The case of the Campa Cola Compound in Mumbai is an eye opener for all stakeholders in the real estate sector and especially the prospective home buyer.
The Supreme Court,in its verdict delivered in February,has exposed the reality of civic regulation in the opening lines of its order: In the last five decades,the provisions contained in various municipal laws for planned development have been violated with impunity in all the cities and those entrusted with the task of ensuring implementation of the master plan,etc.,have miserably failed to perform their duties.
Caught in this web are the residents of the illegal flats who have until May 31,2014 to vacate. The court is set to take a view on the case again,after it stayed demolition on November 12 the date it was set to take place on humanitarian grounds.
This can happen to any home buyer if care is not taken at every step before buying a home. To see how,it would be instructive to revisit the Campa Cola case.
the case
The land in question is owned by the Brihanmumbai Municipal Corporation (BMC) and was leased to a company Pure Drinks Ltd,which manufactured the Campa Cola brand of beverage in the 1980s. This company sold development rights to the land to a group of three builders to construct homes on a part of the plot,now known as the Campa Cola Compound.
The builders,during the period from 1984 to 1989 constructed 35 more floors than what was approved by the BMC.
The additional floors were in blatant violation of floor space index (FSI) applicable in Mumbai then. Stop work notices were sent but the builders continued with the work assuming the violation will be regularised, an officer of the BMC told The Indian Express on condition of anonymity.
The builders kept modifying plans but none of the plans with these floors were approved by BMC,which eventually did not issue the Occupation Certificate (OC) to the project.
Despite this hurdle,the builders went ahead and sold the illegally constructed flats to the home buyers. BMC did not give water connection in the absence of OC and the residents of this portion continued to manage water through tankers for almost a decade.
The case filed against the BMC by the residents for getting water connections exposed the illegality of the structure in court,and after the court order for appropriate action against the violations,the demolition notice was served by the BMC about a decade ago.
On the basis of the agreement,it was alleged that buyers,at the time of booking,were aware that approvals were pending. It was alleged that they also knew that due to lack of approvals,the rate for these flats were lower than the prevailing rate in the vicinity. Further,the builders verbal assurances made buyers sign up.
We were told that the permissions will come through in due course. So we went ahead. In fact,some of us obtained home loans on the basis of the papers given by the builders. How could we imagine that papers would be wrong or would be misleading? said a resident on condition of anonymity.
There were several options to resolve the issue. The state ordinance was one of them. However,the Maharashtra government does not want to set a precedent with respect to illegal structures. In addition,it would tantamount to contempt of court.
Giving extra FSI for a new building is another option,but there is no space on the same plot to rehabilitate so many. An adjoining plot is stuck in third party contractual commitments. Demolishing the entire complex could be a non-workable option as of now as it will involve legitimate flat owners and bring about several complications.
The reality is no one is able to come up with constructive solutions that satisfy legal parameters. The state is unable to help due to the court order and also because the BMC is the opposing party.
buyers,be vigilant
The Supreme Court in its verdict observed: Unwary purchasers in search of a roof over their heads find themselves becoming victims to the designs of unscrupulous builders. The builder conveniently walks away having pocketed the money leaving behind the unfortunate occupants to face the music in the event of unauthorised constructions being detected or exposed and threatened with demolition.
It all comes down to one action point: due diligence,for there will be nobody to help as the residents of Campa Cola Compound have seen it unfold. A regulator for the sector is a work-in-progress,and until then,the onus is primarily on the buyer.
check the status: Check the credentials of the developer and the track record of earlier projects. Do remember that approvals are different at different stages of the project. In the beginning,the project must have an approved plan and commencement certificate (CC),and at the end,the project needs an Occupation Certificate (OC). One must visit the site to be sure that the work is actually being carried out.
The buyer can ask for the copies of the relevant papers from the developers sales team. Usually,the sales team is averse to sharing the details since the talks are at the enquiry level. In such a situation,one must cross check the details with the concerned civic body. If the details are not easily available,one should apply for it through Right to Information (RTI) route. This may take time and effort,but well worth it given that it is ones money at stake.
take professional help: Buyers must take the help of professionals such as lawyers and property consultants as the stakes are high in this game. One can retain a professional to verify the claims of the developer and also get a search report of the project. This report includes legal status of the property and detail of the owners and legality of its ownership along with any loans or obligations on it.
Buyers usually avoid lawyers because they feel that fee paid is an unnecessary overhead. They do not realise that it may cost a little,but can save the earnings of a lifetime,said Shefali Madan,an advocate and real estate expert.
The property consultant can find out if the construction is as per the approved plan and there is no violation of FSI or any other regulation. He will also be able to check the financial status and capacity of the developer to complete the project in the committed time. One can always ask for the copy of the draft agreement for sale after paying a token amount with the condition that it will be refunded if your lawyer thinks it is not just and fair.
The lawyer can go through all the clauses that can pose a danger to the buyer in future,and can also point out at the catch in the terms and conditions and possible financial and legal implications.
There are cases where the company has changed its name and in a few cases,the developers have sold off the project to another investor half way. These could create legal issues at a later stage, said Somesh Ranka,a property consultant.
take a Loan: Even if one has the means to settle for an all-cash deal,it would be advisable to take some proportion as a home loan,only to ensure an objective third-party check by the bank. Several reputed developers already have a tie-up with several banks so as to speed up the process. Legal approval of the project and sanctioning of home loan usually relieves the home buyer of most of the worries.
continuous Checks: Buyers must be constantly vigilant about the progress of the project. In Mumbai,the BMC is planning to start a website that would detail the progress of the project along with the approvals granted,FSI sanctioned,floors and area of the flat applied and approved etc.
Had the buyers of the Campa Cola Compound taken into account the legal and regulatory status of the project and been aware of the implications of non-compliance,they would not have plunged into it tempted by the low rates. They feel betrayed,but the courts have not found them to be totally innocent. It is better to be armed with facts then be sorry later.