The recently-announced zero period policy by the UP government will provide some relief to those developers whose projects are stuck because of delay on the part of authorities to hand over land or because of litigations.
A hurdle for the growth of the real estate sector, stalled projects pose problems not only for buyers but for developers alike. Keeping this in view, the recently-announced zero period policy by the UP government will provide some relief to those developers whose projects are stuck because of delay on the part of authorities to hand over land or because of litigations, including those in the National Green Tribunal. The developers whose projects are stuck due to any of these reasons will be exempted from paying penal interest on outstanding land dues for the number of years their projects are stuck.
A research by Anarock says that as many as 19 lakh units across the top 7 cities are under various stages of construction as on Q3 2019 end, which include stalled, delayed and all ongoing under-construction units. Further analysis reveals that out of these 19 lakh units, nearly 5.76 lakh units were launched in 2013 or before. Given that the typical time required to complete a project does not exceed 5 years, these units can be categorised as ‘chronically delayed’ or ‘stuck’ inventory.
This announcement comes in with the hope of reviving the unsold units and the realty sector as a whole to do away with the liquidity crunch it is facing since last year. The benefits of the policy is only bestowed to those builders who promise to give a written insurance. The insurance will make it mandatory for them to complete the particular project by June 2021. The state government expects one lakh new housing units to be constructed by that time.
Talking about Delhi NCR, this policy will be a win-win situation for the buyers who have invested in a real estate project in Noida, Greater Noida and Yamuna Expressway. The policy will also help the builders stuck in the defaulters category as these builders are eligible to take loans for any fresh construction. Under this policy, the developers will have the chance to restructure their finances and avoid being put in the defaulters category by the banks.
Apart from boosting a builder’s credibility, the policy will also diminish the liquidity crunch faced by the builders during the stalled period. As per the data of UP RERA, there are around 50 housing projects in Noida and nearly 80 residential developments in Greater Noida that have got delayed due to land disputes. Most of these projects stood standstill due to the absence of approach road or the authority’s failure to hand over the housing land to developers within the time period promised.
As per Anarock research, NCR has 29% or over 5.40 lakh units in various stages of construction. Of this, 2 lakh units are chronically delayed because these were launched in 2013 or before. This policy announcement will prove fruitful to all the real estate projects of the region and motivate builders to start new projects too.
Apart from this policy the immediate need is to take a few more measures to revive the housing sector. The steps include expediting the timelines for releasing the funds and actual implementation; getting private players to participate in completing stalled/delayed units; relaxing the 70% norm for escrow deposits in under-construction projects and relaxing/removing GST for at least 6 months.
(By Rahul Chaudhary, Promoter, Sunworld Group)