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LAW RELATING TO PURCHASE OF A HOUSE
Asha Mahant, Solicitor

Buying a house requires a huge investment and hence a flat purchaser needs to be very prudent in ensuring that his hard earned life savings are adequately protected and the house purchased by him is free from all encumbrances.

In the State of Maharashtra, the construction activities of the Builders and Developers are regulated by the Maharashtra Ownership Flats Act, 1963 (the “Act”) and Rules, as amended from time to time, framed thereunder.

Set out below are some general rules / precautions which must be followed while purchasing a house either from a promoter/ developer or through a second sale. However, these steps are only guidelines for examination of the prima facie title to the property and are not exhaustive and may differ from case to case, depending on the complexities involved in the transaction and therefore expert advise must be sought prior to purchasing a house. Once the house is identified and the commercial terms are agreed upon, following safeguards must be kept in mind.

In case of sale directly by a promoter/ developer, the following documents should be verified:

  • The title deeds in the name of the land owner and revenue records of the plots on which the building is constructed or is under construction i.e. 7/12 and/or property card which must bear the name of the land owner with whom the developer has entered into agreement for development. The title of the property should be clear, marketable and free from encumbrances. All dues on the property should have been paid.
  • The Agreement for development between the owner of the plot and the promoter/developer. It should be ascertained that the promoter/developer has sufficient rights and power to develop the property and the documents assigning the development rights is stamped and registered with the office of sub-registrar of assurances. In case of development agreement verify whether the development rights include right to sell the flats and convey the property to the society once it is formed. The promoter/developer must also furnish an Irrevocable Power of Attorney executed by the owner of the property in his name. This is to ensure that in future the owner of the property cannot dispute the right of the promoter/developer to sell the house.
  • The promoter/developer must produce the following documents which shall be part of the Agreement of Sale:
  • Approved plans/specification
  • Commencement certificate
  • I.O.D.
  • Title Certificate
  • Occupation Certificate, when received
  • Building Completion Certificate, when received
  • The flat sale agreement (the “Agreement”) should be in the standard format prescribed under the Act and must be executed by promoter/developer upon receipt of any payment exceeding 20% of the sale price of the flat. The Carpet area of the flats should be clearly and unambiguously defined alongwith the nature, extent and description of all “Amenities” and common facilities must be clearly mentioned in the Agreement. At the time of taking possession check if you have received all these Amenities and also measure the flat area (built up / carpet are) as stated in the Agreement. You must also check that the construction is carried out according to the sanctioned plans and specification granted by the Concerned Authorities. The promoter/developer must ensure good quality materials and proper workmanship.
  • With respect to the payments made to the promoter/developer, the payments must be made according to the progress of the work, under the provisions of the Act. The promoter/developer should not enhance the price of flats on any account whatsoever once the Agreement is executed except for additional government levies/taxes/court orders.
  • The Agreement is required to be stamped and registered. The Stamp Duty is payable on the higher of the market value of the property or on consideration paid under the Agreement. The Agreement must be adjudicated before stamping. Presently the rate of stamp duty payable is 5%. The stamp duty has to be paid before signing or executing the Agreement. The Agreement must be registered with the Sub-registrar of Assurances on whose jurisdiction the property is located. The Registration should be completed within four months from the date of execution of the Agreement. The present registration fee is 1% of the market value of the property or the consideration whichever is higher subject to a maximum limit of Rs. 30,000/-.

 

In case the flat is being purchased in resale and not directly from a promoter/developer, the additional precautions would be to ensure that the seller has made full payment to the developer including all outgoings and has stamped and duly registered his/her agreement of purchase. Also ensure that the flat being purchased is free from all mortgages and loans. In case the flat is in a co-operative housing society, ask for a NOC and no dues certificate from the society and check whether all taxes, maintenance charges and electricity bills are duly paid up-to-date.

The author is a Chembur based practicing legal advisor to individuals, promoters, developers and the co-operative housing societies on the structure of the transactions involving joint ventures in land development, exploitation of balance FSI and utilisation of TDR etc. Any queries can be sent to: ashamahant@gmail.com

 

LAW RELATING TO LEAVE AND LICENSE
Asha Mahant, Solicitor


In the State of Maharashtra, it is very common for a landlord to grant a leave and license to a person for using the premises for a certain period.
A license is not defined under the Maharashtra Rent Control Act, 1999. The same is defined under Section 52 (Chapter VI) of the Indian Easement Act, 1882. The definition of license reads as follows: "Where one person grants to another, or to a definite number of other persons, a right to do, or continue to do, in or upon the immovable property of the grantor, something which would, in the absence of such right be unlawful, and such right does not amount to an easement or an interest in the property, the right is called a license."
A mere license does not create any estate or interest in the property to which it relates; it only makes an act lawful which without it would be unlawful. Thus the status of a licensee is essentially different from that of a trespasser or a tenant. In fact, the possession of a licensee is not a juridical possession but only an occupation with the permission of the licenser. While the actual occupation remains with the licensee, the control or possession of the property is with the licensor through his licensee
Under Section 55 (1) of the Maharashtra Rent Control Act, 1999, any agreement for Leave and License or letting of any premises entered into between the landlord and the tenant or the licensee as the case may be should be in writing and should be registered under the Registration Act, 1908. Section 55 (2) imposes the responsibility of getting such agreement registered on the landlord. It further provides that in the absence of a written registered agreement, contention of the tenant about the terms and conditions on which the premises have been given either on leave and license or even let out shall prevail. An agreement for Leave and License is required to be stamped under Article 36A of Schedule-I of the Bombay Stamp Act.
Applications for recovery of possession, for premises given on leave and license after 1.10.1987, shall be filed under Section 24 of the Maharashtra Rent Control Act. In case of disputes not falling under the definition of license or falling within jurisdiction of Small Causes Court, where the subject matter of dispute or dispute is more than Rs.10,000/-, the suit should be filed at the City Civil Court, Mumbai and if it is more than Rs.15,000/-, the suit should be filed at the Mumbai High Court.

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The author is a Chembur based practicing legal advisor to individuals, promoters, developers and the co-operative housing societies on the structure of the transactions involving joint ventures in land development, exploitation of balance FSI and utilisation of TDR etc. Any queries can be sent to: ashamahant@gmail.com

Private builders will get to redevelop cessed buildings in Mumbai

Posted by paragjani on March 20, 2009

MUMBAI: The Maharashtra government recently cleared a guideline that will open up a huge business opportunity for redevelopment in South and Central

Mumbai, considered to be among the few of the most expensive real estate markets in Asia.

In a notification that clears the modified Development Control Regulations (DCR) 33(7) and 33(9), the government has paved the way for redevelopment of about 16,000 cessed buildings in south and central Mumbai and also allowed private developers to redevelop properties with a size of 43,000 sq ft in joint ventures with Mhada, or tenants/owners.

Earlier, this clause under the DCR was allowed only to Mhada and the BMC. This implies that developers, including Orbit Corporation, Housing Development and Infrastructure, Akruti City, Lok Housing and Unity Infra Projects, can now join hands with the state’s housing authority, or their tenants and owners, to develop the properties.

The prospects for such developers are also better as in a redevelopment project, the investment is comparatively low and the saleable area is about 50% of the project. In particular, Orbit Corporation, HDIL and Akruti have developed their business models focusing on redevelopment projects.

Cessed buildings are typically old constructions wherein the tenants pay a predetermined amount to the BMC.
The notification also stipulates an increase in the applicable floor space index (FSI) to four (from 2.5), thereby giving developers more space develop.

Said Cess Properties Developers Association president Kishore Aversekar: “The modified DCR is aimed at providing an incentive for accelerated development through the cluster approach in the urban renewal scheme and encourages development of projects through joint ventures with the Maharashtra Housing and Area Development Authority, tenants and landlords and private developers.”

The modified DCR has also increased the threshold of the minimum area to be allotted to the tenants/occupants of the cessed building to 300 sq ft carpet from 225 sq ft. “It’s a huge opportunity for us,” Ram Yadav, finance director of Orbit Corporation, said.

“The change in DCR 33(9) would allow us to develop at least 20 to 25 new housing societies. We are already in talks with various housing societies and tenants at the moment.” Other redevelopment-focused developers, such as Shapoorji Pallonji, the Rohan group, Lodha and RNA, have initiated steps to tap the opportunity as well.

The initial investment in the average redevelopment project is about 30-35% of the total development cost that needs to be paid to owners and tenants. Other costs for a middle-class redevelopment project include transit rentals and construction costs.

The government has also applied the eligibility criteria on the lines of the Maharashtra Slum Area (Improvement and Clearance of Redevelopment) Act, 1971 for developers and has made it compulsory for private developers to obtain the consent of at least 70% of the occupants.

Source : http://economictimes.indiatimes.com/News/Economy/Infrastructure/Private-builders-will-get-to-redevelop-cessed-buildings-in-Mumbai/articleshow/4284632.cms

Past prices perfect for now

Posted by paragjani on April 5, 2009

Could residential demand pick up if prices are rolled back to levels prevalent a few years back?

Yes, seems to be the answer going by the experience of one of the largest developers in Mumbai — Housing Development and Infrastructure Ltd (HDIL).

Property buyers in Mumbai appear to be looking for 2004 prices in the current economic scenario, going by the responses that HDIL got last fortnight.

One of the large-scale real estate developers in Mumbai, HDIL has executed 32 projects spanning over 28 million sq.ft of saleable area, besides four million sq.ft under slum rehabilitation schemes in the city since 1996.

Primarily into residential housing, HDIL priced its March launches, comprising one- and two-BHK (bedroom-hall-kitchen) apartments at Kurla, a central suburb in the city, at Rs 5,251 a sq.ft — a level of pricing that prevailed there in 2004. The response has been overwhelming and the company, which opened bookings on March 6, has sold over 85 per cent of the 756 apartments till date.

Even in the present market conditions, where builders have lowered rates across the city, the Kurla project appears to be at least 30 per cent lower than the prevailing rates in the locality.

The second project of 413 apartments at Andheri, an upmarket locality close to the airport, too garnered good response so much so that the company has raised the price from Rs 7,651 a sq.ft to Rs 7,951 a sq.ft.

“We were looking for first-time buyers, who were pushed to the sidelines over the last three-four years and who form a sizable population of the working class in Mumbai,” says Mr Hariprakash Pandey, Deputy General Manager – Finance, HDIL.

Referring to the Kurla project, Mr Pandey says the offering of one and two BHK in the range of Rs 50 lakh fitted the bill of the middle and upper-middle classes who are willing to pay that much more for a central location with good road and rail connectivity, besides other infrastructure. “Many of our buyers told us that they had gone in for no more than a Rs 30 lakh loan by bringing in the balance as margin money,” he said.

The Andheri property too has its advantages, though the company managed to leverage on the prevailing rentals at the locale to arrive at the price point. With two BHK rentals at Rs 50,000-60,000 and buyers known to correlate rentals to the equated monthly instalments of bank loans, the pricing was seemingly attractive. “More importantly, there is no fresh supply coming in at the moment in the locality and the price is close to 40 per cent lower than the 2007 prices,” says Mr Pandey.

HDIL has lined up two more such launches in the coming months, where the price band would look overtly competitive to home-seekers.

Opts out of Dharavi

HDIL has pulled out of the Rs 15,000-crore Dharavi Redevelopment Project and may instead look for contracts from the bid winners.

Mr Pandey said the contract had become unviable and there was a great deal of uncertainty over the biding process. Further, there was no clarity in execution — how much space would have to be provided to the slum dwellers — 269 sq.ft or 400 sq.ft, besides the issue of premium the government sought for the slum resettlement project.

In 2007, the company was awarded the Mumbai international airport slum rehabilitation project as part of the Mumbai airport expansion project, which involves resettling 85,000 slum families by 2012.

Under phase I, HDIL plans to resettle 20,000 slum families on 38 acres at a cost of Rs 3,200 crore by December.

Source : http://www.thehindubusinessline.com/iw/2009/04/05/stories/2009040550781500.htm

 

 

 

 
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