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Delhi Urban Development Minister Arvinder Singh Lovely said basic services like drainage, water supply and power distribution network will have to be strengthened if vertical expansion in the city is allowed.

“We absolutely have no problem with vertical expansion of Delhi. But when approval is given to high-rises, then we will have to strengthen existing infrastructure like sewage network, water distribution system and power transmission. The Centre will have to provide Delhi government funds for enhancing the infrastructure,” Lovely said.

Vertical growth will also address the problem of shortage of housing in the city and insisted that sincere efforts must be made to ensure optimum use of land resource, he said.

Nath has been strongly pitching for allowing high-rise buildings in Delhi to accommodate the growing population.

Chief Minister Sheila Dikshit was understood to have reservations about the proposal. She had said that availability of power and water should be factored in before allowing high-rises in the city.

The Urban Development Ministry is currently in the process of reviewing the Master Plan of Delhi 2021 and is expected to finalise a number of amendments soon like allowing high-rises and increasing the existing floor area ratio (FAR).

FAR is the ratio of the total floor area of a building to the plot area. “We must ensure optimum use of scarce land resources. I think vertical growth will address the problem of housing shortage also,” said Lovely.

Senior officials in the Delhi government said the Urban Development Ministry as well as Delhi Development Authority have given enough indication of increasing the FAR.

The Delhi Development Authority in March had approved the long-awaited land pooling policy. It allows developers or land owners to pool in land for constructing residential blocks.

The Delhi government’s decisions yesterday to extend Lal Dora to 360 more villages and easing restriction on use of agriculture land for construction are also aimed at encouraging private developers to construct residential units.

The government yesterday decided to ease restrictions under the Section 81 of the Land Reforms Act which will mean agricultural land will be allowed for construction of houses and other purposes.

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With a number of these developers having defaulted on the payment to be made to the Greater Noida Authority, banks were not disbursing loans to buyers of these projects. This resulted in buyers falling back on payments, a pretext used by builders to threaten cancellation of allotments.

As a matter of fact, in Noida Extension information sought under RTI showed a number of developers had defaulted on payments to the authority. “Every bank comes to the authority for no-objection certificate before disbursing loans. Now, if the builder has defaulted on payments to the authority, the banks will not disburse loans,” says a senior official of the Greater Noida Authority.

Three years after the Haryana Government launched a scheme to build affordable houses in the city spread across 200 acres of land, the Gurgaon Citizen Council (GCC) threatened to move court over non-implementation of the policy. The GCC has given the government an ultimatum to reveal the names of the developers who were awarded licences along with the project locations.

In 2009, the government had earmarked land in various sectors of the city to construct nearly 40,000 houses, priced between Rs. 4 lakh and Rs.16 lakh. Several builders had also applied for licences to develop the units with an area of 270 square feet and 520 square feet.

“The policy was notified on May 5, 2009, but no houses have been built to date. We have asked the government to show us how many builders had been granted licences and where they are developing these projects in Gurgaon. We suspect the builders have misused the policy by using the land for other purposes,” says TN Kaul, General Secretary, GCC.

However, while in most of these cases the grudge of the buyers has been genuine; it seems the overdoing proved to be the nemesis of the consumer activism during the year. For instance, backed by the Competition Commission of India (CCI) penalty of Rs 630 crore on DLF, for “unfair trade practices” and “abuse of market dominance”, the Belaire Owners’ Association suddenly became self-styled crusaders against developers.

They started openly advising several residents’ welfare associations (RWAs) from Gurgaon to Greater Noida how to resolve their flat-related problems. The moot point, however, is whether a judgement passed by a quasi-judicial body empowers a group of victims to suddenly emerge as de facto consumer courts overnight?

Qubrex, the real estate brokerage firm that presented an expert report to the CCI on the market share of DLF to establish its dominance in Gurgaon, also got its hands full, with various buyers seeking its help against developers. It seems the overt media trial and taking to streets has not gone down well with the judiciary and the administration, leave aside the developers, and hence in 2012 the residents were snubbed by the courts and the administration even when the grievance looked legitimate.

…..to be continued

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CREDAI Chairman Lalit Kumar Jain expressed his views on the subject based on the press release from the Union Cabinet and added that he would provide detailed observation after receiving the draft legislation.

Jain said the real estate sector definitely needs a regulator on the lines of the one controlling telecom, banking, stock markets and insurance sectors.

He lauded the intent of the Housing Minister but said that the discretionary powers for registering or deregistering projects and adjudication by a bureaucrat could become breeding grounds for corruption. Moreover, the provision for criminal prosecution of developers could lead to the exit of professional and qualified developers.

“Our fear is that those with expertise to handle political influencers will only survive, thus leaving the all important industry in the hands of corrupt people,” Jain said and called for regulator covering all stakeholders like defaulting customers, the approving authorities and financial institutions that fund projects.

“How can anyone blame the developer if a project is held up due to approval delays or funds for that matter?” he asked.

“CREDAI has worked hard to advise the ministry to come out with appropriate comprehensive Bill with teeth to direct all stakeholders including approving authorities which will protect consumers while enhancing quality environment for the business,” he pointed out. Otherwise it will be an added establishment with huge costs, serving no purpose other than adding cost, thereby making tenements costlier.

Jain welcomed the statement of Ajay Maken, Union Minister for Housing and Urban Poverty Alleviation, that the Bill provides for a uniform regulatory environment to protect consumer interests, help speedy adjudication of disputes and ensure orderly growth of the real estate sector.

“Also, the promotional role of the proposed Regulator like standardization in the sector carpet area, checking money trail and curbing money laundering, professionalism and promoting planned development are music to our ears,” he quipped.

On the provision in the Bill for mandatory deposit of 70% of the cost in an escrow account, Jain pointed out, “This is impractical.”

The construction cost of the project varies in different markets. For instance, in micro markets as in prime areas, the cost of construction may be around 30% where as in suburban areas it could be a high at 80% of the entire cost elements. The provision should be based on the ratio of the extent of the construction cost so as to ensure timely completion of projects, and prevent fund diversion.

Otherwise, the growth in the sector will get arrested as the reality of the day is that funding for land purchase is just not available from banks, thanks to the negative weightage given by the RBI for real estate finance.

He explained that the Bill provides for a speedy and specialized adjudication mechanism to settle disputes by an officer of the rank of joint secretary. This is also not practical since the judicial process is a specialized task and hence an expert of the field only can redress the disputes. Or, it should be left to a judicial officer and not bureaucrats, in any case, who may be influenced by higher-ups or corruption.

The Bill should have aimed at catalyzing domestic and foreign investment into the real estate, thereby contributing to enhance economic activity and increase in GDP growth. Sadly, this is missing, Jain added.

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“The buyer should establish the existence of a proper Society. The original sales deed and the Society share certificate are most important, since the transaction cannot proceed without them. Also, the buyer should bear in mind that in the case of a resale property, proper transfer and re-registration is necessary,” says Ahuja.

The check list of documents required for registration of residential flats, apart from the sale deed, include a letter from the Society that reflects details such as the number of floors in the building, the construction year, the apartment’s built-up area and the number of lifts in the building.

The buyer must demand for an assessment bill to the Society from the municipality in question, a NOC from the Collector if the building exists on Collector’s land, a copy of the property card, and a receipt for the payment of registration fees. In addition, the buyer of a resale flat should ask for a clear ownership history if the residential property has changed hands before.

The local registrar will establish the authenticity of these documents. If one is buying the property via a home loan, the bank will also run a routine due diligence.

Om Ahuja has a word of caution when he says there are certain challenges that a buyer of a resale flat may face. This could include lack of proper chain of documentation, especially in cases where the property has changed hands more than a couple of times in the past. If the property is over 18-20 years old, it is possible that it was never formally registered in the first place. Registering it at the current point in time would put the onus of paying the stamp duty in arrears on the buyer.

“There may also be additional expenses for repairs to masonry, plumbing, electrical wiring and fittings. Obtaining a home loan for a property which is anywhere close to 50 years of age can also be a challenge. Finally, one should bear in mind that the Indian residential property market is in a constant state of evolution. One is unlikely to find the facilities and amenities that are available in the newer projects on the market in an older building,” says Ahuja.

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The draft, which has to be passed in parliament, is expected to protect buyers from erring developers and usher in an era of transparency through a regulatory process.

The draft bill, which has been in the making for about five years now, makes it mandatory for developers to launch projects only after acquiring all the statutory clearances from relevant authorities.

Besides, it has certain tough provisions to deter builders from putting out misleading advertisements related to the projects carrying photographs of actual site. Failure to do so for the first time would attract a penalty which may be up to 10% of the project cost and a repeat offence could land the developer in jail for a maximum of three years.

It also aims to make it mandatory for a developer to maintain a separate bank account for every project to ensure that the money raised for a particular task is not diverted elsewhere.

It would provide for a clear definition of the ‘carpet area’ and would prohibit private developers from selling houses or flats on the basis of ambiguous ‘super area’.

Currently, the sector is not regulated. The draft Bill by Ministry of Housing and Urban Poverty Alleviation (HUPA) is expected to ensure sale of immovable properties in an efficient and transparent manner and protect the interest of consumers. It also seeks to establish an Appellate Tribunal to adjudicate disputes and hear appeals from the decisions or orders of the Authority.

Anil Kumar Sharma, President, CREDAI-NCR said, “We welcome the thought of Government on bringing the bill but we are not willing to accept it in its current form. We have been opposing the bill in its current form from the beginning. We are disappointed with the way government is going ahead without addressing our concerns. According to us, said bill is neither benefitting the Consumers nor other stake holders.”

The industry has been opposing the bill and the draft has been revised various times since 2009, when it was first draft was made.

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Till only recently the primary reason for going in for a resale flat was inability to buy a home in a strategic location where no new supply was coming in. However, the dynamics has changed after new launches and under construction could not meet the desired euphoria of buying a brand new home.

Moreover, in urban cities, especially in metro cities, home buyers are increasingly getting concerned about the neighbourhood which can be ensured only with a second hand property, unless one is buying a super luxury house where “By Invitation” buyers are picked. Most of the Indians don’t have that luxury.

Experts also suggest if one has personal cash resources at one’s disposal and is not reliant on a home loan (a home loan on a very old property cannot be taken for granted), buying a home in a project that is even 20 years or more in age can be a good investment bet if the residential property is in a strategic, high demand location with low or no new supply. This would mean that the project would come up for redevelopment, ensuring a tidy profit to the owner.

Property analysts believe that resale property market has few of the beneficiary deals going if only the buyer has the patience and goes for some research. In the resale market one can actually get the house one always wished for at cost less than those fresh projects in the similar area.

Banks are not as reluctant nowadays as few years back for resale properties. Of course, black money transaction has been a deterrent as people who survive on their salary generally do not carry black money and banks don’t wish to lend higher than money mentioned in the sale deed.

That, however, is also changing of late with the kind of sellers who wish to improve to a bigger house. They like to accept the entire payment through cheque so that there is no tax mismatch since the sale processes are utilised to purchase another home.

There are many advantages of a resale property. Not only one can select your neighbourhood and other conveniences like schools etc, generally old properties charge less maintenance fee equated to fresh projects.

…..to be continued

Track2Realty Exclusive: The redevelopment of a city depends on many local factors and cannot be replicated ad hoc. Mumbai has its own character and flavour and has to be developed according to local needs and infrastructure availability. The government in consultation with developers should work in redeveloping the city of Mumbai by improvising on infrastructure.

Diipesh Bhagtani, Executive Director, Jaycee Homes has a different take when he says Mumbai has a distinct identity of its own, and therefore, it is wise not to ape any other global city for redevelopment.

“Yes, Mumbai lags way behind in the redevelopment space when compared to other cities globally. A developer faces a lot of hurdles while undertaking redevelopment projects. Apart from the investments involved, many other issues tend to crop up during the course of redevelopment. A developer in Mumbai has to take the consent of at least 75% of members for the redevelopment of a building. Getting the consent of all the tenants is a cumbersome process but it is important; inevitably, there are many tenants who oppose redevelopment and take a legal route. This ultimately stalls the process for a very long time. Also, getting timely approvals is a major issue in Mumbai. a developer has to obtain about 50 odd permissions to get approval for the project. Nowhere across the world do developers face such issues. Therefore, Mumbai lags behind other global cities in terms of redevelopment,” says Bhagtani.

There is a general consensus that what Mumbai needs is a strong commitment to planning. Many of the case studies globally show that successful projects had well thought-out plans at their bases. The case studies reveal that one very successful strategy is the creation of strong economic development agency that has independence, power and financial resources necessary to move difficult projects through the development process.

Some key initiatives by the state government would go a long way in revitalizing the urban renewal challenge, particularly in context of Mumbai. This includes granting incentive FSI to developers for construction of  LIG/MIG housing in lieu of their free-sale component;  single-window and time bound disposal of  Annexure-11  for slum redevelopment schemes;  premium for fungible FSI under SRA projects should be lower compared to non-SRA projects and higher delegation of authority for fast track clearances to key authorities.

Ends…

Track2Realty: Omkar Realtors & Developers, one of the leading players in making the slum redevelopment a success story in Mumbai believes slum projects are generally feasible in Metro Cities and more particularly in Mumbai. Shifting focus on Slum Rehabilitation for ECB will really help the sector.

Manoj Paliwal, CFO of Omkar Realtors & Developers says that since land parcels with large number of tenants are available in Mumbai, requirement of capital is also more.

“We are taking up the matter with concerned authorities. Slum redevelopment projects are state level issues, guidelines are meant for the entire country. Therefore, some delays are logical. But ECB in SRA would be a game changer for Mumbai redevelopment as a new window for financing will be available to the developers at reasonable rates,” says Paliwal.

The moot point is why is the move to slum ECB stuck up in policy logjam? Requesting anonymity a Housing Ministry official says Reserve Bank of India has already come out with the guidelines. You have to understand that Government of India and NHB are also working towards issuance of their part of the policy guidelines. I expect that soon these guidelines should be made available.”

Diipesh Bhagtani, Executive Director, Jaycee Homes says the Government has to be proactive with regards to ECB in SRA projects. The lack of a clearly defined policy is the main reason for this logjam. The eligibility levels and related fundamentals need to be established clearly for this policy to take off.

“ECB in SRA would eventually be a boon for the real estate market in Mumbai. The cost of funding through ECB would be cheaper than private funding through normal schemes. Additionally, ECB in SRA will help the poorer sections of the society to benefit as loans will be far more accessible and cheaper. ECB for SRA has the potential to lift the slum dwelling population from slums to live in respectable and affordable houses. Thus, ECB in SRA has the potential to make ‘housing for all’ a reality in a congested city like Mumbai and other metro cities. So, yes, it will definitely be a game changer for Mumbai redevelopment,” says Bhagtani.

It is true that ECB in affordable or low cost housing has not taken off in metropolitan cities of India. The high cost of land, raw materials, labour and inordinate delays in granting approvals act as a deterrent to affordable housing in cities like Mumbai and Delhi. Due to high cost factor, affordable housing as defined by the government is not possible in metro cities.

So, as an alternative, it is better to have developers to access funds from external sources and channel it towards slum rehabilitation projects. But there is a need for a clearly defined policy with regards to slum rehabilitation projects also. Though the Housing Ministry is preparing guidelines for slum rehabilitation projects that can raise funds via the ECB route, but the delay may defeat the purpose for which the proposed guidelines are being framed.

Track2Realty Exclusive: The Umeda Exit of the Ikeda Route of the Hanshin Expressway system passes through this building. The expressway is the tenant of these floors. The elevator doesn’t stop on floor 5th-7^th; floor 4 being followed by floor 8. These floors consist of elevators, stairways, machinery and other stuff.

The highway passes through the building as a bridge, held up by supports next to the building, making no contact with the building itself. The building has a double core construction, with a circular cross section and special care is taken by providing surrounded structure to the highway to protect the building from noise and vibration.

Babulal Varma, MD of Omkar Realtors & Developers believes if policy incentives are granted, Mumbai is quite capable of replicating global standards, while providing its own unique solutions. According to him, the Urban Renewal Authority’s 4Rs strategy is now well established and gaining recognition in the community. The 4Rs are Redevelopment, Rehabilitation, Reservation and Revitalisation which, when applied together, enables a holistic approach to unlock the full potential of urban renewal.

“Today, Hong Kong has emerged as a world class city with tall vertical structures, sector-by-sector massive development, open spaces and greenery and most prominently, Floor Space Index (FSI) of 5–35. Similarly for urban revitalization, there are several policies and programmes in American cities. The pursuit of growth through economic development has become the key strategy in efforts to revitalize older American cities. All levels of government have come to play roles in the complex inter-governmental process of designing, funding and implementing economic development programmes,” Varma narrates as an example.

Pranay Vakil, former Chairman of Knight Frank, asserts holistic solution is needed for reaching global benchmark as urban infrastructure has not kept pace with the massive influx of people. Roads in a constant state of disrepair, perpetual traffic congestion and an overstressed rail network are characteristics of our transportation system. One only has to look global at leading western cities like Manhattan and London which have multiple efficient lines of commute into the CBD.

“Manhattan faces much of the same land constraints of Mumbai as well as the fact that it is a peninsular city. However, efficient and farsighted planning has ensured its evolution over and under the ground with skyscrapers and underground metros which maximize land-use. Its local railways connect locations up to 132 kms away and ferries provide connectivity to dense residential hubs like New Jersey. Using this example as a model, existing FSI norms for frontline city like Mumbai must be relaxed to maximize land-use,” says Vakil.

…..to be continued

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From buyers’ perspective the cost of units in these townships is not always lower than the suburban areas of the city. This is because the land cost may be low but cost of creating entire infrastructure in the remote areas is very high which is also passed on to the buyer.

Analysts argue the most viable roadmap would be to develop the project on a public-private partnership with select developers who will be responsible for infrastructure development, construction, marketing, operations and maintenance of the proposed township. Integrated townships would then only hold the key to urban solution.

 Track2Realty ranking of the top 10 integrated township destination cities of India:

1. Bangalore
2. Delhi-NCR
3. Mumbai
4. Lucknow
5. Kolkata
6. Jaipur
7. Chandigarh
8. Chennai
9. Pune
10. 10. Panipat

Many realtors developing township across the country feel the boost given on development of infrastructure and improving connectivity by constructing highways will open new opportunities to develop both commercial and residential townships. However, they believe that the government needs to adopt a multifold strategy for revival in the real estate sector. Their expectations are:

• The government must incentivize developers by waiving off development charges and reducing stamp duty and registration costs
• Explore Public-Private-Partnerships which should be scaled up rapidly so as to match the demand for affordable and integrated townships
• The developers should get infrastructure subsidies on developing townships as it leads to an overall infrastructure development of the area leading to an increased cost for the developer
• Clarity in policy and more FDI infusion in township projects