Noida Authority Targets Recovery of Rs 7,000 Crore Dues with Escrow Accounts for Real Estate Developers

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    To safeguard against the diversion of funds and ensure timely payments, the Noida Authority has called upon real estate developers to jointly open escrow accounts. Officials familiar with the matter have revealed that this move is expected to aid in the collection of over Rs 7,000 crore in pending dues from builders. By implementing these accounts, both the builders and the Authority will have joint control, making it arduous for developers to redirect funds towards alternative projects or purposes.

    Instances of developers channeling funds into unrelated ventures have led to project delays in Noida, exacerbating their failure to meet land cost payments to the Authority. In light of this, Swatantra Kumar, Chief Finance Controller at the Noida Authority, emphasized that this initiative aims to discourage fund misuse, promote transparency, and ensure the retrieval of outstanding payments from developers. “In Noida, there are currently 59 promoters who are required to establish escrow accounts. The unpaid dues owed to the Authority by these builders surpass Rs 7,000 crore. Through this mechanism, we intend to recover these outstanding payments. Thus far, we have approved and processed escrow accounts for four promoters in the last 15 days. However, 55 others have yet to open these accounts, and we are exerting pressure on them to do so,” Kumar explained to Moneycontrol.

    Elaborating on the mechanics of the escrow account, Kumar highlighted that as per the terms, 50 percent of the total collections from a project must be deposited into this account. “For example, if a promoter accumulates Rs 100 crore from buyers in a project, then Rs 50 crore will be transferred to the escrow account, enabling us to collect our payment,” Kumar stated. The specific amount to be allocated to the escrow account will vary depending on the outstanding dues for a project and the expected funds from buyers, he added.

    Officials noted that a similar scheme was initiated in 2018, mandating developers to open escrow accounts to prevent the misuse of funds collected from homebuyers and minimize project delays. However, its effectiveness was limited. “Now, the Noida Authority has taken a firm stance on this issue, applying pressure on every promoter to establish an escrow account. Moreover, notices will be issued to promoters of delayed projects, urging them to open these accounts to ensure efficient project delivery and expedite the retrieval of outstanding payments,” Kumar affirmed.

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