Audit Shows Banks Going Cold Behind Noida Builders' Stuck Projects
An ongoing audit of real estate developers who have failed to meet the completion deadlines of their respective projects shows “diversion of funds” was not the reason behind their failure. The ongoing audit exercise by global consultancy Currie & Brown on behalf of the Noida Authority shows only two of 15 builders might have diverted money collected from buyers to employ it elsewhere. When a large number of homebuyers approached Uttar Pradesh Chief Minister Yogi Adityanath last year over delayed projects, most of them suspected fund diversion was the key reason behind developers failing to meet completion scheduled.
It is worth mentioning here that there are about 94 stuck residential projects in Noida, in which about 78,000 people have invested. These stuck projects are also costing the Noida Authority – the development body has not been able to recover Rs 11,000 crore the builders of these projects owe it.
On complaints of the homebuyers, CM Yogi in September last year directed the three development bodies in the region — the Noida Authority, the Greater Noida Authority and the Yamuna Expressway Industrial Development Authority — to audit the accounts of promoters who did not meet project deadlines. Subsequently, Currie & Brown was hired by the Noida Authority to audit the accounts of 51 developers in November last year. In the second phase of the auditing, the consultant found that only two of the 15 builders actually diverted money; the remaining could not complete project owing to different reasons.
A change of manner in which banks dealt with the sector has much to do with it, the audit reports points out. The ongoing slowdown in the sector made financial institutions wary of real estate developers. In turn, they stopped funding real estate projects. Green hurdles have also been a key reason behind stuck projects. Cases pending with the National Green Tribunal have been instrumental in delaying score of real estate projects. In the middle of all this, buyers stopping the EMI (equated monthly installment) payments made only matters worse for the already hard-pressed developers. Wary of the delay in getting possession of projects, several buyers stopped the monthly EMI payment as a form of agitation. Most of these buyers had invested their money in these projects owing to the affordability factors — the double pressure of paying rent and EMI for far longer a time than they expected made their investment anything but affordable.