Tuesday, November 14, 2006

Purchase of Property- What Consumers Should Know?

[Courtesy: A mail from Ashok Chaitanya Ashok[_]chaitanya[at]yahoo.co.in]

The recent spate of demolitions of residential and commercial structures in cities like Delhi and Mumbai has dented the confidence of innocent purchasers of property who had invested their life savings in property only to find that it was illegal or that it could not be used for the purpose it was purchased for.

Urban Planning- Plans on Paper Selectively Implemented

The urban population of India has rapidly increased in recent years. In 1961 about 79 million persons lived in urban areas of the country, by 2001, their number had gone up to over 285 million, an increase of over 350 percent in the last four decades, which will increase to over 400 million by the year 2011 and 533 million by the year 2021. In 1991 there were 23 metropolitan cities, which have increased to 35 in 2001. As a result, most urban settlements are characterized by shortfalls in housing and water supply, inadequate sewerage, traffic congestion, pollution, poverty and social unrest making urban governance a difficult task. Big cities like Delhi, Bangalore and Mumbai due to pressures of rapid urbanization have now become unlivable. Further the the failure of the local governments to adhere to the Master-plan and the greed of builders to earn a quick buck have added to the chaos of urban life in India.

To stem the rot, the courts have stepped in and in many cases as seen in Delhi and Mumbai have ordered demolition of illegal structures or structures not adhering to the master-plan. However many property owners, tenants and consumers of urban services have become unwitting victims of court judgments, simply because they were misled by unscrupulous builders. It is not that these purchasers of property were not aware that they were purchasing were illegally built property or that the same was without authority of law. In most cases, they were misled to thinking that the official apathy and corruption which allowed the buildings to come up in the first place would continue. Thus they believed that they could continue to live in the illegal structures. None of them bargained for judicial activism in regard to the activities of the municipality.

What are Master-Plans?

Master plans has been in vogue for enabling orderly development of cities so that urban development was in accordance with a comprehensive plan. At present, hardly 20 percent of the urban centers have some sort of a Master Plan, which in many cases is just a policy document. It is estimated that there are about 1200 master plans prepared by various Agencies responsible for plan preparation but their implementation is not encouraging. The implementation of a master plan facilitates the orderly and planned development of cities in a sustainable manner, which would ultimately help in good governance.

Today, the master plan, (which was initially perceived to be a process rather than a conclusive statement) provides guidelines for the physical development of the city and guides people in locating their investments in the city. In short, Master Plan is a design for the physical, social, economic and political frame work for the city, which greatly improve the quality of Urban Governance also. Either way, in today's context, a master plan read with the Municipal rules is an important document to ascertain the legality of the structure.

A Buyers/ Tenants Checklist

The following guidelines would guide property owners and prospective buyers on the laws relating to properties. For convenience and uniformity we have made reference to the laws in Delhi. However, laws in most urban areas are more or less similar.

1. Check if Use of Property would amount to Change of Land Use:

Please confirm whether the property you purchased could be used for the purpose it was purchased. You need to confirm with the master plan whether the property falls within the residential area, green belt or industrial zone. There are penalties for contravention of the plan. For example, in Delhi, the law prescribes that no person can change the use of any land or building or part thereof to other than the sanctioned or permissible use and the offence of the misuse is punishable u/s 347 of the D.M.C. Act 1957, which may result in simple imprisonment that may extend to six months or fine which may extend to Rs. 5,000/- or with both.

2. Check if Non residential Activity in Residential Premises Is Permissible:

In Delhi, specific provision for mixed use have been given for Walled City, Karol Bagh and other parts of the Special Area in the relevant sections in the Master Plan after making payment of conversion and parking fee @ Rs. 5500/- per sqm. of the permissible covered area at G. Floor as per Office order No. 5/EE (B)/HQ/92 dated 18.8.1992.

In case it is found feasible to permit mixed use in a street / area the same would be permitted subject to the following conditions:

i) The commercial activity allowed shall be only on the Ground Floor to the extent of 25 % or 50 sq.m. whichever is less.
ii) The establishment shall be run only by the resident of the dwelling unit
iii) The following activities shall not be allowed:

a)

Retail Shops

Building materials (timber, timber products, marble, iron and steel and sand.)
Firewood, Coal.

b) Repair Shops

Automobiles repairs and workshops
Cycle rickshaw repairs
Tyre resorting and retreading
Battery Charging

c) Service Shops

Flour mills (more than 3 kw. Power load)
Fabrication and welding

d) Storage, godown and warehousing

e) Manufacturing units (excluding house hold industry)

f) Junk Shops

Nursing Home, guesthouse, and Bank shall be allowed in residential plots of minimum size of 209 sqm. facing a minimum road width of 18mtrs. wide (9 mtrs. in special area and 13.5 mtrs. in rehabilitation colonies) subject to the conditions laid down in the guidelines issued in this regard.

The front setbacks for these plots shall be surrendered without compensation unconditional to local body for use as part of the right of way for parking etc. Because of conversion of use activity the conversion fee shall be charged from the beneficiary as decided by the Authority.

3. Check if the Muncipal Guidelines allow Mixed Use

Mixed Use, viz.- carrying commercial activities in residential areas are generally governed by laws which indicate the permissible limits of mixed use. For example, the following is the law in Delhi.

The Master Plan for Delhi has been modified vide Notification dated 7th May, 1999 allowing Guest House, Boarding House, Lodging House, Nursing Homes and Banks in residential plots of minimum size 209 sqm facing roads of minimum width 18 mts. (9mts. in special areas and 13.5 mts, in rehabilitation colonies) subject to the following conditions;

Minimum road frontage as mentioned above will be necessary for allowing above mentioned activities. For Guest Houses, Banks and Nursing Homes, which are already in existence this requirement may be relaxed, provided there is clearance from fire department.

For Nursing Home and Banks, a maximum of 2/3rd-floor area may be allowed for conversion for plot size upto 250 sqm. In case of larger plots, the use for the above-mentioned purposes may be permitted subject to a ceiling of 2/3rd FAR or 600 sqm whichever is less. In the cases of guest Houses a maximum of 3/4th-floor area may be allowed for conversion regardless of size of plot. A maximum of 15 Guest rooms will be permitted in guest Houses.

The maximum plot size for the above-mentioned activities will be 1000 sqm.

No commercial activity in the form of canteen or restaurant will be permitted. Catering will be allowed only for the residents of the Guest Houses /Nursing Homes.

A permission fee will be charged at the rate of 10% per annum of 'the difference between the average commercial rate and average residential rate from Banks and Nursing Homes and 2.5% from Guest Houses as approved by the Ministry with the option to the property owners to pay use permission fee for 5 to 7 years in advance. The fees will be based on the actual floor area utilized for such non residential purpose. The amount collected through the levy of permission fee will be placed. in a separate escrow account by the concerned local body (MCD) collecting it and will be utilized for augmentation of infrastructure in and around the area.

Where residential premises are already being put to such non-residential use, the same will be regularised on their payment of permission fee vide para (ix) above from the date from which, its functioning has been established.

The law mandates that the Local bodies will ensure that permission fee is paid for each financial year within six months of that financial year. In case of violation of these guidelines /default, prompt action will. be taken to issue time-bound notice to party and in case of non-compliance close and seal the premises and pern1ission fee with 100% misuse fee recovered. Further, whatever premises are utilized for such non-residential but permissible use it will be ensured that no nuisance or hardship is created for the local residents.

4) Certain Professional Activity permissible in Residential Areas

The law in several cities in India permits professional activities by self-employed professionals like lawyers, chartered accountants and doctors within the confines of their own homes. In Delhi for example, professional activity shall be allowed in residential plots and flats on any floor on the following condition:

Part of the premises shall be permitted to be used upto a maximum of 25% of FAR or 100 sq.mtrs. which ever is less, for non residential but non nuisance activities for rendering service based on professional skills.

Similar rules exist in other cities and states in the country.

5) Check if the Building adheres to the Sanctioned Plan

There are important criteria to be checked before a building is used. For e.g., is the building constructed within with the Floor Space Index (FSI) of the locality?, and, whether there has been deviations to the approved plan sanctioned by the local authorities? In many cases unscrupulous builders have built in excess to the sanctioned plan. More often than not it seen that the developed property does not in any way adhere to the sanctioned plan. To get more sale able space, the builder most readily compromises by flouting the sanctioned plan.

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