Now, escrow accounts will be opened with the projects so as to ensure that developers use money received from homebuyers on building projects rather than using it to other projects or purposes. Such a step will win the trust of the homebuyers who at times stop paying the installments to the builders in the event of delay in delivery of flats. Moreover, these accounts will be managed by the builder and the authority. The term “Escrow” means the money taken by a third-party on part of transacting parties.
For more than 90 group housing projects, nearly 40 builders in Greater Noida have frozen the work in midway, claiming that they don’t have funds to carry out the constructions as stated by the officials. Interruption of work has hit nearly one lakh buyers.
Deepak Agarwal, chief executive officer of Greater Noida authority have said that many homebuyers have stopped their payment post realizing that the builders are not conducting the work as they think they have started to presume that if they pay the rest of the money, the developer will invest that money in some other project. But now, with the implementation of this account, the money can only be withdrawn with the consent of the authority.
Citing a slowdown in sales, many developers haven’t paid the Rs 2,600 crore land dues to the Greater Noida authority. Therefore, the authority has asked the builders to pay the land dues until 23 September 2016 failing which a strict legal action will be taken against them also including the cancellation of group housing plots. Those 2 to 3 new projects for which the construction is yet to begin will also come under the new scheme. Homebuyers have been asking for an escrow account since a long time but the builders and authority came up with it a bit late.
The chief executive officer also said that this is the right time because if a homeowner has paid the 95% of the total amount and only 5% is left to be paid the opening of escrow account will ensure that the builder uses it on the project and gives the project quickly. It will benefit to most of the projects that are at their end stage. Realtors’ body, CREDIA or Confederation of Real Estate Developers Association of India have reviewed the escrow account plan in particular with Greater Noida authority office in Chitvan Estate.
Post collecting the money from builders, it will be deposited in the escrow account and the authority will guarantee that 30% of it goes into paying land dues and the rest 70% is used for building the project.