A few recent headlines suggest Uttar Pradesh Government has woken up to the realities of erring builders who not only take the buyers for a ride, but also exploit the government agencies and dry up the government coffers. But on a closure look Ravi Sinha finds that the builders have put the Government’s development agencies on ransom, and all that the State Government is doing is trying best to save its skin, and loss to the State exchequer.
First the headlines:
News #1: UP government seeks list of builders handing over flats without registry, as per a media report
News #2: UP Draft Policy bars defaulter builders from bidding for group housing projects
News #3: Noida Authority changes rules; home buyers get registry at the time of first payment
Prima facie, it looks like the government has realized how the builders are exploiting the system to harass the home buyers. And hence, the rules are being changed to ease the pains of the gullible buyers. The State Government seems to be determined to check the malpractices in the business. After all, property hotspots like Noida, Greater Noida and Yamuna Expressway fall into the State which is also the hotbeds of maximum number of consumer grievances.
But no! A big no!
As a matter of fact, the development agencies in the State are crying before the Government to save them from these exploiting builders. The Government machinery is helpless in front of these all-mighty builders, many of them happen to be rich promoters of sick companies. So, the policy tweaks are meant to save the development authorities and not the home buyers.
For instance, take the case where the development authorities have been asked to prepare a list of such defaulting builders who are handing over the apartments without registry. Is it for the welfare of the home buyers? No, this is rather the Government’s idea to save itself from loss to State exchequer as Stamp Duty is not paid when the home buyers get possession of apartments.
It is noteworthy to mention here that Section 13 of the UP Apartment Act and provisions of the Stamp Act, 1899, make it mandatory for any developer to get their flats registered before handing over. The builders still have the guts to flout the set principles of law. As a matter of fact, UP RERA has even ordered that OC is a must for even offering Letter of Possession to the buyers. But in Noida alone, there are reports of 23,000 flats handed over without registry and 66 builders have got notices early this year.
I must add here that the Government agencies too seem to be incapable of calculating their due. Take for instance, the reported revenue loss of INR 12,000 crore out of 600 unregistered flats in Ghaziabad. Really? What is the price of each apartment? It seem the official who gave this figure to the media didn’t have any idea of what he was talking about. But media? Don’t aske me now! We all know the intellectual capability of real estate journalists. And it is not a case of just one journalist making an inadvertant mistake, rather many of them did the same story with same factual error without any application of mind, forget about journalistic copy check.
The question here is why are these builders not executing registries even after obtaining the OC (Occupancy Certificate) & CC (Completion Certificate) from the authorities concerned. The fact is that these smart developers delay & often deny registries to the home buyers to get maintenance of society when it is not registered. They continue to charge hefty amount in the name of society maintenance. Add ot it, revenue that they get from inflated power bills. After the registry of the apartment, majority of apartments buyers are free to form AOA (Apartment Owners’ Association).
Has the Government woken up to this legal lacunae now? Will things change moving forward? Your guess is as good as mine, but the news of FIR against such buyers is making the rounds since 2018.
The big question is when will action be taken?
Moving to the news item number 2! The UP Draft Policy bars defaulter builders from bidding for group housing projects. The question is what is the definition of defualter builders? Those who have cheated the buyers? Those who have repeatedly not delivered projects on time? There was one proposal initially when the RERA was at the discussion stage. It said, “The regulator will have the power to cross check the credentials of the developers and if he has defaulted twice in the past he will never get a new license.”
Has anyone heard of any proposal now that defines the defaulter builders from the standpoint of home buyers’ safety? The Government idea of defaulter builder is one who has not paid his due to the development agencies. As of now, there are reports of INR 4000 crore due from these developers to the 3 development authorities of Noida, Greater Noida and Yamuna Expressway.
So, a financially viable project, and builders who don’t dare to cheat the development authorities, are eligible even if they have cheated the poor home buyers.
Similar is the story with news item number 3. Noida Authority has changed rules with which home buyers get registry at the time of first payment. There has to be a tripartite agreement after home buyer pays 10%. 2% stamp duty is paid upfront and the rest is paid after final payment and final registry. At present registry is done after full and final payment and completion. At the initial stage, agreement is only on INR 100 Stamp Paper.
In the backdrop of present scenario where lakhs of home buyers in Noida are living in their houses without registry, this appears to be a justice in favour of the home buyers. But then reasons are many – developers land dues due to which OC & CC is denied and there is no registry. This is a legacy issue as well due to Deferred Payment Plan of the earlier Governments.
The move is said to make housing transactions transparent and to stop dubious sale. Builders can’t sell same flat to multiple buyers. Home buyers are assured to get Government certified agreement.
But the move is primarily aimed at ensuring Government Stamp Duty; as development authorities across Noida- Greater Noida are often at the mercy of the builders to get their due and have Stamp Duty from the buyers. Now they know the buyers and even if builder defaults, the development authorities can collect full Stamp Duty by the time project is ready.
In the amended policy, absolute title right for the buyers doesn’t exist even after paying the initial Stamp Duty. Moreover, in the wake of buyers selling back to builder where at present the Government doesn’t get any revenue, there is revenue to the State exchequer.
In a nutshell, all the efforts are being made, and policy tweaked, to make sure that the Government doesn’t lose revenue and the development authorities are not at the mercy of the builders, like now. Of course, the Government needs money but then what about the interests of the home buyers. For how long will the system allow the builders to exploit the poor home buyers? So, the Government is determined to get its pound of flesh and media is reporting it as home buyers’ welfare schemes. But the average home buyer is just clueless.
Ravi Sinha
Twitter: RaviTrack2Media
Ravi Sinha is a journalist with over two decades of cross-discipline media exposure. He is the CEO of real estate thinktank group Track2Realty. He has been writing extensively on the real estate sector for more than a decade now. Evaluation of real estate brand performance is his core domain expertise and he has immense insight into consumers’ psychograph. He has conceptualised Track2Realty BrandXReport as India’s 1st & only objective & non-paid brand rating journal that is industry-accepted benchmark of brand equity & ranking of the Indian real estate companies.
Track2Realty is an independent media group managed by a consortium of journalists. Starting as the first e-newspaper in the Indian real estate sector in 2011, the group has today evolved as a think-tank on the sector with specialized research reports and rating & ranking. We are editorially independent and free from commercial bias and/or influenced by investors or shareholders. Our editorial team has no clash of interest in practicing high quality journalism that is free, frank & fearless.
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