Real estate developers in Noida and Greater Noida have strongly opposed the local body’s new mandate of registration of builder-buyer agreements after payment of 10% of the price of the residential property.

The mandate requires homebuyers to pay 6% stamp duty on payment of 10% of the total cost of the house, which, according to developers, will spell financial burden for buyers.

“This would not be a favourable practice, as it imposes an unnecessary financial burden on buyers, who already have to arrange a significant amount at the time of booking,” said Manoj Gaur, chairman of the Confederation of Real Estate Developers' Associations of India. “In other states, the sale agreement is processed on a nominal stamp paper valued between Rs 1,000 and Rs 10,000, which is not the case here. The proposed 1% non-refundable registration fee that is part of the provision is also a direct loss for buyers.”

Developers said the lack of clarity on the refund policy in case of cancellation had added to the unease. Usually, 15-20% of bookings in residential real estate projects are cancelled due to various reasons, which is also recognised by the Real Estate Regulatory Authority.

“However, the new rule will cause a huge dent in finance for buyers seeking to cancel their booking as they are already burdened by unforeseen circumstances. The sector is of the view that the present provision would significantly deter the sector in Noida, Greater Noida, Yamuna Expressway and, in fact, the entire state, where real estate has emerged as a prominent part of the state economy,” said Gaur, who is also the chairman of Gaurs Group.

The National Real Estate Development Council (NAREDCO) also expressed concern over the order.

“Authorities have taken this decision unilaterally without taking into confidence the developers and the homebuyers who are the main stakeholders in the process. This would be a serious setback for the new homebuyers and would badly impact the financials of the sector in which a large number of projects are trying to come out of the liquidity crisis,” said RK Arora, president of NAREDCO-UP.

NAREDCO has appealed to Noida and Greater Noida Authority not to implement this decision as it would badly impact the efforts of the real estate sector to complete the projects and give delivery of flats to homebuyers.

Additionally, as per the order, buyers will have to pay 1% of the property value as registration charge for completing the paperwork in Noida and Greater Noida.

Currently, buyers and builders enter into an initial agreement on a Rs 100 stamp paper, and the authority enters the scene only after the developer has obtained an occupancy certificate and completion certificate for the project.

“We believe this new mandate by Noida-Greater Noida authorities may create a significant financial strain for homebuyers in Uttar Pradesh. Paying a 6% stamp duty to the government at the agreement signing stage adds to the already high initial costs that buyers face when booking a property. This makes homebuying harder and more expensive for buyers, especially those in the middle-income bracket,” said Sanjay Sharma, director, SKA Group.

Under the old norms, buyers signed an unregistered agreement to sale with the developer for a unit without payment of any stamp duty on the total cost of the builder-buyer agreement. They paid 5-7% of the total property cost as stamp duty charges when the flat was ready to move in and the registry was executed.