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What’s in store for Noida Ext investors

What’s in store for Noida Ext investors
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First Published: Fri, Jul 15 2011. 01 21 AM IST

Updated: Fri, Jul 15 2011. 10 34 AM IST
Delhi-based Mitin Raj Singh, who works at a multinational software services firm in Delhi, was very happy when he booked a spacious flat in Noida Extension. Offering good connectivity to Delhi, Noida as well as Ghaziabad, the project suited him as it fit into his budget. Little did he know then that flat No. 602, tower No. E4, in Supertech Ltd’s Ecovillage 2 would become part of a larger Indian story of court activism and his plans would need to change within four months of booking.
The land on which the project was to come up was allegedly illegally acquired from farmers. The matter went to court and the Supreme Court (SC) ruled in the favour of farmers.
While the farmers got their land back, the homebuyers who had booked flats in the projects coming up in the area got a rude shock. Though the SC has taken steps to salvage the situation for the investors by asking developers on Tuesday to refund (with interest) or shift them in another project, many find their plans toppled.
Court activism
The SC on 6 July upheld the Allahabad high court (HC) ruling. The apex court also imposed Rs 10 lakh as penalty on the Greater Noida Industrial Development Authority and directed it to hand over the land to the villagers and farmers.
The Allahabad HC had cancelled land allotment to six builders by the Greater Noida Authority in Shahberi village. A bench of justices G.S. Singhvi and A.K. Ganguly had said the state government had indulged in mala fide use of its powers for “urgent” land acquisition to benefit developers rather than serving any public purpose. It had said that land acquisition was a “colourable exercise of executive power” unsustainable under the Land Acquisition Act.
Who’s affected
Around 6,500 homebuyers have been affected due to the judgement across five projects—Amrapali Group, Panchsheel Buildtech Pvt. Ltd, Supertech Ltd, Mahagun India Pvt. Ltd and Gulshan Homz.
About 5 acres of the 20-acre Panchsheel Greens, a residential project, has been affected. It was developing 400 units. Similarly, about 15 acres of land in the 40-acre project by Amrapali has taken a hit. Supertech Ltd’s Ecovillage 2 and Mahagun’s Mywoods Phase II have also been affected.
Noida Extension is made up of 13 villages, including Shahberi. The total land allotted to builders in Noida Extension is around 2,200 acres. Shahberi constitutes a small portion of the total land.
Due to the cancellation of land acquisition in Shahberi village, around half a dozen projects, coming up on around 200 acres of land, have been hit. Though the total area in the village is around 400 acres, developers were allotted around 200 acres. The remaining 200 acres was used for developing infrastructure such as roads and the sewer system in the region.
The background
The story and history of Noida Extension is a classic example of a marketing gimmick. After 2009, while areas in Delhi-NCR such as Gurgaon, Dwarka and Noida have been offering apartments at an average basic rate of Rs 5,500, Rs 5,000 and Rs 3,500 per sq. ft, respectively, Noida Extension has been attracting homebuyers because of the price advantage it offers.
Since January last year, the area has witnessed entry of small and mid-size developers offering apartments in the range of Rs 1,600 per sq. ft to Rs 1,900 per sq. ft. Developers such as Amrapali Group and Supertech Ltd were one of the first developers to announce their projects in the affordable category, attracting many buyers.
Since Greater Noida is still considered out of bounds, developers coined the term, “Noida Extension” to sell their projects. Noida Extension and Greater Noida together have roughly 250,000 proposed apartments that are already under construction or have been recently announced.
Out of the proposed supply of 250,000 units, around 100,000 have already been sold, according to the Confederation of Real Estate Developers’ Association of India (Credai), Western UP.
Slow response from developers initially
Though the sales pitch was shrill, the response to the crisis by most developers has been nothing but lackadaisical. What’s more, even though a court case was on builders kept roping in new buyers without informing about the ongoing case.
For instance, when Singh booked his flat, the case was in the Allahabad HC but he had no idea about that. It was only after the SC judgement that he realized there was a problem. “I wish I had come to know about the court case in April itself; I would not have thought of investing in this project then,” says Singh.
Even after the ruling came, buyers were left in the lurch and didn’t know what to do. “My case was brokered by Noida-based firm, Investor’s Clinic. After repeated calls and emails to the developer as well as the brokerage firm, company officials finally informed me that the tower in which I had booked my flat is affected by the ruling.”
In fact, in a conference organized by Credai on Thursday, in which all the affected developers participated, except Gulshan Homz, it was announced that letters will be formally sent to all the buyers in the next 10 days. This letter will contain official information about the refund or the shifting options.
Who is giving what
It has taken a crisis for the buyers to find out how good the builder is. The reaction of various builders who are caught on the wrong foot by this judgement shows their levels of concern for homebuyers. Your status or compensation will depend on the builder with which you booked your flat.
While some real estate firms such as Amrapali, Supertech, Mahagun and Panchsheel have been quick in reaching out to customers, some others such as Gulshan Homz have been slow to respond.
Amrapali: This group is the first among the six developers to shift around 3,000 homebuyers from its residential project, Smart City, in the region to another project, Dream Valley, situated in Greater Noida at the same price. The company has also given a refund to about 200 homebuyers.
Delhi-based businessman Mukesh Giri is one such homebuyer who has opted to shift to Dream Valley project. He says, “The company was prompt in informing us. I had invested in an 805 sq. ft apartment. The new apartment is slightly bigger, around 1,048 sq ft. It’s working out to be a good deal for me.” The extra area comes at the rate he was charged for his 805 sq. ft apartment.
Says Amrapali Group chairman and managing director Anil Sharma, “Nobody in the real estate market will want his buyers to exit the project. Developers will in fact focus on implementing their projects in the region.”
Supertech: “The company will contact the affected buyers formally offering them options to exit with their refund or to remain invested with the company in a second project of their own choice. Under this, buyers will have the option to shift to other projects of Ecovillage (phase I and III, which are not affected) or to some other projects of their choice,” says Supertech’s chairman and managing director R.K. Arora.
Supertech has at least 10 projects in Noida and Greater Noida. “Depending on the buyer’s preference, he can make a shift to our other projects,” adds Arora. However, he did not say anything about the extra charges that a buyer may need to pay depending upon the new area.
Panchsheel: This developer has offered its 124 buyers to shift to its other projects in Noida Extension, Hynish and Panchsheel Greens 2. Says Anuj Chaudhary, director, Panchsheel, “We have offered our 124 buyers exit as well as shift options.”
Buyers of Panchsheel Greens will have to pay extra if they shift to another apartment that has bigger area, adds Chaudhary.
Mahagun: Mahagun Myra was launched in April and no work has started as yet on the project. It had only 75 villas and therefore as many investors. They are offering a refund and are also willing to shift buyers to another project in the same area, Mywoods Phase I, which consists of apartments. They are willing to refund money in case of shifts to cheaper apartments.
“However, whether the refund will be paid as a lump sum or adjusted in future payments by buyers will depend from case to case,” says Dhiraj Jain, director, Mahagun India.
Gulshan Homz: The developer didn’t respond despite repeated calls. It didn’t even participate in the Credai conference on Thursday.
How much is the refund
In the Credai conference, builders said homebuyers would get back all their money, including costs incurred as home loan interest payments. Builders said they were sitting on a loss of about Rs 500-600 crore due to the SC order.
Around 500 applications for refund have been received by the developers so far. However, there is no deadline yet on when the refund will come.
Other projects in Noida Extension
Ajnara India Ltd did not have a project Shahberi village, but it is coming up with two projects in Noida Extension—Ajnara Homes and Ajnara Le Garden Villas—that fall in the domain of other villages. But the land on which these projects are coming up is locked in court battles.
Vineet Sharma, vice-president (marketing), Ajnara, who attended the Credai conference, said, “We will wait till any court order comes. It may or may not be in favour of the buyers and the company. Depending on that, we will inform our buyers.”
What should you do
So does it make sense for you to remain invested with the builder and shift to another project or exit by taking the refund along with the interest?
Refund: If you opt for this, it would typically mean you invest in another flat and area of your choice. Says Shveta Jain, director, residential services, Cushman and Wakefield India, a property consultant firm, “People can look at other alternatives if they do not want to stay in Noida Extension anymore. Developed sectors of Greater Noida and neighbouring Ghaziabad offer good options in the same range.”
Shifting: There are three things you must consider before shifting—cost, location and possession date.
The apartment to which the builder shifts you may be bigger but it will come at an extra cost though at the same rate. Typically the per sq. ft rate of flats is more for a larger-sized flat. For instance, Giri got his 805 sq. ft area at the rate of Rs 1,890 per sq. ft. For the 243 sq. ft extra that he is getting in the new flat his builder has shifted him to, he is being charged at the same rate even though for normal buyers the bigger flat is available at around 3,400 sq. ft.
But don’t base your decision just on the price factor, consider the location too. Says Jain, “Shifting to another project depends a lot on the location of the project. People can look at other alternate options if they do not want to stay in Noida Extension anymore. Places like Greater Noida and neighbouring Ghaziabad offer good options in the same range.”
In fact, with a few other court cases still going on in the Noida Extension area, many think it is advisable to move out of the region completely. Says Pradeep Mishra, a Delhi-based real estate consultant, “If you shift to another project located in Noida Extension, be careful as you may end up getting stuck in another project. There are other cases filed by other villagers that are still pending before the courts.”
Another thing you should look at is whether the possession date will get delayed. If the builder shifts you to a newer project than the one you were originally booked for, your possession date will get pushed that much further.
The last word: If you are being shifted by your developer or even if you are a new homebuyer, stay away from Noida Extension as of now or do your due diligence before finalizing a deal.
Graphics by Yogesh Kumar/Mint
devesh@livemint.com
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First Published: Fri, Jul 15 2011. 01 21 AM IST