News: GMDA revises EDC payment schedule to help builders tide over post-Covid slump-27-01-2021
With real estate industry being in a state of downturn ever since the outbreak of Covid-19 pandemic, the Gurugram Metropolitan Development Authority’s (GMDA) collection of external development charges (EDC) has taken a significant hit, show official records
With real estate industry being in a state of downturn ever since the outbreak of Covid-19 pandemic, the Gurugram Metropolitan Development Authority’s (GMDA) collection of external development charges (EDC) has taken a significant hit, show official records. In order to tide over the crisis, the authority has recently restructured its EDC payment schedule, allowing developers to pay their dues in installments and offering discounts to those who clear their outstanding dues in one go.
As per the GMDA’s statement of income for the ongoing financial year, the authority has collected only ₹88.5 crore in EDC from developers as of December 2020. In comparison, EDC collection for the financial year ending in March 2020 stood at over ₹20 crore.
EDC refers to the money that private developers pay to the government when developing new real estate projects. These funds are utilised by urban local bodies to develop public amenities for the project’s benefit, such as roads, water, power, sewerage and drainage. The quantum of EDC is decided by relevant local authorities, such as the GMDA or the department of town and country planning (DTCP), and then typically passed on to property buyers by the developer.
The fall in EDC collection post Covid-19 is likely to compound the GMDA’s financial constraints, at a time when the estimated deficit in EDC in Gurugram runs into thousands of crores. While official figures are not in the public domain, chief minister Manohar Lal Khattar, speaking at a public event in July last year, estimated that nearly ₹12,000 crore in EDC dues are pending in both Gurugram and Faridabad.
A senior official in the GMDA’s urban planning department, seeking anonymity, said, “More than half of this amount is yet to be collected from projects in the city. Builders claim they are unable to pay because inventory just isn’t moving. People aren’t investing in property right now.” The official also added that this will affect the development of future public amenities as well.
“Take the Southern Peripheral Road revamp for example. A large part of the project is to be funded from earlier EDC receipts, which have not yet been received. So that area still suffers from bad roads and poor drainage. A lot of developing neighbourhoods, especially in sectors 58 to 115, wouldn’t have be facing constant issues with power water supply if EDC collection was done in a streamlined manner,” the official said.
In response, the GMDA has now restructured its EDC payment schedule for projects requiring a change of land use (CLU) licences. The new system, officials said, will help builders tide over the current market slump, while allowing the GMDA to recover a larger portion of EDC dues up front.
The GMDA had first restructured it’s EDC payment schedule in August 2019, during the tenure of its former CEO V Umashankar. At the time, from recovering just 10% of the EDC from developers before granting occupancy certificates (OC), the schedule was revised to collect 10% of dues at the time of issuing the change of land use (CLU) permits. Another 40% was collected at the time of approving the developer’s building plan, and 50% at the time of providing the project’s occupancy certificate.
However, in its last meeting on December 8, 2020, the GMDA decided to revise this schedule in view of the “post-Covid” situation. Accordingly, the GMDA will now collect 20% of EDC at the time of granting CLU, while another 40% will be collected during the approval of building plans. Of this second tranche, developers will be required to pay only half the amount up front, while the remainder can be paid in equal installments over a period of one year.
The third tranche of 40%, payable at the time of applying for OC, can also be paid in similar installments — half at the time of application, with two more equal installments to be paid over one year. This is at the condition of a bank guarantee submitted by the developer.
The GMDA’s interest rates for each installment have been decided at 12% per annum, with an additional 3% “penal interest” to be levied on defaulters. In case developers choose to clear their outstanding dues in one go, they will be given an “incentive discount” of 10%. Builders who have already been granted CLU licences (vis-a-viz the previous payment schedule) will be required to clear 20% of their EDC dues in the next 30 days, and will be allowed to pay the remaining 80% in four equal installments over two years.
Though he did not comment on the total quantum of EDC dues owed to the GMDA, CEO VS Kundu admitted to a significant shortfall in EDC receipts. “Out of the ₹1,000 crore expenditure to be funded out of EDC in the ongoing financial year, only ₹170 crore was received, of which ₹50 crore was given to the GMDA and ₹120 crore to the National Highways Authority of India. The budget for the next year is yet to be drawn up,” Kundu said.
As per the last available data, obtained from the GMDA in 2019 via an RTI request, the total EDC amount yet to be collected by the GMDA stood at ₹7,549 crore in March 2019 — up from ₹3,247 crore in 2014.
