REAL ESTATE(REGULATION & DEVELOPMENT) BILL 2013 how the Central Government has let free the Builders to loot the general public.
The one most important thing which the Government has deliberately omitted to take in to account is the date of creation of the undivided interest of the Flat seeker in the land and common area of the project . The government ought to freeze the f.s.i of the builder to the date on which he accepts the first payment from any flat seeker in his project. In order to understand the matter more clearly, the readers may read the following Example. In short the undivided interest in Land & common areas of a project comprises in general 50 % of the cost of the Flat and in posh localities as much as even 95 % and more. For example if the F.S.I is say 1.5 and the cost of the Land in say greater Kailash in delhi or say Pali Hill in Mumbai is say Rs. 5 lakh per square meters (At present the cost of the best of construction is only Rs. 15 thousand per square meters). So on a Plot of say 1000 square meters , based on the F.S.I, of 1.5, the covered area will be 1500 square meters. divide it in to fifteen flats of say 100 square meters each. Now the total cost of the flat wil be 1000(plot area) X 500000 (land cost)+1500 (covered area ased on 1.5 F.S.I) X 15000 (cost of Construction per square meter) divided by 15 (No. of Flats) =Rs 34833333=00(three crores forty eight lakh, thirty three thousand three hundred thirty three). Now each flat owner will own interest in land and common areas of the project to the extent of 1000 sq meters divided by 15 flats =66.66 square meters which @ 5 Lakh per square meters will be worth Rs. 33333333=00 (three crores thirty three lakh, thirty three thousand three hundred thirty three). The remaining 15 lakh being the cost of the construction of flat @ 15000/= per square meters so the interest of flat owner in the land & common areas of the project is 95.69 % of the total cost of the Flat. Now except for Maharashtra no other State has tried to safeguard this interest of the Flat owner and even in Maharshtra, it has not been done from the proper stage. What they provide is that the Builder cannot construct any additional unit unless he seeks N.O.C of all the Flat owners, now that on first sight looks okay but it is not so because this protection is given only after registration of agreement which is either midway or at Completion time. Now take the general Scenario where at the time of sanction of the Project Building Plans, the F.S.I applicable is 1.5 in the above example and the builder start selling the flats keeping a healthy profit for himself based on the F.S.I available and cost of Land suppose he sells the flats at Rs. 4 crores each thereby earning a profit of 4 crores minus 3.4833 crores cost=0.5167 crores per flat or 7.75 Crores on the project of 15 flats. It is to be clearly understood that the Builder adds his profit from day-one and all his calculations are based on the initially available F.S.I only.
Now suppose the builder Lobby collects say one thousand crores bribe and pays it to the concerned Minister & officers of the state or the center and manages to increase the F.S.I to say 2.00 midway through the project now he gets to build an area of 2000 square meters instead of the 1500 square meter at which he started his project or in other words he gets to build 5 more flats so instead of 15 flats he now gets to sell 20 flats @ 4 crores each and makes 10.334 crores profit instead of the 7.75 Crores and in the bargain the share of undivided interest of each flat owner in the project Land & common areas comes down to 1000 Sq meter divided by 20= 50 square meters worth only Rs. 50 X 500,000=00=2.5 crores only instead of 3.3333 crores his interest was originally worth so each flat owner suffers a loss of Rs 83 lakh. I have been researching the subject for more than twenty years and I have found that even 5 % of flat owners do not take this most important aspect in to account while buying the flat. I met Sri Shankar Agarwal the Principal secretary Housing of U.P.in about 2008/09 and even he admitted that his own builder in NOIDA had sold more Flats than planned and that he was not aware that he had lost money on account of diminishing of his interest in the common areas and Land of the Project. Most surprisingly this very same Housing Secretary , within a month or two of my meeting with him increased the F.S.I in the State of U.P from 1.75 to 2.5 to even 3.75 & more. Now he and his minister may have got a few Crores from the Builder Mafia but he caused a loss of lakhs of Crores of Rupees to the Flat owners in the then ongoing Projects.
Now in the above example case if the F.S.I was increased to say 3.0 instead of 1.5 then the Builder would get to build thirty flats instead of fifteen and thus make a profit of Rs.15.5 Crores instead of 7.75 Crores and each Flat owner would own only 33.33 Square meters Land in the project worth Rs.1.66 Crores instead of 3.33 Crores originally thus a little less than 50 % of his investment will be wiped out without his knowing. Now if the Building were to fall down in say an earthquake then each Flat owner will own onlyRs.1.66 crores worth interest in the bare Plot.
So how can this fraud be prevented ?
Very simple –by freezing the F.S.I of the Builder in the Project to the F.S.I initially sanctioned for the project or to the time of acceptance by him of the First advance from the first Flat seeker in his project.
Or in other words any Increase in F.S.I. if needed to make affordable housing available , should not be extended to the ongoing Projects in which selling of Flats has already commenced.
Robby Sharma
Kanpur
Mob-919415438326,919235844258
Email-sharmarobby1@gmail.com
Blog-sharmarobby.wordpress.com
