The Noida Authority has taken a firm stance in response to concerns of non-compliance with previous directives and potential fund diversions by developers involved in delayed under-construction projects. Over 50 developers have received a mandate to establish individual escrow accounts for each project experiencing delays, with a strict deadline set for August 26. Failure to meet this requirement could result in penalties, as disclosed by officials familiar with the matter.
As the body responsible for the development and upkeep of the Delhi satellite city, the Noida Authority had issued guidelines in June of this year, outlining the necessity of creating jointly managed escrow accounts. These accounts would be overseen collaboratively by the developer and the authority, specifically for projects encountering delays. However, compliance with these guidelines has been limited, with only a handful of developers adhering to the mandate thus far.
Merely six developers have successfully established escrow accounts for their respective projects. Responding to the evident lack of adherence, Lokesh M, CEO of the Noida Authority, recently convened a meeting with real estate developers. During this session, he delivered a stern warning of stringent measures if developers fail to set up escrow accounts for all their projects by August 26, 2023. This information was conveyed by a Noida Authority official speaking to Moneycontrol.
Roughly 59 promoters in Noida were instructed to establish escrow accounts. The Noida Authority is also actively pursuing the recovery of non-litigated builder dues, amounting to over Rs 7,000 crore, through the implementation of the escrow account mechanism. Presently, only six promoters have complied with the escrow account requirements for delayed projects. Officials emphasize that this initiative aims to prevent the potential misuse of funds by developers, thereby enhancing transparency and facilitating the recovery of dues.
While initiated back in 2018, the effective implementation of this scheme encountered obstacles. Officials have clarified that half of the total collections from a project should be directed into the escrow account. However, the precise amount will be determined on a case-by-case basis, considering outstanding project dues and the funds collected from homebuyers. During the developer meeting, the CEO also instructed officials to issue recovery certificates for developers who have failed to settle dues linked to the plots allocated to them. Furthermore, the CEO mandated the publication of debt-related information for each developer in newspapers and the installation of signage at project sites. These signs will outline the developers’ obligations to the authority, a step aimed at fostering accountability and transparency within the development process.
Also read: Builders Beware: Noida’s Escrow Accounts Aim to Curb Fund Misuse & Project Delays