The Uttar Pradesh government has updated the guidelines for the allotment of commercial plots, aiming to enhance transparency and eliminate procedural irregularities, as published by The Economic Times.
The revised norms, issued on December 3, 2024, now require individual bidders, not just their holding companies, to independently meet key technical criteria, such as net worth, solvency, and turnover.
These changes come after a controversy surrounding the allotment of prime plots to two subsidiaries of the Gurgaon-based real estate company M3M, which sparked concerns about the fairness and competitiveness of the bidding process.
The new regulations are designed to address the issues highlighted by a controversial land allotment process involving Lavish Buildmart and Skyline Propcon—subsidiaries of M3M. In 2023, these companies were allotted commercial plots in Noida, but the process faced scrutiny after it was found that the firms did not meet the required eligibility criteria.
In November 2022, Lavish Buildmart was allocated a commercial plot worth Rs 827.4 crore in Sector 94, while Skyline Propcon received a plot valued at Rs 176.5 crore in Sector 72 in February 2023. Both companies, however, faced accusations of non-compliance with the eligibility terms outlined in the Uttar Pradesh Industrial Development Authority’s e-brochure for the scheme. Specifically, they failed to meet net worth and other technical qualifications, triggering questions about the fairness of the bidding process.
The controversy was further fueled by the fact that the companies’ bids were only slightly above the reserve price. In both cases, the bid prices were just Rs 5 lakh higher than the reserve price, leading to concerns about the lack of competitiveness in the allotment process.
The Uttar Pradesh Industrial Development Department, under Principal Secretary Anil Kumar Sagar, canceled the allotments to the two companies in May 2023. The department argued that the bids did not reflect a competitive market rate, and the process had failed to secure the best possible prices for the government.
In its decision, the government emphasized the importance of having competitive bids in land allotments to ensure fair pricing. The cancellation order also noted that while the Noida Authority had extended the tender date twice, the bid prices remained insufficiently competitive.
The revised guidelines also reflect recommendations from the Comptroller and Auditor General (CAG) of India, which flagged significant issues in the previous commercial land allotment scheme. The 2021 CAG performance audit report pointed out that the eligibility conditions were ambiguous, especially regarding the qualifications of holding companies and their subsidiaries.
According to the report, the commercial land allotment scheme’s brochure allowed holding companies to use their qualifications to meet the eligibility requirements of their subsidiaries, even when the subsidiaries themselves failed to meet the minimum criteria. The CAG identified this as a loophole that allowed for potential misinterpretations and irregularities in bid evaluations.
The updated guidelines, issued by the Uttar Pradesh government, introduce stricter eligibility conditions and clearer rules to ensure a more transparent and competitive bidding process. The primary changes are as follows:
Independent Criteria for Individual Bidders: The new norms mandate that individual bidders must meet the technical qualifications, including net worth, solvency, and turnover, independently from their holding companies. This ensures that the bidding process is fairer and that each company’s capabilities are properly evaluated.
Holding Companies and Subsidiaries: The revised guidelines clarify that in cases involving a consortium of holding and subsidiary companies, the qualifications of the holding company may be considered only if it owns 100% equity in the subsidiary. The holding company must retain this ownership throughout the duration of the project. This removes the ambiguity from the previous rules, which allowed holding companies to use their qualifications to support subsidiary bids, even if the subsidiaries did not meet the required standards.
Consortium Rules: The new regulations specify that for consortiums involving unrelated companies, the qualifications of those holding at least 26% equity will be considered. This ensures that consortium members have a meaningful stake in the project and are adequately qualified.
Noida Authority Implementation: The Noida Authority has been instructed to incorporate these new norms into all future land allotments. The updated guidelines are expected to make the government’s decision to revoke the land allotments for M3M’s subsidiaries more robust.
The revision of these guidelines signals a commitment by the Uttar Pradesh government to address issues of fairness and transparency in the land allocation process. By enforcing stricter eligibility criteria and clearer rules, the government aims to eliminate procedural irregularities that may have previously allowed non-compliant bidders to secure prime commercial plots.
The changes are expected to result in more competitive bidding for commercial plots in Uttar Pradesh, particularly in Noida, where significant commercial real estate developments are underway. By ensuring that only companies with the appropriate qualifications are able to participate, the government aims to foster a more transparent and efficient allocation system.
The cancellation of the land allotments to Lavish Buildmart and Skyline Propcon has set an important precedent for future land deals in Uttar Pradesh. The state government’s decision to cancel the allotments of M3M’s subsidiaries demonstrates a strong stance against irregularities and is likely to discourage non-competitive bids in the future.
This move also underscores the government’s efforts to align the land allotment process with best practices, ensuring that public assets are allocated in a manner that maximizes value and ensures fairness.
The revised guidelines represent a significant step forward in creating a more transparent and competitive commercial land allotment process in Uttar Pradesh. By clarifying eligibility criteria and eliminating ambiguities in the previous system, the state government aims to attract serious and qualified developers for future commercial real estate projects.
These changes will likely strengthen the integrity of the bidding process and improve the long-term sustainability of commercial land development in Noida and other regions of Uttar Pradesh. The updated guidelines will not only prevent procedural irregularities but also provide a clearer framework for companies seeking commercial plots in the state.
As the Noida Authority implements these new norms, the commercial real estate market in Uttar Pradesh is expected to see a more structured and transparent approach to land allotment, promoting fairness and competitiveness in the bidding process.