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Occupancy certificate saga
June 30, 2013Reblogged from http://ravikanthpropertyconsultant.wordpress.com/2013/02/13/the-saga-of-occupancy-certificate-in-bangalore-apartment-complexes/
I remember reading a number of anxious queries/heated debates on the subject of “occupancy certificate” in the Indian Real Estate Forum where under the username “RAVIKANTH” – I had given 1000s of advises freely to 10′s of 1000s of people on 100s and 1000s of projects all over Bangalore as a Career Real Estate Professional – when I used to help people freely on http://www.indianrealestateforum.com. But if you go there now, you will mostly find useless garbage discussions by immature young school kids. Some even brawl and even get into fist fights like primary school children. They call themselves Techies. The day I realized that about 6-8 months ago – that I was helping school drop outs there, I got myself banned there and decided never to help anyone freely. Some such school drop outs, every now and then, occasionally do come to this blog website of mine too – to pick up a fight with me by writing nasty emails to me to get some sadistic momentary pleasure out of it. They call themselves highly qualified highly salaried highly educated foreign returned Techies. But by behavior and decadence displayed, worse than school drop outs and auto-rickshaw drivers.
This above “search term” obviously means there is a lot of confusion and anxiety, misinformation and rumors spread about the “need” for or “absence” of Occupancy Certificate.
In brief, let me try to explain here the how and what of it.
The OC for the Building/Complex is required by you only if you are going in for a bank loan to purchase the flat there in the complex because the bank requires it as a document to approve the loan for the property. Without that OC, the bank will not approve the loan and hence you cant buy it on Loans/EMI or bank funding.
Now, when does one get OC? You can get it only after the building is completed, fully ready to occupy. Not before that.
Then how do banks approve the loans without OC since all of you anyway buy flats everyday all over Bangalore?
During the construction of the project, banks are not aware or will not know to what extent the builder will deviate from the approved plan. So, the question of deviation or OC can not be guaranteed. Since banks exist in this world to do business and not bother about your OC, they will give you the loan during construction stage anyways (as they do not know about deviation since the builder will not tell the bank or you nor do you care. You care only about your bank loan. Period).
When you put up your flat for resale – the next guy who comes to buy your flat can not buy it from you if you don’t have a OC for the complex. Since this new buyer new guy will also depend on a bank loan to purchase it just like you, he will not be able to buy it as his bank will reject the Loan Papers for want of the OC that you could not provide (since your builder did not provide it to you).
So, how do you sell then? You will have to find a fully funded self financed cash ready guy to buy your flat (somebody who will not go in for a bank loan). The other solution is Private Banks like Axis Bank, ICICI Bank do provide loans for such purchases even if the OC is not available. It is only Government Banks or Nationalized Banks which play havoc with your life when you ask for a loan when they insist on a OC from you.
Not having a OC does not mean that the building will be demolished. Usually, builders construct the entire top floor illegally. For example, if a G+4 is approved by BBMP, they will construct the 5th floor with another 2 dozen illegal flats. However, they don’t sell it to you. Because they know it is illegal/unauthorized. What they do is – they keep it for themselves to let-out/rent out and use that entire illegal top floor for Rental Income risking the demolition of only the illegal top floor if ever and when the BBMP actually comes to demolish it (only the illegal top floor). In such cases, the builder will be the loser and he will lose that illegal top floor. The same is true for Pent Houses too which are constructed as “Deviation”. Check if the Pent House is approved in the “Approved Plan” before you buy it. Ask if it is an illegal construction. In 99% of the cases, builders openly tell you that it is “deviation” and “unauthorized”. They say so, openly, frankly, truthfully even about the entire top floor – if constructed illegally – those 2 dozen flats in the top floor as in the above example.
Moral of the story:
1) You can buy a flat in a complex even if it does not have a OC.
2) Only drawback is bank will not fund/finance you if it is a resale purchase you are making.
3) During construction too, if you are buying in an unauthorized, illegal top floor – the bank will refuse the loan to you. They will tell you “buy in the authorized G+4 floors, we will fund you”.
4) You can take Housing Loans from Private banks to buy a resale apartment in a complex which does not have OC
5) 95% of all buildings in Bangalore are all done with deviation with illegal/unauthorized constructions in the top floor either with a swimming pool or with a club house or with extra unauthorized flats or with penthouses or with a Gym/Party Hall in the top floor. Anything on the terrace/top floor is unauthorized/illegal – especially if it is not shown/approved in the Sanctioned Plan by BDA or BBMP – depending on the jurisdiction.
6) If you are self funded/fully funded with own savings/cash – you dont have to worry about OC, hence go ahead and buy blindly if you like the flat and if it falls within your budget – since you don’t need a bank loan anyways.
7) People already living/owning flats in buildings without OC have to worry only if they want to sell and want a profitable exit and if their buyer is a guy who is coming in with a Housing Loan in mind – that too especially only if he is insisting on a Nationalized Bank Housing Loan. You should educate him and encourage him to go to a Private Bank for a Loan to buy your property and thus make it a win-win situation for both of you.
8) Don’t worry – nobody is going to bulldoze your building and throw you on the streets just because your builder did not give you an Occupancy Certificate for the building. Only that illegal floor at best may be demolished one day sometime in the next 20-30-40-50……..years if the Supreme Court orders.
Real estate bill gets introduced in India
June 24, 2013Are you one of those people who got lured by these catchy advertisements by builders only to realize that most of the features advertised aren’t available? Are you one of those people who paid the full amount to the builder and had to painfully wait for months before the project got completed? Are you a prospective home buyer who is scared of these kind of misleading Ad’s and delays from builders?
There is great news for all Indians who want to buy or invest in real estate. The government of India has come up with a New Real Estate Bill that is bound to make the lives of the common-man much easier when it comes to buying property.
The idea of this article is to take a high level look at this new bill and how it would benefit us. Please note that only high level details reg. the bill are available and there may be amendments to this bill if our parliament sees fit. The Union Cabinet Minister for Housing & Urban Poverty Alleviation Ajay Maken is expected to address the Press and elaborate on the intricate details of the bill very soon. So, for now, let us take a look at the highlights of this proposed bill.
Highlight No. 1: A Regulator for Real-Estate is proposed
On the lines of SEBI that regulates the stock market and IRDA that regulates the Insurance industry, a regulatory body that governs real-estate in India will be created. It will have the powers along the lines of what a SEBI or an IRDA has.
Highlight No. 2: This Bill only covers Residential Property
This bill as well as the proposed regulatory agency will govern or supervise only the residential property market. The commercial real-estate market is currently out of bounds. It may get included in future, but the current idea is to protect the common man first.
Highlight No. 3: No More Misleading or Deceiving Advertisements
Most builders flout advertisements that grossly mis-state the facilities or amenities available in the property and mislead the customer. The bill will tighten such regulations and any such intentional mis-stating of facts may result in stiff punishments. If the builder promised a recreation club, a gym and swimming pool when you signed up for the Apartment and instead built yet another block of houses in the place ear-marked for those facilities, you as the buyer can complain.
A first time offender faces penalties of up to 10% of the Project Cost. Repeat offenders can expect stiffer penalties as well as Jail time of up to 3 years.
Highlight No. 4: No More Flouting of Projects without Proper Approvals
One of the main causes for delays of housing projects is the fact that builders flout projects and start collecting money from customers even before getting all the requisite clearances and approvals. Sometimes or should I say, most of the times the government machinery in India works in its own pace and such approvals may get delayed. This results in projects getting delayed for no fault of the buyer. The bill mandates that the builder obtain all necessary permits and approvals before they start collecting money from buyers.
Highlight No. 5: No More Asking Huge Down-payments to Book Your House
Builders in prominent residential areas demand high up-front down-payments for customers to book their dream home even before the documentation and legal agreements are signed. The Bill mandates that Builders cannot ask or take more than 10% of the project/property cost without a proper written agreement. Buyers can ask and claim a full refund of the money they paid if the builder delays the written agreement formalities.
Highlight No. 6: No More Diverting of Funds from One Project to Another
Developers usually collect money for one project and use it to complete other projects or use it in other business ventures. This results in delays in case they are unable to come up with cash to continue with the current project. The Bill mandates that developers must put aside at least 70% of the proposed project cost in a Separate Bank Account and track it properly to ensure that the project progresses as planned and without any delays.
Highlight No. 7: Specify Usable Area or Carpet Area Clearly
Most Builders these days sell projects under the “Super-Area” concept where the customer buys a property by knowing just the overall area of his house. The actual carpet area or the usable area is around 20 to 30% lesser than the area the customer pays for. The common area like lift lobby’s, veranda’s etc. are not part of the usable area for the customer and in most cases the buyer is not aware of how much common area he/she is paying for. The Bill mandates that builders clearly specify how much carpet area or usable area comes under each house and how much common area each buyer is paying for. Though the amount the buyer is going to pay will remain as before, the clarity on how much area each house is will increase.
Some Last Words:
Most builders advertise like
3 bedroom 1200 sq. ft. house starting from 48 lakhs
The actual price of the house including car park, Electricity and water deposits, registration etc. will be much higher and will work out to the range of around 52 to 55 lakhs. But, the advertisement will state only 48 lakhs. On top of that, the actual living area of the house will only be around 900 odd sq. ft. and the builder advertises a 1200 sq. ft. house.
In future the advertisement will be like
3 bedroom 1200 sq. ft. apartment with a carpet area of 950 sq. ft. starting from 52 lakhs
Sounds a lot better isn’t it? What do you think about this new bill? Feel free to leave your comments in the comments section…
Happy Real Estate investing!!!
sjr watermark, sarjapur road – complaint
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Rental agreement
April 21, 2013Rental agreements are more or less similar all over the country. It mentions various terms of the agreement, which include:
* Amount of rent to be paid every month
* The amount of safety deposit to be paid to the owner on a return basis
* Period of rental agreement
* Number of people occupying the property
* Type of lease – residential or commercial
* Maintenance issues – who will pay the monthly maintenance bills (in case of a property in a housing society), minor repair work charges, major repair work charges and so on
* Termination of lease rules
The rental agreement in India has been designed well to protect the rights of both the lessor and the lessee. Other clauses may be added in the agreement as per the discussions between the two parties.
Lease Agreements & Deposit
Apart from being drawn up for commercial and residential purposes, there are three types of rental agreements based on the duration of the lease:
* Week to week
* Month to month
* A fixed term, not be less than six months or more than 12 months.
The duration of the notice period prior to the termination of the lease depends on the period of the agreement. Once signed, the landlord needs to give the tenant a duplicate copy of the agreement within 10 days of signing or the tenant may withhold the rent till they receive the copy.
The safety deposit amount to be paid for the duration of the lease may be negotiated. Technically, the safety deposit amount is calculated as the first three months’ rent which is fully refundable subject after the amount of repair and maintenance deductions the landlord has to make. In practice, however, if the landlord is charging a higher amount of deposit, then the rent amount will be lower and vice versa. The deposit amount has to be refunded within a month or the tenant may charge an interest on the amount that is computed on a daily basis.
The Tenant’s Rights
The Indian rental agreement provides ample security to the tenants. Once the tenancy commences, the landlord is not allowed to infringe upon the tenant’s privacy. Although, periodic checks of the property are done to check on the maintenance, the landlord has to give prior information before coming or sending their representatives.
The tenant may also ask for repair work or some other changes to be made to the property if they feel it is absolutely necessary. For instance, a tenant may request installing a grill on the balcony or terrace for child proofing.
The Landlord’s Rights
The landlord holds the right to evict the tenants under strict circumstances if they violate any of the terms of the rental agreement. However, a prior notice of at least three weeks has to be served. Also, if the tenant terminates the lease agreement without prior intimation, the landlord has the right to withhold the full security deposit amount.
Extensions
The rental agreement in India is drawn for a period of 11 months. If both the parties want to extend the lease, a new pact must be drawn a month prior to the expiry of the agreement. Further, the landlord is allowed to impose a 10 per cent raise in rent, which means:
* In accordance with the new rent amount, the security deposit amount may also be raised.
* The duration of the rental agreement may be revised.
The rest of the terms and condition will remain the same if both the parties are satisfied and a few additional clauses may be added as per their discussion.
Legal Issues
If the agreement is not honored by either party, they are free to take legal recourse. The rental agreement has been made flexible so that neither party may be tied down by pre-defined rules in case of exceptional circumstances. The Indian tenancy laws are strict; however, the legal procedure is long and time consuming.
A part of the problem in the system also arises from the subjectivity in the agreement that does not define the terms and conditions very clearly. When an agreement drawn concisely, the tenant and landlord benefit equally.
Blog recommendation
March 17, 2013SJR avalon issues
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How builders handle the maintenance
January 23, 2013Example of how builders are ripping you off in the name of maintenance.
This is why it is important to make sure of the reputation of the builder.
Salarpuria serenity Issues
December 4, 2012The issue is: for all of us, the flat numbers mentioned by salarpuria in the sale agreement are not matching with the flat numbers mentioned in the BBMP approved typical floor plan blue print document. This is for all flats in the blocks A, B, C and D. This is legally WRONG.
Salarpuria will continue to use the same flat number which is there in the sale agreement in all future legal documents (like registration documents). This number differs from the one in the BBMP approved plan. As per lawyers this is not correct.
In the BBMP approved typical floor plan, the flat numbers are given continuously for all the blocks. That means for example for the fifth floor the flat numbers are: A501, A502, A503, A504, B505, B506, B507, B508, C509, C510, C511, C512, D513, D514, D515, and D516. Where as salarpuria has given 1, 2, 3, 4 for each blocks. To better understand what I am talking about, please see the image. Even for A block the numbers in the approved plan are not matching with the ones builder is giving in the sale agreement.
When my personal lawyer was verifying the documents we found this issue. According to the lawyer, BBMP approved plan is a legal document. If the unit numbers (flat numbers) are given in that document, same numbers should be present in all the consequent legal documents like sale agreement, registration documents.. etc. Otherwise it will not be legally correct. My lawer is very experienced in property document verification.
When we asked Mr. Rao, to give the same number in the sale agreement he told it is not possible. He further told that “if you want we will give you a letter saying that your flat number in the sale agreement corresponds to ‘so and so’ number in the approved plan”. To this my lawyer is telling such letter will NOT do anything good legally. My lawyer suggestion after many discussions was to go for another project if this builder is not going to give the same number as in approved plan.
We were disappointed by this. We approached another well known property lawyer. We went to BBMP office and got a copy of actual approved plan in their records for the cross verification. Again this lawyer also told the same thing – “Builder must follow the same numbering which is there in the approved plan. Other wise drop the idea of buying from him. Look for another property”.
I know Mr. Rao quite for some time. I know how he just try to calm down the customer. When we discussed with him about this issue his answer was “Lawyers don’t know anything! As a buyer you should understand logically. Keep faith on us”. Logically I was not convinced, but nothing else I could do that time.
From the legal stand point this is not a small issue. It is issue for every flat in the blocks A, B, C and D. We are paying our hard earned money and buying from such a well-known/premium builder by thinking that legally the documentation will be correct.
If the documentation is not proper and have issues like this, then what is the point in paying huge amount and buying from him?
Do any one of you or your lawyer noticed this issue? Did you approach the builder? I am not sure how to resolve this. Could you please share your thoughts or plans on how we can handle this issue?
Occupancy certificate mystery
October 13, 2012What is occupancy certificate?
This is given by the engineering department of the BBMP. Once the building licence is got and the building is ready for the construction, at the plinth level itself the builder has to apply for the commencement certificate. After which the BBMP officers inspect the property to ensure that it does not have any deviation from the sanctioned plan. The occupancy certificate is obtained at the end of the construction. Once the builder applies for the certificate an inspection is done again to confirm if the construction has happened according to the sanctioned plan. This certificate is mandatory for any builder before he allows people to take possession of the property. This certificate was made compulsory by the BBMP to ensure proper construction in the city. The Joint director of Town Planning is in-charge of this certificates and the engineering department takes charge of issuing, inspecting and acts as a regulatory body to ensure that each builder obtains it. Sometimes without occupancy certificate u won’t get water and power….
What happens when you builder doesn’t provide you occupancy certificate?
The building is considered illegal and the residents can be evicted. This has happened with springfield apartments earlier. Read this
Has CLPD provided Occupancy certificate in any of his 4 projects?
Suncity – Occupancy certificate not available for all blocks.
Euphoria – Not applied till now. The building is already 6 years old.
Zephyr – Not applied till now. The building is already 6 years old.
Genesis – Not applied till now. The building is already 4 years old.
Why doesn’t CLPD, the builders of suncity gloria, apply for Occupancy certificate?
Because of many deviations they create in the approved plan. Because of these deviations (commercial area, BDA roads, encroachment, building on notified land) they government refuses to give Occupancy certificate. Residents continue to live on, till one fine day when government wakes up and evicts residents. Many places residents have to pay 10 Lac per apartment to regularize their buildings using schemes like Akarma Sakarma.
What should I do now?
If you have not already bought the property then stay away. In fact run away. If you have already bought the flat in suncity gloria, see if you can still sell it to bigger fool. There is a very less chance you will find somebody though. You can also talk to builder and cancel your booking. Even if it costs you 1 or 2 Lac, I would suggest you bear the cost and scoot.
Fraud builders of India 
