Properties, Homes & more

In a shocking revelation to Times of India, Brihanmumbai Municipal Corporation (BMC) civic chief Swadhin Kshatriya told that not a single building with car decks on each floor has so far received the mandatory occupation certificate (OC) from the corporation. According to the records with BMC, most of “such” residential buildings were still in the construction stage! And as a matter of fact, most of these building are in prime locations across the metropolis.

In fact, BMC has already stopped sanctioning buildings with car decks, in order to prevent any possible misuse. The chief cracked the whip after a TOI expose on how builders who had got permissions to construct car parking decks on each floor were misusing the space by selling it as part of your apartment. That means, builders claim that they are providing private car decks and in the process grab additional FSI. For example, one of the prominent developer in the metropolis show to prospective buyers the living room in the area earmarked for the car park! This is clearly illegal and is a criminal act of deceiving innocent buyers…

The most blatant case is that of a new residential building in JVPD (one of the most prime areas of Mumbai) where the BMC’s building proposal department sanctioned 386 car slots for just 33 apartments. You can read more details about the story here.

A real-life version of “Khosla Ka Ghosla” is being played out with an increasing number of non-resident Indians (NRIs). The Ministry of Overseas Indian Affairs (MOIA) is being flooded with increasing complaints of illegal / fraudulent real estate deals and encroachments. In fact, with the recent Satyam scam casting its shadow on Maytas Properties, apprehensions amongst overseas investors has deepened.

It should be noted that property dispute is one of the most frequent complaints by NRIs. They are unable to protect their property due to long absences or lack of awareness of laws. The largest number of complaints are from major real estate markets like Delhi, Mumbai, Bangalore, Andhra Pradesh, Kerala and Punjab.

The nature of the complaints are mainly protection of property that has been forcibly occupied or encroached, dispute relating to division of property or inheritance and cases where investors have been cheated by real estate developers.

What actions are being taken by Government?

A minister from MOIA has mentioned that, following this flood of complaints, he had written to state governments asking them to appoint nodal officers for civil, judicial and police matters. These nodal officers are independent from NRI cells that are dedicated for issues related to financial or welfare interests of overseas Indians. The ministry has also planned a session on property disputes at the Pravasi Bharatiya Diwas in January 2010. The purpose of the interactive session is three-fold: allowing NRIs to invest safely in realty, putting in place an institutional mechanism at the state-level for property related disputes and providing a channel for credible information relating to property and inheritance laws.

A few days back, a leading newspaper carried an advertisement on their front page from a builder claiming that they are going to shed a light on the truth and are digging out the fact how the projects from another leading builder are charging Rs 5800/sqft for Plinth Area using hidden costs like Common Areas etc while they charge only Rs 2370/Sq ft for Plinth Area exclusively.

Now, the focus of a property seeker shifts towards the fact that how must he save himself from these smart games from the builder where he tries to buck extra? The smooth talking salesmen on the site of the builder chooses to skip on this fact too. So what should we do? The only way to save your skin from this hook is to have the right knowledge on the Carpet Area , Super Area and Plinth Area.

Here is a quick run-through the exact definitions you should know before diving in to scoop the best deal on property.

• “Carpet Area” refers to the total usable area within the four walls of an apartment or a commercial space, as the case may be. In other words, it refers to the area for which a carpet can be laid if required by the owners.
• “Plinth Area” refers to the entire carpet area along with the thickness of the external walls of the apartment. It obviously includes the thickness of the internal walls and the columns, if any, lying within the four walls of an apartment. The commercial space is not taken into account in calculating the plinth area.
• “Super Built-up Area” refers to the plinth area of an apartment or a commercial unit as added by the balconies and other common areas like corridors, staircase, lift room, motor room, security room, meeting hall, gymnasium and an area reserved for indoor games.

The builders, while advertising or quoting the rates for there properties, tag the carpet area and print the rates of the same in there commercials and public issues. But what they usually sell you is the Plinth Area. There has been a huge lot of roaring on this matter in past and yet the strength of the definition of Builder Area’s is enigmatic.

How many of us really get into the carpet area? We seem to simply go by what the builders say in terms of the saleable/chargeable area.

DO NOT GET FOOLED BY THE BUILDERS. I am intentionally posting this on April Fool’s Day, so as to warn all the readers and prospective proerty-buyers from being called “April Fooled by the builder”!!! Pass on this warning to all those you care about.

In order to realize the grand dream of affordable housing and massive infrastructure growth, the cost of the most important ingradient - construction material - must come down substantially. (Ref: article published in the Times of India)

In the last few months, the government has been pressing for affordable housing. However in the middle of election and economic slowdown, the measures have been nothing but half-hearted. Although the government, in its effort to arrest increase in the prices of construction material, announced cuts in service and excise taxes on cement prices, they still continue to remain high. Steel prices too are fluctuating. However, if the dream of affordable housing has to be realized, such frequent fluctuations in the prices of cement & steel must be controlled. In fact, the government should ensure stringent and effective measures to keep the prices at a sustained level to make the dream a reality.

According to some developers, the desperate need for infrastructure development has increased the demand of the construction material and its impact is felt on the housing projects as well. While in metros like Mumbai land prices (which have always been at a premium) contribute substantially towards the cost of the project, the cost of construction too constitutes a substantial fraction of the total cost. The housing sector consumes 55% of cement, while the infrastructure sector eats up 35%, and the balance 10% goes into other cement products. The ongoing price hikes of cement have hit the construction industry hard.

Now with the housing industry experiencing a slowdown, the capacity utilisation of cement plants, which has gone down to 86% in 2008-2009 is set to go down further during Q1 of this year due to the likely addition of 28.55 million tonne capacity. Cement firms are producing blended cement by adding 25% of fly ash to Portland cement. This actually reduces the production cost, which is NOT passed on to the consumers.

Steps needed to control price increase

With the increasing trend of mass housing, builders are coming up with newer technologies to reduce costs. The new projects have redefined the housing industry. The designs, use of vitrified tiles, polymer paints, paved areas, luxury amenities have upgraded the final output of the products contributing to the increase in costs. Also a few years ago, there were only G+4 or G+7 FSI, but now with high rises, costly technology is required, resulting in the steep increase in prices. Supplementary forces like labour and transport add up to the cost. But introduction of new technologies, which have reduced labour cost, is possible only in case of huge housing projects. For a builder investing in such technology is expensive.

Though government is laying down certain policies it should try to regularise one door clearance of documents to avoid the builders running from pillar to post to get their documents in place in time. To encourage the construction industry, VAT on cement and RMC (Ready Mix Concrete) should be brought down to four per cent. Most important, the government, the builders and manufacturers need to work closely.  To help reducing prices effectively and to encourage fair pricing, the government needs to appoint a more powerful regulatory body, completely ban the export of cement, remove the countervailing tax completely to make import easy so that domestic prices remain under control and bestow more power to the MRTP commission in order to be able to take strict action against the offenders and bring in more transparency in working of these systems.

What developers are doing to arrest spiralling prices?

According to a builder, the major factors for the increase in cost of construction are the raw materials, cost of TDR (transfer of development rights), increasing interest rates, government delay in clearances of various projects. In order to control cost, some developers have already started making efforts to procure raw materials in time, minimize wastage, have better information system, better negotiation for pricing of raw materials and use of ERP software to keep costs in control. Developers need to maintain a systematic construction schedule, stock raw materials, arrange work force and other daily requirements to minimise expenditure.