NEW DELHI: In a big relief to
real estate companies
in NCR region,
the Supreme Court
on Wednesday directed that the rate of interest to be paid by them for delay in payment to Noida and
authorities for the cost of land will be at 8% against the present exorbitant rate of 15-23%.
A bench of Justices Arun Mishra and U U Lalit said that there is a need to "give impetus" to real estate sector and relief should be granted to builders as many of them are struggling to survive due to economic slowdown and because of COVID-19 pandemic. It said that charging a reasonable rate of interest of 8% will enable them to invest the money to complete the housing projects.
It passed the order on a plea of Ace Group of Companies which alleged that various projects are stalled and became dormant due to excessive lease rent, penalty and interest charged by authorities. It contended that SBI MCLR (Marginal Cost of Funds based Lending Rate) rate of interest for three years is only 7% to 8%, and Noida authorities be directed to reduce the rate of interest.
"Considering the current state of real estate, the projects are standstill, and in order to give impetus to such housing projects and mainly considering plight of
and as pointed out by Noida and Greater Noida Authorities that 114 plots were allotted from 2005 onwards, most of 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 annum and let the Noida and Greater Noida Authorities do a restructuring of the repayment schedule so that amount is paid" it said.
Welcoming the apex court verdict, President of National Real Estate Development Council of
and Chairman of
R K Arora said that the order is a solace to the ailing sector. "The Authorities have been charging interest compounded half-yearly, resulting an effective rate of approximately 20% per annum which is not viable in business point of view, and the liquidity crisis with the real estate sector is largely attributable to this wrong and excessive interest rate".
He said that capping interest rate at 8% would enable the developers to complete the stuck and delayed projects and would help approximately 1 lakh buyers to get their flats soon.
The court noted that Noida and Greater Noida Authorities have allotted over 114 plots since 2005 to various group housing societies but more than 60% of projects have not been able to come up so far. 81 plots were handed over the possession on payment of 10% of the total premium. Only 29 out of 81 were completed. The Authorities are not issuing completion certificates to such projects and they are not able to realize their outstanding dues.
The court, however, made it clear that if the builders failed to clear the dues within reasonable time then the concession granted shall stand withdrawn.