EDC IDC Charges in Real Estate

While investing in a new property, you would come across EDC IDC charges and you would think:

  • What are EDC IDC charges?
  • Why do I have to pay for it?
  • How come different builders are charging different rates in the same locality/ area?
  • How to calculate EDC and IDC?

There is a lot of confusion about EDC IDC charges in Real Estate. Builders are not interested in educating the buyers and in fact are charging extra from customers for lack of information and knowledge. Even the government departments have not done a good job in clearly explaining the meaning & calculation of EDC IDC charges. So, we did a bit of research and here are our findings on EDC and IDC.

State governments collect various types of development charges from builders such as scrutiny fee, institution of land use, change of land use, license & permission fees and infrastructure charges. EDC IDC charges are part of infrastructure charges which is collected by the state to build infrastructure in the local area and across state. Let us now look at the definitions and purpose of EDC and IDC charges.

edc-idc-charges-in-real-estate

What are EDC IDC Charges?

EDC (External Development Charges)

EDC or External Development Charges are collected from the builder/ developer by state government in order to carry out external development works that include roads, electrical works, water supply, sewerage, drains, necessary provisions of treatment and disposal of sewage, sullage and storm water, solid waste management and disposal, schools, colleges, hospitals, stadium/sports complex, fire stations, grid sub-stations etc. and any other work to be executed in the periphery of or outside colony/area for the benefit of the colony/area.

IDC (Infrastructure Development Charges)

IDC or Infrastructure Development Charges are collected from the builder/ developer by state government to develop major infrastructure projects across the state. IDC deposited by builders is credited to the state development fund, which is utilized for socio-economic growth and development of major infrastructure projects including national/ state highways, transportation projects, major water supply scheme and power supply projects etc.

The builder in turn passes on the EDC IDC charges to the customers on per sqft basis.

An Illustration – Calculation of EDC IDC Charges in Gurgaon

Department of Town and Country Planning (DTCP), Haryana has classified various towns of Haryana into different potential zones:

Sr. No.ClassificationAreas
1.Hyper Potential ZoneAreas forming part of the development plan of Gurgaon-Manesar Urban Complex.
2.High Potential ZoneAreas forming part of Development Plan of Faridabad-Ballabgarh Complex, Pinjore-Kalka Complex, Gwal Pahari & Periphery Controlled area of Panchkula (All for commercial Use only)
3.Medium Potential Zone(i)Areas forming part of Development Plan of Faridabad-Ballabgarh Complex, Pinjore-Kalka Complex, Gwal Pahari & Periphery Controlled area of Panchkula (All for other than commercial use); (ii) Area forming part of Development Plan of Sonepat-Kundli Urban Area Complex and Panipat; (iii) Part of Sohna Development Plan falling in Gurgaon District; and, (iv), Any other Urban Area declared under clause (o) of Section 2 of the Haryana Development and Regulation of Urban Areas Act, 1975 (8 of 1975), to cover the Controlled Area declared in Gurgaon District excluding the areas forming part of Development Plan of the Gurgaon-Manesar Urban Complex, Development Plan Pataudi and Farukhnagar.
4.Low Potential ZoneAll other urban areas in the State.

Calculation of EDC Charges in Gurgaon

Haryana government collects EDC charges on per gross acre basis as described below. However, the builder in order to pass these EDC charges to customers, calculates the EDC on per sqft basis. To understand the calculation for EDC on per sqft basis, first we need to understand the concept of FAR.

What is FAR?

To calculate the maximum permissible built up area of a colony/ township, we need to know the FAR (Floor Area Ratio)  of the area. Floor Area Ratio is ratio of total floor area of all buildings to the area of the plot. For eg. if a plot measures 1,000 sqft. and permissible FAR in the area is 3, then the maximum area that can be built up on the plot is 3,000 sqft. FAR of an area is decided by the development authority or town & country planning department on the basis of supporting infrastructure of the locality/ town.

For Group Housing Project FAR (Floor Area Ratio) allowed in Gurgaon is 1.75.

FAR = 1.75

1 Acre = 43560 sqft

Total permissible built-up area = 1.75 x 43560 = 76230 sqft

As per DTCP Haryana Policy and Notification No. P.F.-7/35502 dated the 4th of April, 2013, Gurgaon is part of hyper potential zone. Haryana Urban Development Authority vide memo No. HUDA.CCF.ACCTT-I-2010/44973, dated 23.11.2010 has conveyed the following revised rates of External Development Charges, along with terms and conditions:

S.No.Type of DevelopmentCharges per Gross Acre
1Plotted DevelopmentRs. 58.76 lacs
2Normal GHS upto 300 densityRs. 176.28 lacs
3Group Housing Scheme for low cost affordable housing with 600 densityRs. 176.28 lacs
4Commercial area including neighborhood shopping area with FAR 1.75Rs. 274.41 lacs

These rates were applicable for the calendar year 2009 after which EDC can be calculated upto calendar year 2012 by increasing the same @ 10% every year on compoundable basis. On similar pattern, EDC can be calculated before 2009 i.e. upto 2006 (last cut off date being 11.06.2006) by reducing the above EDC @10% p.a. on compoundable basis. Therefore, EDC calculation will be as follows:

2009-2012

License YearEDC
(Rs. per Acre)
Permissible Built Up Area
(sqft) with 1.75 FAR
EDC
(Rs. per Sqft)
20091762800076230231.25
20101939080076230254.37
20112132988076230279.81
20122346286876230307.79

2006-2009

License YearEDC
(Rs. per Acre)
Permissible Built Up Area
(sqft) with 1.75 FAR
EDC
(Rs. per Sqft)
20091762800076230231.25
20081602545576230210.23
20071456859576230191.11
20061324417776230173.74

Let us now calculate IDC charges for Gurgaon.

Calculation of IDC charges in Gurgaon

IDC charges as per DTCP Haryana are as follows:

With effect from Jan 28 2008(in Rs. per sqm)
CategoryHyper-Potential ZoneHigh-Potential ZoneMedium-Potential ZoneLow-Potential Zone
Residential50037525070
Institutional50037525070
Industrial25019012535
Commercial1000750500190
Group Housing62546032090

Note:

  1. For plotted development, the charges are applicable on gross area of licensed plotted colony.
  2. For group housing/ commercial/ IT Parks/ IT City, the charges are leviable for permitted covered area on all floors of the colony.
  3. The Hyper Potential, High Potential, Medium Potential and Low Potential Zone shall be as classified in the Schedule to these rules prescribing rates of License fee per gross acre vide Notification No. P.F.-7/35502 dated the 4th of April, 2013, published in the Haryana Government Gazette (Extraordinary), dated the 4th April, 2013.

Therefore, for Group Housing project in Gurgaon, IDC charges will be Rs. 625 per sqm of the covered area. Please note that for group housing project, IDC charges are applicable on the total covered area and not on the plot area.

Now, to pass on the IDC charges to the customers, the builder will convert per sqmtr rate to per sqft rate.

1 sqmtr = 10.764 sqft

IDC = Rs. 625/ 10.764 = Rs. 58.06 per sqft

Do we need to pay service tax on EDC IDC?

No. EDC and IDC are government levies (tax) and service tax is not applicable on government levies. Tax on EDC IDC would mean tax on tax. If your builder is collecting service tax on EDC IDC from you, you should immediately ask for return.

Final Word

It is an irony that different builders are charging different EDC IDC charges in the same area however they have to pay the same rate to the government. The government authority clearly states that the builder should explain the EDC IDC charges to the customer transparently. Now that you know how to calculate EDC and IDC, you should ask your builder about his calculation methodology and you can ask him to return any extra amount charged by him.

References:

Over to You

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Team AY is the editorial team of AssetYogi led by Mukul Malik. A small group of Real Estate enthusiasts, Team AY works hard everyday on a vision of making high quality Real Estate knowledge freely available.

7 comments

  1. Sir,

    I have a query on EDC. I had paid EDC of 1,20000 on a 1341 sq ft Flat earlier (In 2012) in Ghaziabad and now in possession letter, builder is charging increase in ED chrages which is around another 1 lakh.

    Can you please suggest if it is correct the amount which builder is charging as increase in EDC charges

  2. EDC AND IDC charges are collected from builders and not from buyers, so is there is % defined on collected rates or it is on selling of per unit of project? I m confused.

  3. Can builder charge service tax @14% on car parking or utility charges.

    • No, by definition service tax is supposed to be charged on the service portion only. So, it cannot be charged @14% on parking and utility charges. Generally, service tax is charged at 25% of the total parking and utility charges.

  4. What if the builder is charging Service tax on EDC/ IDC and does not want to understand Clause 143- Section 66D?
    What is the possible way out to set it straight with the builder?

    • Hi Aman
      Charging service tax on EDC/ IDC is unfair. You can write to the builder and ask for the explanation in writing.

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