What Are External Development Charges: Find Out?

External development charges are a term that you should know more about, in case you are a homebuyer or developer. What are they all about? The RERA Act of 2016 highlighted these charges for external and infrastructural development that are payable by homebuyers based on their construction and apartment sizes. Developers are also mandated to ensure public facilities across their housing projects. They pay EDCs (external development charges) for this purpose to municipal authorities. Buyers have to pay varying charges with the rates (per square foot) for their properties. 

Why are External Development Charges Levied? 

These charges are paid by developers upon beginning any new project and also during any modification to an existing structure. These standard charges are collected by the Government authorities for funding several infrastructural projects including improving sewage and water supply systems, building or improving roads, parks and public amenities, drainage systems, and so on. The charges are levied to ensure better civic infrastructure and surroundings for a better lifestyle. 

What is the Impact of External Development Charges? 

The impact of external development charges can be classified as the following: 

• The EDC may impact the total pricing of the property since it is passed onto customers. 
• This leads to an increase in the property prices and impacts overall affordability levels. 
• EDC charges vary across areas and projects while also impacting buyer decisions due to the increased costs. 

What do External Development Charges Contain? 

Here are the key components of external development charges: 

• Road Development Costs- These are used for building or improving roads along with overall transportation systems. The funds are also used to widen roads and enhance intersections along with taking care of other vital tasks. 
• Environmental Costs- These charges may be levied for conservation initiatives like biodiversity conversation, afforestation, pollution control, and other projects. 
• Infrastructure and Society Development Costs- These are charges imposed for contributions to community and social infrastructure development including healthcare centres, schools and community centres among other amenities. 
• Park and Open Area Charges- The authorities allocate these funds for improving public playgrounds, open spaces and parks within their jurisdictions. These funds also contribute towards landscaping, land acquisition, creating new amenities and recreational infrastructure development. 
• Sewerage and Water Supply Charges- These cover the maintenance costs of water supply and sewerage facilities along with further construction or expansion whenever needed. They also help fund drinking water and water treatment plants along with distribution network enhancements. 
• Drainage Management Charges- These funds are allocated for building or maintaining sewerage systems in various areas. This includes building ditches, drains, ponds and more. The funds are also used for managing and controlling the overall flow of water. 

What happens if External Development Charges are not paid? 

If these charges are not paid by the developer, then it may lead to the following consequences: 

• Legal disputes amongst property stakeholders like Government agencies, developers and buyers. 
• Occupancy certificates and other permits may be denied due to non-payment, thereby impacting property sales considerably. 
• Legal action aside, penalties and fines may also be imposed due to the non-payment of external development charges. 
• The reputation of the developer and project may be affected negatively in such scenarios along with exclusion from Government benefits. 
• Non-payment may also lead to sizable delays in project approvals. 

These are some of the basic details of external development charges (EDCs). They are different from internal development charges (IDCs) which are for recovering the costs of internal infrastructure facilities within the boundaries of the housing project. The latter funds the amenities used only by the residents of the project and are calculated on the basis of the per-unit area of the project. IDC fees are charged for developing roads and sewerage facilities in the project along with building internal roads. They are mostly included in the overall budget for the project. 

Knowing more about the EDC and non-payment implications is essential for not just property buyers but also real estate developers. They should comply with the payment regulations in order to complete projects in a timely manner without any delays in obtaining clearances and other official permits. This is something that should not be neglected by the developer.