Friday, September 27, 2013

External Development Charges (EDC)

Before we dwell upon what EDC is all about, there are a couple of institutions that we need to know a little about to understand the whole concept. Primary is, of course, the Town and Country Planning Haryana. This department is responsible to REGULATE the development and also to check the haphazard developments in and around towns in accordance with the provisions of the following statues:-

1. The Punjab Scheduled Roads and controlled Areas Restrictions of Unregulated Development Act,1963.
2. The Haryana Development and Regulations of Urban Areas Act, 1975.
3. The Punjab New (Capital) Periphery Control Act, 1952.

In order to involve the private sector in the process of urban development, the Department grants licenses to the private colonizers for the development of Residential, Commercial, Industrial and IT Park/Cyber Park Colonies in accordance with the provisions of the Haryana Development and Regulation of Urban Areas Act, 1975 and rules framed thereunder. On grant of license to the private colonizer the Directorate u/s 3 (3 (ii)) takes an undertaking from the colonizer to pay proportionate Development charges if the external development works as defined in clause (g) of section 2 are to be carried out by the Government or any other local authority.  This amount is on gross acre of the colony that the Colonizer intends to develop and construct and is fixed by the Directorate as per policy for the year of the license. That means in the Urban Estate of Sector-75-89 Faridabad, for year 2006 the rate was fixed as 94.94 lacs per gross acre. Therefore all licensee's of that calendar year would be charged the same rate for the same Urban Estate as per policy. Therefore this is the Govt. Agency/Body that issues license to the colonizer and charges the EDC on the Colonizer, who in turn is allowed to collect the same from its consumers/Home Buyers and Deposit the recovered amounts in the accounts of HUDA.

HUDA or Haryana Urban Development Authority is primarily engaged in the planned development of the Urban estates of the state. It undertakes development of land after the same has been acquired by the Govt. of Haryana through its Urban Estates Department for specific land usages, like residential, commercial and Industrial etc. in accordance with the provisions of the development plans of the particular area, which are prepared and published by the Director Town and Country Planning Haryana, in exercise of powers conferred by sub-section 7 of section 5 of The Punjab Scheduled Roads and controlled Areas Restrictions of Unregulated Development Act,1963. HUDA is empowered to acquire, sell and dispose off property, both movable and immovable and also to use this acquired land for residential, industrial, recreational and commercial purpose. HUDA, also carries out all EDC works through out the licensed areas granted to the Colonizers as per master plans prepared by Town and Country Planning Haryana. Further, HUDA makes available developed land to Haryana Housing Board and other bodies for providing houses to economically weaker sections of the society.

So it is clear that Town and Country Planning charges the EDC and HUDA collects the same to fulfill the objective of planned development of the urban estates. Therefore we shall now understand EDC. EDC or External Development Charges, is defined U/s 2(g) of The Haryana Development and Regulations of Urban Areas Act, 1975. It says, "External Development Works include water supply, sewerage, drains, necessary provisions of treatment and disposal of sewage, sullage and storm water, roads, electrical works, solid waste management and disposal, slaughter houses, colleges, hospitals, stadium/sports complex, fire stations, grid sub-stations etc. and any other work which the Director may specify to be executed in the periphery of or outside colony/area for the benefit of the colony/area".

Each Home Owner or intending home buyer has to pay his proportionate share of EDC demanded by the builder for the external development works that are carried out by the HUDA. The calculation is simple arithmetic. If we take above example then for a colony of the size of 10 acres the amount of EDC per gross acre @ 94.94 lacs per acre, equals to 9.494 crores. This amount the builder has to collect from all allottees. as per FAR for group housing scheme the colonizer, in 10 acres project can build an area 10 acres X 1.75 X 4046.86 X 10.76= 7,40,251 sq. ft. Therefore the builder can easily divide the total cost of 9.494 crore by the area that he can construct and sell to get the per square feet cost. Therefore 94940000/ 740251 = INR 128.25. ( for your builder calculation you need to check the actual FAR he is using , as this is the max permissible FAR and mostly builders are able to utilize some decimal points less then the max permissible). This is an Ideal situation but builders do not sell on FAR    calculations.. they have devised a devil in the name of SUPER AREA which according to their BUILDER BUYER Agreement is about 25-30% over and above the FAR Area, which invariably means, if more area is divisible by the total charge (EDC AMOUNT) then the per square feet cost would come down. In the case in hand, if area is increased by 30% , than the total area would jump to 9,62,326 lac sq.ft., thus EDC now would amount to 94940000/962326= INR 98.70 Approx. per sq. ft. But what the Builder does in reality, he charges Rs150/- per square feet on super area which means a cool profit of Rs 41.30 per feet, which adds up to a humongous INR 3.97 crore, for entire 10 Acre project. Voila!! Isn't it fantastic that on a mere payment of 9 crore the builder has profited to the tune of approx 4 crores? Which other business would give you such super profits.. can not think of any other.

But the game does not stop here. Had it, we Indians would have been spared the trauma of living in un-developed/under-development urban estates of the state of Haryana.  The Builder even after over charging in the name of Govt. expenses does not pay the prescribed amount of EDC to the authorities within stipulated time schedule and the authorities who are supposed to REGULATE planned development easily turn a blind eye to this violation of bilateral agreement between self and builders, thereby allowing on one hand, easy back door liquidity to the builder ( who uses these amounts for other business purposes) and on the other hand sacrificing or defeating the purpose of planned development ( cause without funds authorities have easy escape route of deferring External development works) in the urban estates of Haryana. The builders generally pay EDC money, either at the time of renewal of license or when they need Occupation Certificate, which means only after three or four years of starting construction and collection of EDC amounts from home buyers.

This is a vicious cycle in which most Home Buyers in Haryana find themselves today. What can we, as consumers do, so that builders can not fleece higher then prescribed EDC from us? How can we find out what amount is demanded from Builder by the Authorities and how much he has paid after collecting from us? We can file RTI to the SPIO Branch accounts, C/o Directorate Town and Country planning Haryana, sector-18, Madhya Marg, Chandigarh, Haryana and get the required ledgers -  provided you have the license number of the colony.   But this will not help in controlling the overcharging by builder and non-payment, as no matter how many proofs you have for licensee's violations the department is hand in glove with the builder and would not take any action. Therefore, the only way this malpractice can be avoided is, if we as consumer groups pressurize the Director to formulate a policy wherein the Director at the time of issuance of License declares on its website along with other details, the total EDC payable on a particular license as well as the cost per flat that needs to be paid by the home buyer ( for all categories of flat the department is sanctioning the layout plan) and mandates the builder to furnish the information available on the departments website                              ( http://tcpharyana.gov.in ) to its consumers, who would be duty bound thereafter to pay  directly to the office of HUDA their respective share. This way the authorities would be able to collect EDC money faster and more importantly without delay and also the chance for over charging would be completely eliminated. I hope representation for such policy mechanism should come from each RWA and consumer groups so that Director General, Town and Country Planning Haryana makes such or any other better policy in this regard.

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