In a bid to seemingly boost its cash reserves, DLF, India’s largest real estate company, has requested the Haryana government to refund license fees worth Rs 235 crore for various commercial and residential projects in Gurgaon.
In two separate letters to the state government’s director of town and country planning department, DLF requested the authority to refund the license as well as the scrutiny fees for commercial and residential projects in various sectors of Gurgaon.
Developers usually acquire agricultural land from farmers and pay the government a conversion fee, or a fee for change of usage of land, and a license fee seeking permission to construct a commercial or residential project on the land. The government also charges a nominal scrutiny fee, which is a kind of a processing fee. The license fee is higher for commercial projects.
The Haryana government charges license fees of Rs 6.70 lakh per acre for group housing and Rs 2.15 crore for commercial projects with a floor area ratio (FAR or actual developable space) of 1.50 and Rs 2.70 crore per acre for FAR of 1.75, one of the highest such fees levied in the country.
DLF has sought refund for about 110 acre comprising 16 commercial projects in almost as many sectors, including 57 acre in sector 88 and 14 acre in sector 89. The company has sought complete or partial withdrawal of license fee in the scheduled projects.
Similarly, in another letter to the government, DLF has sought refund of license and scrutiny fees worth Rs 8.6 crore for multiple projects spread over 103 acre in Gurgaon. The company has not given any specific reason for withdrawal of license applications in either case, but only mentioned that the licenses were pending and were formally being withdrawn.
Even as realty players are struggling with a cash crunch, DLF chairman K P Singh on Tuesday said that the company faces no liquidity issues. However, he added that some projects have been deferred and some jobs cut due to weak demand. Seeking a refund of license fee is not an ordinary way of shoring up liquidity at any firm.
Changed usage of land and the license to construct a project on it is what differentiates raw land from development land. Development land fetches far higher value than a piece of agricultural land. In India, getting these licenses is a mammoth task.
Several multi-million dollar foreign investments, which came into the realty sector in the past few years, attached a huge premium to the land. Developers’ equity was mostly limited to the land. The ability to obtain licenses for construction in Indian is what put developers in a strong position vis-a-vis other investors, including private equity players.