CAG report: Why the housing dream turned sour for buyers in Noida

NOIDA: The Comptroller and Auditor General (CAG) has drawn up a comprehensive map of all
that’s wrong with Noida’s prized real estate scheme – group housing societies. The legacy of
years of lapses and gaps in allotment procedures is the severe distress that homebuyers now
find themselves in.
Out of a total 113 projects that were initiated in the period under audit (2005-06 to 2017-18),
only 63% (71) were either completed or partially completed, the CAG said. And out of the 1.3
lakh sanctioned flats, occupancy certificates have been issued for just 44%.
Though in terms of growth, the 2009 to 2011 period was the best for real estate developers in
the city, this was the time things went south for buyers as the Noida Authority eased financial
eligibility criteria while allocating plots for group housing, but at the same time, started offering
bigger plots.
Having tweaked its rules so that allottees had to pay less upfront payment, citing recession in
the western world, the Noida Authority started accepting bids from companies that had lower net
worth. As a result, a plot valuing about Rs 500 crore was being offered to a company with a net
worth of Rs 75 crore for an upfront payment of Rs 50 crore. The CAG report points out builders
with limited financial capability were able to corner larger plots, one of the main reasons for a
large number of housing projects running years behind schedule.
Originally, the Noida Authority used to take 30% of the land premium upfront, the rules were
revised during 2009-2011 with land being allocated on payment of just 10% of the premium. The
remaining 20% was demanded within 60 days of the allotment. The CAG report highlights a
case of allotment that was done in April 2007. Despite not making a payment beyond 30% for
more than four years, the Noida Authority did not take any penal action against the allottee apart
from issuing notices, thus condoning the action of such builders.
A clause to allow the exit of the lead member was also introduced by reducing its shareholding
from 51% to 26%. The change in rule allowed small players to take over the big land parcels
that had been given based on participation of the lead member. The CAG has asked the state
government to take strict action against the Plot Allotment Committee (PAC), a team of senior
authority officials who vetted the applications of the builder and recommended allotment of
group housing plots. The PAC comprised the officer on special duty, AGM (group housing),
finance controller, chief project engineer, chief architect planner, chief legal advisor and
administrative officer.
The CAG also explained how allowing sub-division of plots contributed to the group housing
mess by leaving large land parcels in the hand of players who did not have the capability of
executing the project.
The auditor noted that sub-division of plots was allowed as a one-time relief measure during the
recession for allottees in financial trouble up to March 2011. However, the Noida Authority CEO
“embedded the one-time concession… as a permanent feature by incorporating it in its
brochures commencing November 2009 and benefitting not just existing allottees encountering
difficulties but also all prospective allottees”, the audit report said.
The report also observed that the Noida Authority made multiple allotments to group companies
of Amrapali and Unitech “who were in default in payment of dues for earlier allotments which
amounted to Rs 9,828.49 crore as of March 31, 2020”, the auditor said. Both Amrapali and
Unitech have a large pendency of flats, which have required the Supreme Court’s intervention.