Six things that can stop you from falling for shady property deals

Akrama Sakrama is not a long term solution to the problems in real estate sector. If the government is willing, it can stop builders from undertaking illegal constructions.

Will the experience of Campa Cola compound flat owners be a lesson to apartment owners in Bengaluru? The Akrama Sakrama scheme is creating havoc. Every builder flouts the sanctioned plan with impunity and there is no one to check. Eventually, the flat buyer suffers while the builder and corrupt officials profit from the illegality.

The impression created by Akrama Sakrama is that illegality will be condoned later and therefore builders continue to build illegal structures and lure buyers. Most buyers trust the promises of builders and some, who know better, go ahead and buy believing that Akrama Sakrama will take care of the violations.

The trick is to get people to occupy the building as an insurance against demolition. The under-construction building that collapsed in Mumbai had families living in them free of rent just for this reason. This situation is unfortunate when the Government and BBMP have all the powers to prevent it, if only they follow the procedure already laid down:

  1. BBMP (or other plan approving authority) should not accept applications for Plan Approval unless the land use permits such building. If the land is prescribed for other use (agriculture, residential etc.), approval of the competent authority (BDA, BMRDA or similar authority) must be a pre-requisite for plan approval. This should not require even an order from the Government or BBMP higher ups. After all, how can a government department sanction building plan when the prescribed land use prohibits such buildings on a land?
  2. Builder should not be allowed to take bookings for apartments before issuance of Commencement Certificate by competent authority (BBMP etc.). This may require amendment to law by the State Government.
  3. The Apartment becomes a saleable property only after the Occupancy Certificate is issued by the competent authority (BBMP etc.) Before that the whole property is a single unit and the building is not recognised as a collection of separate apartments. Registration Departments should be instructed to register sale deeds of apartments only after verifying the occupancy certificate. This one step will go a long way to protect customer interests.
  4. BESCOM (or other electricity supply co.) should not give Electricity Connection till occupancy certificate is issued by competent authority.
  5. Customers who book their flats at the time of launching of the project or any time before issuance of Occupancy certificate, should be given a Bank Guarantee by the builder for an amount equivalent to the agreed price of the flat or the actual amount paid by the customer. The Bank Guarantee can be invoked at the discretion of the customer any time after expiry of 6 months (or whatever) from the date of agreed date of delivery of possession, the only consequence to the customer being cancellation of the allotment of flat booked by him/her. This is to safeguard the interests of the customer in cases of the builder flouting the building norms and thus fails to get occupancy certificate.
  6. The Bank Guarantee also should cover the rent for flat over and above the agreed delivery date. Builders may argue that these provisions will push up the prices of apartments. Considering the amount believed to be spent by the builders to bribe several officials of several departments, this should actually reduce the cost of apartments. If officials have no discretion to approve something unless prescribed parameters are complied with, there will be no need to bribe officials. Cost of bank guarantee cannot be more than the money spent on bribes and therefore cost should not go up. Even  if it does go up, it is still worth it. Peace of mind and secure future do not come cheap.

Except for the requirement of Bank Guarantee and perhaps for banning pre-launch bookings, everything else can be achieved by simple administrative instructions by the Government. This should go a long way to protect interests of the customers and also free genuine builders from a lot of hassles.

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Comments:

  1. Sumana Pal says:

    Very good proposal. Yes, the government can bring a change if they want and this is their primary responsibility and they must act proactively to close loop-holes and opportunity of any corruption.

    Commencement Certificate => Bank Guarantee => Construction => Occupancy Certificate => BESCOM Connection => Registration => Possession / Re-sale

    Remember government is collecting about 15% of a flat cost ( tax + registration ) as tax and stamp duty and still buyers are harassed.

  2. C N Kumar says:

    Excellent suggestions. Please add that BWSSB should not give water or sewage connections till OC is issued. If BESCOM and BWSSB co-operate then most of this problem will be solved. BBMP should not issue Khata without OC or sub divide khata without OC. Pipe dream!

  3. batteredCitizen says:

    Recently, Mr. Ashwin Mahesh of the Loksatta party has written a blog about
    Akrama Sakrama (http://loksattakarnataka.org/fixing-akrama-sakrama/).

    The very first point in Mr. Ashwin Mahesh’s article is this:
    (a) There must be a LIST of the buildings that are currently identified to have violated the building bye laws or the zoning regulations, and this list must be made public.

    To this effect, http://bangalore.citizenmatters.in should make space/provision for readers to list builders/buildings that are non-compliant.

    We can start the list with this:
    M/s. Celebrity Housing Projects have built and marketed several apartment complexes and layouts in and around the premier Electronic City Area of Bengaluru.

    This builder has blatantly violated the sanctioned plans in every case. Having built apartments with major variations from the initial approved plans, they have never bothered to obtain “Occupancy cum Completion Certificates” from the agencies.

    So, please avoid buying properties from this builder.

  4. chandrashekar muniyappa says:

    Six or Sixteen things, nothing will stop these criminals. STOP NEGOTIATING OR BUYING ILLEGAL PROPERTIES. If there is no Demand, automatically, in a short span, the builders and developers will not develop it.

  5. Murali Manoharan says:

    Agreed that implementing these measures will go a long way in protecting customer interests. But who will bell the cat? The government or the officials are not going to root for this as it will affect their ‘main’ income. Builders are not very entusiastic about this because, bribing an official and getting things done is much easier than spending the same amount and going through cumbersome administrative procedures. And finally, people are not going to stop buying properties because owning an ‘apartment’ in the city is THE dream, even if it is just a foxhole. Corruption is a vicious cycle and we Indians are so much used to it that we actually enjoy being corrupt.

  6. Sanjay Dharmani says:

    My friend has been staying in an apartment for last 8 years. BDA has sent a notice that the land belongs to the govt. layout and the construction is not legal.
    Is it possible for govt to claim land when we have bought this building, stayed there, taken loan from govt banks against that property etc.
    Please provide advise and what steps should association taken.

  7. Prakash says:

    Thank you for the article. It’s very informative.

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