New Delhi: Clause for project developers to submit a bank guarantee was canceled by the CEO of Noida Authority in 2006 without receiving approval from the council, CAG has observed in his report submitted on Friday.
The decline in this clause for an escrow account, it is intended to protect the interests of the Noida Authority against failed developers and repetitions, causing piling up, national auditors have said in the first comprehensive performance audit of the Noida Authority.
“Note supervision revealed that the fact of the removal of the Bank’s warranty clause from the condition of the brochure was not delivered for the consideration of the Noida Board because the further brochure was not installed on the board for approval and after that it had been included.
In fact, nine brochures were even not placed on the board for approval and since then And then the clause has not been entered, “said the CAG report.
Brochures for the Ekspres City scheme (March 2006) stated that allottee had to provide bank guarantees from a nationalized bank equivalent to one installment along with interest on or before the implementation of rent and renewable until all contributions were cleared.
The audit observed that Noida authorities exclude the condition of the Escrow account in all brochures from May 2006 and so on.
The 8.5 clause of the brochure for the Express City provided that the developer will open an escrow account in a nationalized bank where all the inflows and the realization of the sale / subsption of plots, buildings and facilities will be saved.
The accumulated funds in this account must be used for project development and accounts must be operated until the developer fulfills all payment obligations.
CAG noted that as an instrument to protect the interests of authority on the payment of contributions by the developer and ensure that the funds collected from buyers spent on the project, the Escrow account is a reliable provision.
CAG also shows that even after the enactment of the Real Estate Law (Rules and Development), 2016, which sets a separate account, an escrow account is not reintroduced in the scheme.
Reply Noida authorities, citing the economic slowdown for relaxation, not impressive CAG.
“The reply was unacceptable considering the fact that there was no evidence of a global economic recession during 2006 when the clause was expelled from the brochure.
The answer also did not discuss the issue of the elimination of the clause without getting the approval of the council.
In addition, in the outgoing conference (September 2020) the government received audit observation and agree to reintroduce and enforce the provisions for bank guarantees, “said the auditor.
The audit also showed noida authorities unilaterally decided to provide further assistance in 2009 by reducing payment for allotment.
“This reduction reduces allottee financial commitments and results in builders to collect more quota because builders enjoy greater leverage to get a larger plot and to take loans from the bank on the back of a smaller advance amount,” said the report said.
CAG shows that file supervision reveals that regardless of the economic slowdown quoted for relaxation, the builder really demands a larger plot.
“This unreasonable Noida action has resulted in an undue assistance to builders on the one hand and increases the extraordinary contributions of Noida on the other because of delay (20% in connection with the plot given in 2008 and 30% in connection with the plots allocated during 2009) premium With Rs 2,664.96 Crore for a period of 10 years in 49 cases.
“This has a negative impact on Liquidity Noida when the builder fails in payment, adds to the non-recovery position.
Like the date (March 31 2020) the amount that is due to the builder, which extended this facility, is Rs 9,864.87 Crore, “said the report.
In the scheme launched during 2006-07 by Noida authorities, the provisions in the brochure require that the deed Rent from the plot can only be run after a minimum payment of 40% of premium land.
This was reduced to 20% from 2008-09.
In the 161rd Board Meeting (May 28, 2009), a decision was taken to further reduce the amount to be saved by Allottee 10% of the land premium and apply to the scheme launched afterwards.