What Are External Development Charges?

In a recent development, Haryana Urban Local Bodies Minister Kavita Jain directed officers to review the rates of the external development charges (EDC) in municipal-controlled areas of the state. According to the official, this would help put a check on unauthorised construction and generate revenue for development of the area.

"Unauthorised colonies exist due to high incidence of EDC rates. In order to put a check on these, the procedure for granting license for small colonies to be developed over 2.5 acres should be made simple and reasonable changes made in the EDC," Jain said.

So, what does a homebuyer need to know about EDC? Here is a lowdown.

What is an EDC?

The EDC is a charge a developer pays to the civic authorities for the maintenance of civic amenities. According to the Real Estate (Regulation & Development) Act, 2016, external development works include roads and road systems, landscaping, water supply, sewage and drainage systems, electricity supply, transformer, sub-station, solid-waste management and disposal or any other work that may have to be done within the periphery of, or outside a project for its benefit, as may be provided under the local laws. These charges are set by the civic authorities of a city.

A developer levies these charges on the homebuyer.

How much does a homebuyer have to pay?

An EDC is not a static charge but varies on the size of the apartment. On an average, a homebuyer has to shell up to 10 per cent of the base cost of the apartment they are buying.

When does the developer pay?

These development charges are generally levied on the developer at the time of granting development permissions. It is levied both on land area and built-up area.

What happens if there is a default?

While the developer deposits this money to the local authorities as EDC, there have been cases when the developers defaulted and did not do so. For this default, they have to pay a penalty, which they cannot pass on to the homebuyers. Hence, watch out your developer is not asking EDC beyond what you have already paid.

In case you want to be sure about the EDC rates in your area, visit the local town planning authority. Make sure your developer is not charging more than the rates set by the authorities.