No clarity on land pooling: have homebuyers been duped of Rs 1000 crore?
With the urban development ministry finalising realty regulatory rules for Delhi, societies registered under land pooling are likely to face problemsreal estate Updated: Dec 03, 2016 19:33 IST
Samarth Daksh, 70 years old, was lured by a man claiming to be a developer to invest in three residential properties two years ago in Delhi’s L Zone - which is part of the Delhi government’s land pooling policy. He made cash down payments for three apartments in three multi-state cooperative societies, which cost Rs 12 lakh, Rs 7.5 lakh and Rs 5 lakh. As proof of the investments, he was just given a kacha (temporary) bill by the society.
Interestingly enough, cooperative housing societies have not been registered or allotted land by the Delhi government after 1992.
Daksh is a worried man today as the ministry of urban development has finalised the rules called the National Capital Territory of Delhi Real Estate (Regulation and Development) (General) Rules, 2016, or RERA for the setting up of a real estate regulator. Once the rules are implemented, developers have to furnish authenticated copies of the title deed of a property reflecting the title of the promoter to the land on which the project is to be developed, show original sanctioned plans, layout plans and disclosures pertaining to the total amount of money collected from allottees.
Daksh is a worried man today as the ministry of urban development has finalised the National Capital Territory of Delhi Real Estate (Regulation and Development) (General) Rules, 2016, or RERA for the setting up of a real estate regulator. Once the rules are implemented, developers have to furnish authenticated copies of the title deed of a property reflecting the title of the promoter to the land on which the project is to be developed and show original sanctioned plans and layout plans. They also have to make disclosures of the total amount of money collected from allottees.
Also, developers who have aggregated land as part of the Delhi government’s LPP have to return a minimum 60% of the land to the Delhi Development Authority (DDA), which will give them a plot for development – not necessarily in the same location as the original plot they acquired. Hundreds of welfare societies have been registered after 2007 when the Delhi Master Plan (MPD 2021) was notified, laying down LPP norms and earmarking five zones in the Capital – J, K (I and II), L, N and P (I and II) for it. About 27,000 hectares are to be developed under LPP out of which 5, 300 hectares are in zone L.
What this means is that no developer can claim to own a specific parcel of land at this stage, especially when DDA is still awaiting the Delhi government’s decision to declare 95 villages as development areas, 89 of them as urban villages. The state government is yet to operationalise the land pooling mechanism and in the absence of such a direction, there is no way in which developers or housing societies can register their projects with the regulator. A Delhi government spokesperson says that it will take time to operationalise the policy.
Daksh fears that the money he has paid for the three apartments (real estate experts estimate such deals to have cost gullible investors anything around Rs 1000 crore) will never be returned. Also, the Real Estate Regulatory Act (RERA) lays down guidelines on how a model agreement should be entered into with homebuyers. How will that be done, when there are mostly kacha receipts that buyers have and no proper agreements.
The question here is how will these societies qualify as a ‘developer’ under RERA rules when the land pooling policy has not yet been operationalised. “Societies, in their capacity as promoters, will need to register under the RERA. Since non-registration (after the setting up of the regulator) is a punishable offence, societies will continue to have to abide by this requirement. This is likely to create a transitional problem,” says Yogesh Singh, partner with a legal firm Trilegal.
Therefore, anyone promoting projects under LPP is committing a financial fraud. “What empowers them to collect money and sell flats under the name of a society? Under the LPP, mere availability of land with a farmer does not make him a developer,” says Ramesh Menon of Certes Realty. “Many land parcels shown to the consumers may or may not be in the same parcel under the LPP and can be reallotted within a 5 km radius. A license to build requires specified land parcel of converted residential land but currently all land is for agriculture. Under the LPP, if the societies ordevelopers have over 20 hectares, they get 60% land back. If they have less than 20 hectares, they get 48% back. The minimum land required is five acre. A company, say it’s called ABC Private Ltd, is only staking claim to a parcel but it actually has no land. It has only given membership of a society which may be developed in the future but the cost of land has already been recovered from the buyers,” he says.
Experts estimate that the total amount collected fraudulently so far from homebuyers, going by the `8 lakh to `15 lakh paid per apartment, could be `1,000 crore.
“This money has so far been collected in the name of proposed development,” they say, adding will this be returned to these buyers and a new model agreement signed between the two entities. Post RERA, the developer entity first needs to qualify as a developer and get a license to qualify as a builder.
Architectural plans of the project have to be approved before it gets a license to build.
What is the way out for people who have invested in housing units sold to them as LPP projects. A model sales agreement would be required. “Under the LPP, all apartment bookings that were entered into are now null and void now. They would have to adopt the new model sale agreement prescribed under RERA Rules which definitely would affect revision of apartment prices as well. Customers should immediately seek refund of their investments and wait for these builders/societies to get registered under RERA first,” says Amit Jain, founder and CEO, FARxchange.com
Experts also question the prices at which the residential units have been sold to buyers. “Most buyers have been sold flats for around Rs 3,000 per sq ft to Rs 5,000 per sq ft. How have flats been sold at this price in the absence of clarity on government levies, external development and internal development charges and the final cost of construction,” they ask.
A housing society coordinator says his society was registered under a trust and had about 225 members and that six acres of the land had been fully or partially paid for. He claims that the society will follow all legal procedures as per RERA. “The procedure that will be followed works somewhat like this. Once DDA operationalises the policy, the society will give back 6 acres to DDA. At that point in time, we will register the society and qualify under the land pooling policy. Once the policy is operationalised, we are hopeful that DDA will give back the developed land within 18 to 19 months.”
Another developer says that both the land pooling and RERA are related. “If RERA has to be implemented, the land pooling policy has to be operationalised. All depends on the intent of the government,” he says.
Another society coordinator is of the view that once the land collected by societies is returned to DDA, it will get a land transfer agreement, a single window document that includes license for the land. This will be followed by getting floor plans and building plans approved by the authority and then finally starting construction. “How much time it takes depends entirely on the intention of the government. The entire process can be up and running within a year,” he says, adding the amount collected so far cannot be returned at this juncture as land has already been bought.
Experts also question why DDA did not take any action against developers/societies who had invited potential buyers to invest in land and merely issued notices warning people to stay away from “any illegal offer of registration of plots/flats under the land pooling policy.” An email sent to DDA officials received no response.
Legal experts say that all home buyers should be warned that the policy is not yet operationalised. Liquidity in the property will be a problem since the plot of land is not identified. Given that the same plot of land need not necessarily be re-allotted, this will also expose the buyer to a risk of his property being shifted to a less desirable location, adds Singh.