setback at present.
“It contributes to the GDP of the country. As a large number of projects have not come up, at the same time, Noida and Greater Noida Authorities have not been able to realize their dues from such projects which are being piled up for the last several years, at the same time interest of home buyers has intervened. Even on the plots where the land was allotted from 2005 onwards, the projects have not been completed so far, though the buyers have paid their money,” it said.
The top court said that constructions have not been completed due to various reasons including due to diversion of funds and there was a failure to comply with the obligation to the home buyers whose money has been invested in the partially constructed structure and partial dues have been paid to the Noida and Greater Noida Authorities.
“It cannot be disputed that the rate of interest, on which agreements were entered into, has gone down by now. The present lending rate is much below and the RBI has taken several steps to revive the economy. In such a scenario, it would never be possible to make payment of interest at the rate fixed by authorities and also a penal interest to be realized by concerned authorities. The home buyers are not able to obtain fruits of the investment and are deprived of legal title of the flats,” it said.
The top court’s order came on a plea of Ace Group of Companies seeking waiver of the interest component from the dues towards authorities on the ground that precarious conditions are being faced by the real estate companies in the entire Noida and Greater Noida region. It said that the interest rates of the Noida and Greater Noida authorities have remained exorbitant contrary to the prevailing economic situation of the country and the penal interest on delayed payment is also added.
The company said that the interest rates of the authorities have been increased from 11 per cent to 14 per cent 15 per cent to 18 per cent 23 per cent per annum. It said that following the economic recession in the last decade, the entire real estate sector has gone downwards and facing acute financial crunch and is fighting for its survival.
It said that the Covid-19 induced lockdown has further aggravated the situation and there have been absolutely no business and commercial activities in this sector, and the entire real estate industry has come to a grinding halt causing further financial losses and damages to the real estate sector, which is generally in a precarious condition in the Delhi/ NCR region.
The real estate company pointed out that various firms have stopped production of the construction/building material in the wake of lockdown and most of the labourers have gone back to their home States resulting in shortage of labourers.
Due to excessive lease rent, penalty and interest charged and levied, additional land costs demanded, and charged on the land allotted, various projects are stalled. Most of the projects have acquired the status of dormant projects, the company argued.