Banks to earn Rs 475 cr from DDA housing scheme charges

The Delhi Development Authority (DDA), advertised in newspaper about the sale of about 5,000 flats in the city. By inviting the applications for the flat DDA is going to make a big earning of about Rs 4.5 lakh per flat as interest on the money it collects as refundable registration fee.

The seven banks, who are mediating the scheme, are expected to collect in about Rs 250 crore by financing the applications.

The DDA is gathering an amount of over Rs 9,000 crore collected from more than 600,000 applicants who have submitted their forms along with the registration fee of Rs 1.5 lakh.

By the last date September 16 it is expected to puff up considerably. Approximately DDA will be taking three months to take out the computerized draw for the allotment of the flats, till that period money is going to remain with the authority on which it will be earning an interest of 10 per cent before refunding the money to the unsuccessful applicants, which means it would be richer by at least Rs 225 crore. This money will remain with the DDA for three months — the approximate time the authority will take for the allotment of the flats through a computerized draw.

This is going to add an extra earning of at least Rs 4.5 lakh per flat as interest on the registration amount, which is kept with the banks that are collecting the applications. If the rate of interest is 9 per cent, the DDA will be earning an extra profit of around Rs 4 lakh per flat.

The DDA has plans to use this money to buy land for low-income group housing schemes. “That’s the model we follow. The money from the registration fees will be used to buy land to build houses for low-income groups,” said DDA spokesperson Nimo Dhar.

The DDA has announced sale of freehold flats in various localities which are aimed to cater to the aam aadmi. The flats have been priced much below the market rates, creating a huge rush of applicants. The lower price tags of the flats clearly show that the DDA is a not-for-profit developer. “We are a no-profit-no-loss organization,” the spokesperson added.

Ramesh S Singh, additional general manager of Central Bank of India, one of the seven banks mediating for the housing scheme, said the response has been tremendous.

“Real estate prices are shooting up and many people find it beyond their means to buy residences built by private players. For this section, especially the middle class, DDA flats are the best option.” Singh says this time people are showing more interest in the scheme than in a similar scheme in 2004.

The scheme has come up at a time when housing loans have gone up as a result of the central bank raising the repo rate and the cash-reserve ratio to control inflation. The premium flats have become even dearer therefore more and more people are trying their luck in this category.

The huge demand for these DDA flats has turned into a risk-free business opportunity for the seven banks — State Bank of India, Central Bank of India, Union Bank of India, IDBI Bank, ICICI Bank, HDFC Bank and Axis Bank — who are mediating the DDA housing scheme.