Noida Authority to Issue Notices to Developers for Non-Compliance with Escrow Accounts

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    The Noida Authority is set to take action against developers of estate projects that have been plagued by delays and have failed to establish escrow accounts. This move aims to address the issue of pending dues, which could potentially amount to over Rs 7,000 crore, owed by builders, according to informed officials.

    The Noida Authority, responsible for the development and maintenance of the Delhi satellite city, had issued directives in June 2023, stipulating the requirement for developers to jointly manage escrow accounts with the authority for projects facing delays. However, only a handful of developers have adhered to this mandate thus far. It has come to the authority’s attention that there are approximately 60 builders with projects running significantly behind schedule.

    An official from the Noida Authority disclosed, “Out of the 59 promoters overseeing delayed projects in Noida, only 15 have taken the step of opening escrow accounts, leaving 44 who have yet to comply. We are exerting pressure on them to establish these accounts, as the authority is poised to initiate the issuance of notices.”

    In response to the alarming lack of compliance with this compulsory measure, Noida Authority CEO Lokesh M convened a meeting with real estate developers in the previous month. During the meeting, he cautioned them about the possibility of severe consequences if they failed to establish escrow accounts for each of their respective projects. The official noted that builder dues, which have not been subject to litigation, presently stand at over Rs 7,000 crore. The authority aims to recover this outstanding amount through the implementation of the escrow account mechanism. This initiative is primarily intended to deter the misappropriation of funds by developers. Since these accounts are jointly managed, it becomes considerably more challenging for developers to divert funds towards other projects or purposes. Authorities have cited numerous instances where developers redirected funds to different ventures, resulting in project delays in Noida and defaults on land cost payments to the authority.

    The terms of the arrangement dictate that 50 percent of the funds collected for a particular project must be deposited into the escrow account. However, the specific amount to be placed in these accounts will be determined on a case-by-case basis, contingent upon the outstanding dues associated with a project and the funds collected from buyers. Although this scheme was initiated in 2018, its effective implementation has remained a challenge.

    Also read: Noida Developers Must Establish Escrow Accounts for Delayed Projects by August 26 or Face Penalties

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