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NOIDA's NEW SWORD: EDC

Last updated: September 24 2011
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  • NOIDA's NEW SWORD: EDC

    I had the chance of meeting an old friend and currently a lawyer in Noida Authority's panel. Discussed many things and possibilities, which mainly are suggested by the lawyers but formulated, implemented and executed by the bureaucrats. (Please don't ask me about the details since most plans are confidential and mostly contingent - not sure will take place or not, my lawyer friend only told me what was within the limits of professional ethics)

    NA is of the view that in present circumstances, keeping in view the upcoming judgements of the HC and the current farmers agitation and politics, there are going to be fundamental changes in the policies of NA, which will set the course for the market in future. All projects, including current and future, will be effected.

    Current Builder Projects will bear the most brunt. The reason: Unpredictable charges on the way to the current buyers in under construction projects. (All those flats, under construction, even constructed but awaiting registration (Once registered you are a free bird), will be affected with the new policies under way of formulation).

    Legalities first: as you know most of the Noida land is under litigation, and bone of contention is the compensation amount to the farmers. In the present scenario, there are 100% chances that the court is going to appoint an arbitrator to determine the compensation amount for all the farmers land, acquired and under construction. (Future land acquisition will be directly by builders through negotiated rates with the farmers, as already disclosed by Mayawati in Lucknow today).

    Well, once compensation is decided, who is going to pay the farmers? Noida Authority? NA doesn't have that money? Builders directly or buyers through builders? Not legally possible and enforceable! NA cannot enforce the builders to pay the extra money: plots are there to keep once sold. Buyers are technically third party to the authority in the lands deal, and cannot be approached for the purpose. Builders, in turn, also cannot enforce buyers to pay for this specific purpose.

    What lies ahead (as a solution) is what is commonly known as EDC (External Development Charges). Future projects in Noida will automatically fetch the EDC because of the new policy.

    But here, the current buyer, for which the EDC was not a factor till now while buying the flat, will have to shred the EDC money before taking the possession. This is the only solution which NA is eyeing right now to compensate for the extra money NA needs to pay the farmers.

    NA would have loved to ask the buyer to pay the farmers the difference proportionately, but as said before, it is legally just not possible.

    Logically, EDC should not be enforced by the NA to the buyers in current projects, since the Authority has already taken its development share, but it is the easiest and most viable LEGAL solution for the NA to do this "vasuli". Remember in BBA agreements that "all government charges which may change will have to be bourne by the buyer" in different languages but crertainly in all agreements. This is an enforceable clause and cannot be disputed with. Some builders oversmart lawyers went to the extent of including the farmers compensation clause also in the BBA, but that clause is not legal and enforceable.

    So, just be ready to shred considerable amount of extra money for your purchases! Here, don't go by the calculations of Gurgaon. Percentage in the existing cases will be different and in the cases of the future acquisitions, it will be different. Noida Authority will attempt to squeeze the all losses through current buyers only. Be ready to pay an extra 20 - 25% in your current projects.

    Those who have already bought are trapped, they cannot escape. Future buyers (only when EDC enforces officially) in NOIDA will have an advantage, and can get the deals at less than what the current buyer will pay, since builders may have to adjust the rates as per market forces. (I wouldn't buy an underconstruction property in NOIDA by an average builder at the rate of 3400 + 800 EDC, I just can find a decent accomodation at that price in Gurgaon, which now looks heaven after experiencing NOIDA).

    Wish all current Noida buyers and investors a good luck, and that includes me too!
  • #2

    #2

    Re : NOIDA's NEW SWORD: EDC

    yes thats one of a good way to pass the buck to user/investor. i just mentioned in another post as to how can a builder pass the buck onto a buyer wrt farmer's payout.

    Problem could blow out of proportion if someone gets over greedy and starts charging on additional super area.
    MM

    Comment

    • #3

      #3

      Re : NOIDA's NEW SWORD: EDC

      Originally posted by Munish Malhautra View Post
      yes thats one of a good way to pass the buck to user/investor. i just mentioned in another post as to how can a builder pass the buck onto a buyer wrt farmer's payout.

      Problem could blow out of proportion if someone gets over greedy and starts charging on additional super area.
      You are right, it will be for builder's benefit: will only do when more than 75% of it's flats are sold. It won't help NA or farmers because that money cannot be transferred to them.

      Comment

      • #4

        #4

        Re : NOIDA's NEW SWORD: EDC

        for EDC to become reality, noida will first has to become freehold. As NA already charges Lease rent, in lieu of EDC. also how can builder buy directly from farmer , when the real owner in noida area is NA , and all land is then sub leased to builders and individuals. Its more complicated than what has been written above. I think prices in noida will go up, NE some areas will remain undeveloped (just like 7X sector 3 years back) and rest all litigation free land will be first developed and maybe after 10 years authority will acquired remaining land in NE. Already authorits has spent lot of money for sector development in NE, etc

        YEW is totally different ball game. there EDC is possibility and fundamental land ownership changes possible.

        Comment

        • #5

          #5

          Re : NOIDA's NEW SWORD: EDC

          Originally posted by anubhaviit View Post
          for EDC to become reality, noida will first has to become freehold. As NA already charges Lease rent, in lieu of EDC. also how can builder buy directly from farmer , when the real owner in noida area is NA , and all land is then sub leased to builders and individuals. Its more complicated than what has been written above. I think prices in noida will go up, NE some areas will remain undeveloped (just like 7X sector 3 years back) and rest all litigation free land will be first developed and maybe after 10 years authority will acquired remaining land in NE. Already authorits has spent lot of money for sector development in NE, etc

          YEW is totally different ball game. there EDC is possibility and fundamental land ownership changes possible.
          There is already another contingency plan to make the NOIDA free hold:

          https://www.indianrealestateforum.co...eehold?t=17995

          If implemented, NA will get fresh new funds from the existing registered properties even. There are hundreds of solutions: Money is in the Front Seat.

          Comment

          • #6

            #6

            Re : NOIDA's NEW SWORD: EDC

            Originally posted by vkumar1 View Post
            I had the chance of meeting an old friend and currently a lawyer in Noida Authority's panel. Discussed many things and possibilities, which mainly are suggested by the lawyers but formulated, implemented and executed by the bureaucrats. (Please don't ask me about the details since most plans are confidential and mostly contingent - not sure will take place or not, my lawyer friend only told me what was within the limits of professional ethics)

            NA is of the view that in present circumstances, keeping in view the upcoming judgements of the HC and the current farmers agitation and politics, there are going to be fundamental changes in the policies of NA, which will set the course for the market in future. All projects, including current and future, will be effected.

            Current Builder Projects will bear the most brunt. The reason: Unpredictable charges on the way to the current buyers in under construction projects. (All those flats, under construction, even constructed but awaiting registration (Once registered you are a free bird), will be affected with the new policies under way of formulation).

            Legalities first: as you know most of the Noida land is under litigation, and bone of contention is the compensation amount to the farmers. In the present scenario, there are 100% chances that the court is going to appoint an arbitrator to determine the compensation amount for all the farmers land, acquired and under construction. (Future land acquisition will be directly by builders through negotiated rates with the farmers, as already disclosed by Mayawati in Lucknow today).

            Well, once compensation is decided, who is going to pay the farmers? Noida Authority? NA doesn't have that money? Builders directly or buyers through builders? Not legally possible and enforceable! NA cannot enforce the builders to pay the extra money: plots are there to keep once sold. Buyers are technically third party to the authority in the lands deal, and cannot be approached for the purpose. Builders, in turn, also cannot enforce buyers to pay for this specific purpose.

            What lies ahead (as a solution) is what is commonly known as EDC (External Development Charges). Future projects in Noida will automatically fetch the EDC because of the new policy.

            But here, the current buyer, for which the EDC was not a factor till now while buying the flat, will have to shred the EDC money before taking the possession. This is the only solution which NA is eyeing right now to compensate for the extra money NA needs to pay the farmers.

            NA would have loved to ask the buyer to pay the farmers the difference proportionately, but as said before, it is legally just not possible.

            Logically, EDC should not be enforced by the NA to the buyers in current projects, since the Authority has already taken its development share, but it is the easiest and most viable LEGAL solution for the NA to do this "vasuli". Remember in BBA agreements that "all government charges which may change will have to be bourne by the buyer" in different languages but crertainly in all agreements. This is an enforceable clause and cannot be disputed with. Some builders oversmart lawyers went to the extent of including the farmers compensation clause also in the BBA, but that clause is not legal and enforceable.

            So, just be ready to shred considerable amount of extra money for your purchases! Here, don't go by the calculations of Gurgaon. Percentage in the existing cases will be different and in the cases of the future acquisitions, it will be different. Noida Authority will attempt to squeeze the all losses through current buyers only. Be ready to pay an extra 20 - 25% in your current projects.

            Those who have already bought are trapped, they cannot escape. Future buyers (only when EDC enforces officially) in NOIDA will have an advantage, any can get the deals at less than what the current buyer will pay, since builders may have to adjust the rates as per market forces. (I wouldn't buy an underconstruction property in NOIDA by an average builder at the rate of 3400 + 800 EDC, I just can find a decent accomodation at that price in Gurgaon, which now looks heaven after experiencing NOIDA).

            Wish all current Noida buyers and investors a good luck, and that includes me too!

            You must be kidding if you really meant this EDC (to the tune of ~800), will be charged to existing buyers as well!!!

            Say at 2000-3000 psf, flat cost would be say ranging anywhere from 30L - 80L (I'm just focussing on major chunk). Now these amounts have got approved by Banks for financing, considering all incomes of an individual and in most cases, would stretch to maximum eligibility...

            Now if suddenly the flat cost increases by 25%, Bank will not fund due to eligibility issues...salaried class buyers cannot arrange these huge funds frm elsewhere...Investors cannot exit bcz no end user for same property at 125%....whole of financial system for atleast 50,000 - 70,000 families+ will get CRASH...and that's NOT a small number!

            Situation is much more complicated than it seems...it will be partly funded by BMW party's black money (its to save elections after all)...partly by lease rent collected by NA...partly by builder cutting the margins...I don't see the possibility of any charges coming to existing buyers directly...though quality can be compromised because of builder margin impact.

            Comment

            • #7

              #7

              Re : NOIDA's NEW SWORD: EDC

              Comment

              • #8

                #8

                Re : NOIDA's NEW SWORD: EDC

                One possible solution is authority may increase FAR to help Builders to pay extra money to farmers.
                NO RISK NO GAIN

                Comment

                • #9

                  #9

                  Re : NOIDA's NEW SWORD: EDC

                  Vkumar: Looks quite logical.

                  If for the flat/plot, registry is done or going to be done soon, will they also be affected. Like i have a auth built up house which is readu for regisrty/lease deed and stamp paper etc. If i do it now, can this stuff still affect me in a letr stage.

                  So basic question lies that f the registry/lease deed is done can this still be added.

                  Comment

                  • #10

                    #10

                    Re : NOIDA's NEW SWORD: EDC

                    Originally posted by ca.anurag View Post
                    You must be kidding if you really meant this EDC (to the tune of ~800), will be charged to existing buyers as well!!!

                    Say at 2000-3000 psf, flat cost would be say ranging anywhere from 30L - 80L (I'm just focussing on major chunk). Now these amounts have got approved by Banks for financing, considering all incomes of an individual and in most cases, would stretch to maximum eligibility...

                    Now if suddenly the flat cost increases by 25%, Bank will not fund due to eligibility issues...salaried class buyers cannot arrange these huge funds frm elsewhere...Investors cannot exit bcz no end user for same property at 125%....whole of financial system for atleast 50,000 - 70,000 families+ will get CRASH...and that's NOT a small number!

                    Situation is much more complicated than it seems...it will be partly funded by BMW party's black money (its to save elections after all)...partly by lease rent collected by NA...partly by builder cutting the margins...I don't see the possibility of any charges coming to existing buyers directly...though quality can be compromised because of builder margin impact.
                    Mayawati parting with her money to pay farmers? Buddy dont you think it's the opposite of whats been happening.

                    I think that if farmers are paid additional compensation then current buyers will have to foot a good part of that bill. Thats how India works. Agreed that a 30% jump in prices may not be possible, but a 200-300 EDC may be a reality in the making. Lets wait and watch.

                    Comment

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