Nexus between Authorities & Some Builders and Noida Development
By Arvind Rai, Director, Valuation Services, Colliers India The recent Comptroller and Auditor General’s (CAG) audit report on New Okhla Industrial Development Authority (NOIDA) and the Supreme Court orders in the Supertech and Amrapali case have exposed the unholy nexus between authorities and some builders active in the region. Some major lapses and inconsistencies highlighted in the CAG report include NOIDA allotting more than 80% of the total commercial land to only a handful of developers, changing industrial land into a sports city sector without any mention in Master Plan 2021 for such land use, allotting land in sports sectors to bidders having no prior experience in sports infrastructure development and allotting land parcels for group housing projects to builders against whom there were huge outstanding dues to the authority. Strangely, it went unnoticed for a long time. The Urgency Clause was used multiple times to acquire land for group housing and commercial developments. In a clear abuse of the Urgency Clause, the original landowner's and farmers' voice was suppressed and undue advantage was given to select real estate developers. These unfair practices also led to additional load on infrastructure due to the uncontrolled and unnatural growth of city limits. In the case of Supertech’s Emerald Court case too, the Supreme Court verdict to demolish the Twin Towers probably hurt the homebuyers more than anybody else. Homebuyers and significant real estate players were in shock. In the order in August, the Hon’ble Supreme Court charged NOIDA officials and the builder with disregarding the basic NBR and NBC (national building) codes. Additionally, the top court pulled up the NOIDA Authority for failing to provide a sanctioned plan to buyers in Supertech's Emerald Court project. The SC bench observed that when homebuyers had asked for the plan, the authority wrote to the developer on whether to share it and refused to share the plan at the developer’s behest. “This is a shocking exercise of power. You (NOIDA) are not only in the league but in cahoots with Supertech,” the bench said. It was only after the High Court expressly directed NOIDA Authority, they provided the plan to the homebuyers. The SC reprimanded the Authority, saying that being a regulatory urban planning authority, it should take a neutral stand “instead of defending the acts of Supertech. You cannot take a private stand for any promoter,” the bench had told the advocate representing the authority. In the Supreme Court order on the Amrapali case too, the apex court had observed that the Noida Authority has worked in an opaque manner to cause unjust enrichment to the builder. It was also observed that the Noida and Greater Noida Authorities and the Bankers have permitted diversion of funds of homebuyers and the possession of other assets by Amrapali Group. The apex court passed the remark that the Authorities have to be vigilant in such cases and not tolerate the default. They have to blame themselves for their inaction and have to wait for the realization of dues by sale of other properties and as against guarantors etc. It is apparent from the report of the forensic audit submitted by Forensic Auditors that there is a serious kind of fraud played upon the buyers in active connivance with the officials of the Noida and Greater Noida Authorities and that of the banks. The NOIDA and Greater Noida Authorities were grossly negligent in reviewing and monitoring the progress of the project and in collusion with leaseholders failed to take action concerning non-payment of dues and illegally permitted the group to Sub-lease the land without payment of dues. The CAG has observed in its report that in 2011, in Noida and Greater Noida various real estate projects for housing were started. In the various projects, the Amrapali Group of Companies proposed to construct more than 40,000 apartments. Under these schemes, it was assured that the delivery of possession shall be made in 36 months. Several revised dates of possession were fixed unilaterally, but they failed to deliver the flats. Further, the Builder did not pay the amount to the Authorities and also to the banks. The dues of Noida alone stood at more than Rs 2,000 crore as of 30 April 2019. Unfortunately, the brunt of these malpractices was borne by homebuyers, taxpayers, financial institutions, farmers, and the authority itself in terms of potential loss in revenue. Many builders were allotted land without any due diligence being conducted with regard to their experience and financial capability, trapping thousands of homebuyers in such projects. Data shows that almost two-thirds of the total projects launched between 2005 and 2018 are yet to be completed, and for many of those projects, construction is completely stalled. In addition to the potential loss in revenue to NOIDA, banks, NBFCs, funds, and other financial institutions financing these projects also suffer due to their loans getting into bad books on account of non-payment. Besides ensuring that stringent action is taken against such officials and builders, guidelines for allotment of land, the selection process, land-use conversion process, and intense audits should be in place to curb such malpractices.
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