Flat buyers must check if builder has right to construct & sell flats

The law mandates that certain documents must be registered, yet even without registration, permits these documents to be admissible in evidence. Would this be construed to dispense with the requirement to execute the agreement, whether registered or otherwise?
Case Study: Raj Developers had constructed Savitri Sadan building at Bhayander on a plot of land jointly owned by eight members of the Thakkar family. The builder failed to form the society. The shop owners and flat purchasers then formed a society on their own without the builder’s assistance. It was registered as Savitri CHS in March 1994.
The society later attempted to get conveyance of the land and building. As the builder failed to execute conveyance, the society filed a complaint before the Thane District Forum against the developer and eight members of the Thakkar family who had owned the building plot.
The forum observed that there was neither any agreement in respect of transferring the title from the land owners to the builder, nor was there any registered development agreement authorizing the builder to construct the building and sell the flats. The forum observed that when the builder does not have clear title, he cannot pass on the title to the society. Hence the forum concluded that it could not order execution of the conveyance. So the complaint was dismissed.
The society appealed against this order. Its argument was that the Maharashtra Ownership
Flats Act specially provided for unregistered agreements to be accepted in evidence.

The Maharashtra State Commission observed that the issue was not about the document being registered or not. It was whether the builder had any right to construct the building and sell the flats. There was no document to show that the builder had purchased the land or the land owners had given him a right to sell flats in the property. So, when the builder himself does not have any right, he cannot create a further right in favour of the society.
Accordingly, the Commission concluded that it did not have the power to direct the flat owners or the developer to execute conveyance. By its order (15.1.2017) delivered by Justice Bhangale for the Bench along with member D R Shiraso, the State Commission reaffirmed the view expressed by the District Forum, and dismissed the society’s appeal.
Conclusion: Flat purchasers must ascertain whether a builder has the right to construct a building and sell flats. A tacit understanding between the land owner and builder would be of no help. What is required is that there must be a written contract between the land owner and the builder. In the absence of such an agreement, the flat purchasers would never get any right to the flat purchased by them. So the only option available would be to seek a refund of their money along with compensation and costs.
Times of India – 22nd  January 2018

 

Grant adequate meeting time to jailed Unitech MD Sanjay Chandra: SC to Tihar Jail authorities

The Supreme Court today directed Tihar Jail authorities to grant adequate meeting time to their inmate Sanjay Chandra, Managing Director Unitech BSE -1.12 % Ltd, for allowing him to strike deals with prospective buyers.

Chandra, head of the embattled real estate group, was recently asked by the apex court to deposit Rs 750 crore with it by December end to safeguard the interests of homebuyers.

A bench of Chief Justice Dipak Misra and Justices A M Khanwilkar and D Y Chandrachud considered the submission of senior advocate Ranjit Kumar that Chandra gets 30 minutes meeting time in jail to deal with prospective buyers and for arranging money.

The apex court had on October 30 said that the jailed businessman will be granted bail only after the real estate group deposits money with its registry by December end.

Today, the senior lawyer said that Chandra has been required to be produced in various courts, consumer forum and commissions on a regular basis which hampered his endeavour to arrange money and hence, the production warrants issued against him by various judicial bodies be stayed for 15 days.

He also said that the accused be allowed to appear in courts through his lawyers. The plea was declined.The apex court, however, clarified that its earlier order directing all courts below not to take any coercive action against the accused for the time being would also be made applicable on all forums including state and national consumer commissions.

It had said if any proceedings were pending against Chandra and the company, those may continue and the final order be passed but no coercive steps would be taken for executing those orders.

Chandra is seeking interim bail from the apex court after the Delhi High Court on August 11 had rejected the plea in a criminal case lodged in 2015 by 158 home buyers of Unitech projects’ — ‘Wild Flower Country’ and ‘Anthea Project’ — situated in Gurugram.

Source – TOI

Maha RERA makes only developer, not land owner, answerable to homebuyers

Maharashtra Real Estate Regulatory Authority (MahaRERA) has withdrawn its office order making land owners equally liable as that of builders and developers

Maharashtra Real Estate Regulatory Authority (MahaRERA) has withdrawn its office order making land owners equally liable as that of builders and developers under the Real Estate (Regulation and Development) Act, 2016, the Bombay high court (HC) was told last week.

Advocate general Ashutosh Kumbhakoni told a division bench of justice Naresh Patil and justice Rajesh Ketkar that the authority has withdrawn the order dated May 1 by which it had introduced definition of the term “co-promoter” in the Real Estate (Regulation and Development) Act, 2016.

The office order defined co-promoter as the person or organisation, who under an agreement with the promoter (builder or developer) of a real estate project, is allotted or entitled to a share of the total revenue generated from sale of apartments in the project or in terms of constructed apartments in the project.

Kumbhakoni was responding to a petition filed by seven city residents, who own a 12,531 sqm plot at Nahur and who have given the land for development to a private developer, Shivkripa Enterprises.

 In the petition filed through advocate Vishwajeet Kapse they challenged validity of the office order primarily on grounds that the authority under RERA was not empowered to introduce any such new term into the enactment. “The impugned office order is tantamount to legislation,” stated the petition. “Respondent (MahaRERA) cannot legislate for the state, much less for the Union,” it added.

They took strong objection to the fact that the office order foisted a liability on land owners which was not contemplated either under provisions of the Maharashtra Ownership of Flats Act or under provisions of the RERA, 2016.

They said the authority under RERA failed to appreciate that the land owner, who is not himself the developer, does not undertake any construction activity and only parts with his rights as owner of the land to the builder or developer (promoter under RERA) to develop the land, and he has no further role to play in construction of the apartments and their sale to individual purchasers.

They withdrew the petition last week after Kumbhakoni made a statement to the effect that the office order has been withdrawn.

Source HT

Housing firm VBHC Value Homes plans IPO by 2019

The company, co-founded by Jaithirth Rao and P S Jayakumar, is backed by a number of investors including Japanese real estate conglomerate

City-based affordable housing firm VBHC Value Homes is planning an initial public offering (IPO) by 2019. The company, which plans to raise upward of ₹1,000 crore, intends to use the proceeds to expand operations across the country. It may also offer exits to some of its investors.

The company, co-founded by Jaithirth Rao and P S Jayakumar, is backed by a number of investors including Japanese real estate conglomerate Daiwa House Industry Co, Caspian Investment Advisors, The Carlyle Group, International Finance Corp, Tano Capital and HDFC Bank. The PE funds and small investors own over 60% stake in the company valued at over ₹800 crore.

VBHC, which sells homes in the ₹16-40 lakh price bracket, had earlier planned to raise money through public market in 2017.

“We postponed the IPO due to policy changes like real estate regulatory bill, goods and services tax and demonetisation,” VBHC chairman Jaithirth Rao said. However, he declined to comment on the exact size of the offering.

Ram Walase, CEO, said: “We will launch about one million sqft of projects across Bangalore, Pune and Mumbai over the next year. Some of our existing projects will also see their next phases opening up.”

Company is backed by a number of investors including The Carlyle Group, International Finance Corp, Tano Capital & HDFC Bank

Source – ET

Home buyers claim Jaiprakash Associates diverted over Rs 10,000 crore from Jaypee Infra

Jaypee Infratech has spent a minimum amount of Rs 13,283 crore towards the construction and development of the Yamuna Expressway, which translates to an amount of Rs 80.50 crore per kilometer

Home buyers claim Jaiprakash Associates has diverted over Rs 10,000 crore from its subsidiary Jaypee Infratech, which is under insolvency, in construction of Yamuna Expressway and other real estate projects.

In a new application filed by law firm Trilegal in the Supreme Court today on the basis of a report by accountancy firm ASA Financial Services, around 2,400 home buyers of Jaypee Wish Town project in Noida asked for forensic audit of accounts of Jaypee Infratech and Jaiprakash Associates, claiming that Jaiprakash Associates has transferred the land bank of Jaypee Infratech for settling its loans without adequate provisions and used its land bank as a security for getting loans.

According to the ASA report, Jaypee Infratech has spent a minimum amount of Rs 13,283 crore towards the construction and development of the Yamuna Expressway, which translates to an amount of Rs 80.50 crore per kilometer. However, the report compares the expenditure with an amount of Rs 17.16 crore per kilometer, which translates to Rs 34.32 crore per kilometer after indexing for inflation as per the consumer price index, spent on constructing a comparable six-lane concrete Mumbai-Pune Expressway.

Thus, the report finds that Jaiprakash Associates might have received an excess payment of about Rs 46.18 crore per kilometer for the construction of the Yamuna Expressway, which totals to about Rs 7,500 crore for the 165-kilometer Yamuna Expressway.

The report also finds that Jaiprakash Associates likely to have have overbilled at least Rs 3,000 crore to Jaypee Infratech for construction and development of the later’s real estate projects.

Jaypee Infratech in financial year 2015-16 gave 967 acres of land as security for Rs 33,000 crore loan taken by Jaiprakash Associates, and transferred 476.29 acres of land worth Rs 2,647.24 crore to the lenders of Jaiprakash Associates to settle its liabilities.

An email sent to Jaiprakash Associates didn’t elicit a response until the publication of this report Monday.

Devendra Yadav, a member representing nine association of Jaypee Infratech’s Wish Town projects urged the Supreme Court to direct Jaiprakash Associates to deposit Rs 15,000 crore, instead of Rs 2,000 crore ordered earlier. “We also demand a CBI enquiry for this scam, so that next time nobody can loot public money like this,” he said.

Home buyers had appointed ASA to undertake diligence of publically available accounts of Jaypee Infratech.

The Allahabad bench of the NCLT classified Jaypee Infratech, a subsidiary of Jaiprakash Associates, as insolvent on August 9 on a petition filed by IDBI Bank under the Insolvency and Bankruptcy Code 2016. Jaypee had defaulted on a Rs 526 crore loan by the bank.

The Supreme Court on September 11 had asked Jaiprakash Associates to deposit Rs 2,000 crore by October 27 to pay off the aggrieved home buyers.

The builder had requested the Supreme Court that it wants to sell off the Yamuna Expressway to generate money, and has an offer in hand for Rs 2,500 crore. The apex court, however, denied permission to sell off Yamuna Expressway, while extending the time to deposit Rs 2,000 crore as per its earlier order till November 5.

However, on the company’s failure to deposit the money on time, the apex court has now directed all the directors, except institutional ones, to be personally present in the next hearing on November 22, while also asking them to disclose their personal assets.

Jaiprakash Associates has now asked its employees to contribute towards arranging the Rs 2,000 crore, which will be returned in nine equal installments starting January 2018.

Meanwhile, the interim resolution professional (IRP) appointed in the Jaypee Infratech insolvency case, received around 18 expression of interests (EOIs) from the likes of steel, energy and cement conglomerate JSW Group, metals and commodities giant Vedanta, Mumbai-based builder Lodha Group, Deutsche Bank, etc, to buy Jaypee Infratech in full or in part.

Source – ET

Global investors eye tieups with local realtors to build commercial assets

Blackstone, GIC, Brookfield and CPPIB have already taken most of the ready and leased assets, leaving other long-term investors ready to write big cheques to scout

Global private equity, pension and sovereign wealth funds eyeing commercial assets in India are now looking to build these assets with local developers given that the demand is far outstripping supply of grade A assets in key markets.

Blackstone, GIC, Brookfield and CPPIB have already taken most of the ready and leased assets, leaving other long-term investors ready to write big cheques to scout for partners for development opportunities on core assets.

“Increasingly global investors are seeking advice on arrangements to be made with local realty developers for developing greenfield assets rather than waiting for the asset to be built by someone else. With this, their returns are also expected to be better as they lock in commercials from day one,” said Bhairav Dalal, partner, PwC India.

PwC’s annual survey on emerging trends in real estate found Mumbai, Bangalore and New Delhi’s pan-Asia rankings in term of investment destination stood at 12, 15 and 20, respectively. However, interest from international investors remains unabated. The survey is based on 400 fund managers and developers across Asia.

Global investors eye tieups with local realtors to build commercial assets

“Developers are successfully attracting funds with good capitalisation rate for their assets. But, that means expensive deals for funds. In this backdrop, investors are open to an idea of developing their own assets provided they find right partners. Capital is not an issue for India, but correct alliances are,” said Rajesh Agarwal, CEO, Shapoorji Pallonji Investment Advisors.

Last month, global insurance and asset management major, Allianz Group, in its maiden property-related engagement in India, partnered with Shapoorji Pallonji Group to create an investment platform for office properties. The fund is aiming to raise $500 million in equity and is also open to greenfield investment opportunities in commercial and logistics segment.

This deal forms part of Allianz’s strategy to allocate about 5% of its global real estate portfolio to the Asia-Pacific region. Allianz’s total real estate exposure across the globe is worth 52 billion Euros and is the world’s second largest principal investor. It is looking to invest more in India, in line with most of the international institutional investors’ plans for Indian real estate.

For domestic institutional investors, however, tenure of their fund that usually is around 4-5 years, acts as a deterrent to take any open position in greenfield office project. “We may not get into a greenfield office project until we launch an 8-10-year tenure fund. In warehousing and logistics, not only have we done it in the past, but we also look forward to do this, going forward. These properties can be quickly constructed as per clients’ specification within 9-12 months and also offer 250-300 basis point higher returns compared to buying a pre-leased asset,” said Sandeep Chadha, partner at Milestone Capital Advisors.

In the backdrop of an ongoing transformation in business environment, Indian real estate is witnessing a robust rise in investment inflow as both foreign and domestic institutional investors are infusing more funds into the sector. Private equity investment into Indian real estate in 2017 is about to set a new milestone estimated to exceed $4 billion this year, well past the 2015 mark of $3.6 billion, the highest since 2010, a recent Knight Frank report showed.

The rise in investment flow is backed by long-term institutional investors’ confidence owing to rollout of a battery of reforms including the Real Estate (Regulation & Development) Act, 2016 (RERA) and relaxation of norms to encourage Real Estate Investment Trusts (REIT) listings.

Source – Economic Times

Waste segregation: Housing societies get BMC notice for flouting composting pit norm

We have issued circulars pertaining to this to all wards. In the last 10 days, notices to this effect have been issued to housing societies flouting these norms,” said BMC Commissioner Ajoy Mehta

In a bid to get residential societies generating bulk waste to segregate and compost wet waste on their premises, the Brihanmumbai Municipal Corporation (BMC) has started issuing notices to housing societies that use the area earmarked for composting units for other purposes. Societies violating the composting unit rule will be penalised. On the BMC radar are housing societies that have come up after 2007, which had shown they have vermi-composting pits.

The civic body had identified 2,389 housing societies across its 24 administrative wards, which had received intimation of disapproval and occupation certificates (OCs) after they showed adequate arrangements for vermi-composting. But in a recent survey by the civic body, of these societies, 1,551 (65 percent) were found allegedly violating the OC condition, and using the space for composting units to park cars or extend garden space or build a shed.

The civic body is in the process of sending notices to all these societies. “We have issued circulars pertaining to this to all wards. In the last 10 days, notices to this effect have been issued to housing societies flouting these norms,” said BMC Commissioner Ajoy Mehta.

The move to conduct the survey of housing societies was taken up after many of them failed to set up the mandatory composting units on their premises citing space constraints. Meanwhile, the BMC is trying to help housing societies that genuinely lack space to set up composting units. The civic body is exploring the possibility of allowing private housing societies to compost wet waste at municipal markets. The civic body is planning to set up composting units in spaces available in BMC-owned market buildings, which will enable societies near these markets or those facing space constraints to use the facility by paying charges.

In June, the civic body made it mandatory for all housing societies and hotels that produce over 100 kg of waste daily or have an area of or above 20,000 sq metres to start segregating garbage and compost wet waste from October 2. These societies and hotels were asked to set up composting units on their premises. After many of them requested for more time, the BMC extended the deadline to January.

“There will be no further extension. The extension given to these societies is enough. Meanwhile, we are trying to help societies in whatever way we can. They had enough time before the first deadline on October 2,” said a senior official from the solid waste management department.

Source – Indian Express

Lifts in Mumbai buildings can now go up to rooftops: Terrace eateries to benefit most

After being in cold storage for over three years, the policy on allowing rooftop or open-air restaurants in the city was approved by the civic body on November 1

Less than a month after approving rooftop or open air restaurants, the Brihanmumbai Municipal Corporation (BMC) has given its nod to a proposal to allow lift shafts to go right up to a building’s roof. While the decision includes residential as well commercial buildings, both old and new, the move is seen as one that is likely to benefit restaurants on terraces/rooftops of commercial buildings more than residential buildings. After being in cold storage for over three years, the policy on allowing rooftop or open-air restaurants in the city was approved by the civic body on November 1.

The move came as a relief to restaurants waiting to set up eateries on their terraces, but the civic body never approved any building plan with a lift shaft that goes up to the common terrace. This meant customers coming to these rooftop restaurants had to take the staircase from the top floor of the building to the terrace. The change in the policy will now allow accessibility of common terrace by lift.

The civic body claims that terraces can be used as recreational open spaces and having lifts up to terraces can ensure easy accessibility. Further, justifying the move, a senior BMC official said, “It is a known fact that Mumbai has a dearth of recreational open spaces. Terraces as specified under DCPR 2034 can be used as an additional recreational area. However, in the absence of a lift reaching up to the terrace, people, especially the elderly and differently abled people can be inconvenienced. A lift will help easy accessibility.”

The official added this change in the policy had been demanded from time to time by housing societies, owners of commercial buildings as well as developers. “The decision has been taken in the larger interest of people and will be beneficial to many societies and its residents,” he said.

As per the policy, the area of the lift well for additional floor height of the lift well opening leading to the terrace level may be given free Floor Space Index (FSI) with special permission of the BMC commissioner on the payment of a premium. FSI is a development tool that defines the extent of construction permissible on a plot. It is the ratio of the built-up area of a plot to the plot’s area. In case of the area having restrictions, such as civil aviation etc, the height including the lift machine room shall be considered.

Meanwhile, in case of existing or old buildings, prior certification regarding structural stability of the building shall have to be submitted by the society/owner. Also, precaution towards safety and security shall have to ensured by the society/holder of the premises where the lift well opening is proposed on the terrace above the top floor.

Source – Indian Express

Bharti Axa buys office space in Mumbai’s BKC for Rs 169 crore

MUMBAI: More than two years after the last recorded commercial outright transaction for office space in Mumbai’s business district Bandra-Kurla Complex, Bharti Enterprises’ insurance arm Bharti Axa has bought 65,000 sq ft space at Parinee Crescenzo. The company has paid Rs 26,000 per sq ft, or Rs 169 crore, for the space spread over an entire floor. Bharti Axa is planning to use the space to set up its headquarters and consolidate its operations spread over two-three commercial buildings in Andheri

The deal was concluded and registered recently, while the Letter of Intent (LOI) for this was signed nearly three months ago,” said one of the persons mentioned above.

Email queries to Bharti Axa and project developer Parinee Group remained unanswered till the time of going to press. Transaction advisor JLL India declined to comment on the story. With this transaction, the building with total 1.1million sq ft leasable space is completely occupied. While the developer has strata-sold certain parts of the building, several lease agreements have also been executed over a period of time since the project was completed in 2013.

In September 2016, Tata Communications picked up 60,000 sq ft of office space on lease in this building, making it one of the key office space transactions in the alternative business district in the last financial year. Tata Communications had leased the entire 15th floor in this 20-storey building through this deal for a total tenure of five years.

In late 2008, Standard Chartered Bank had bought 300,000 sq ft spread over five floors to set up its corporate office here in this building, while it was under construction. Australian Trade Commission, SBI Mutual Fund, Signet Pharma and Estee Lauder are among the other prominent tenants in this building. The deal assumes significance as over the past few years, end users and occupiers have been increasingly resorting to long-term leasing of commercial space as against outright purchase and this transaction is in contrast with the trend.

The last outright transaction for office space was reported in September 2015 when drug maker Abbott India bought 4,35,000 sq ft of at Godrej Properties’ commercial project Godrej BKC for about Rs 1,480 crore. The deal was also billed as India’s largest enduser office space transaction by value. Abbott had said the acquired office space would house more than 1,500 employees.

Source – ET

MahaRERA orders Neptune to give home buyers flats in other wings

The Neptune 100 Above Buyers’ Welfare Association, set up by 53 home buyers who had booked apartments in Neptune Eleve’s B wing in Kanjurmarg in suburban Mumbai

In a first ruling on a complaint filed by an association of home buyers, Maharashtra Real Estate Regulatory Authority (MahaRERA) has directed Neptune Ventures and Developers Private Limited, which failed to give promised possession of flats in B wing of Neptune Eleve project in Kanjurmarg in 2014, to shift the flat buyers to flats in C and D wing, which are likely to be completed earlier. So far, the Maha- RERA had given orders on individual complaints only.

The Neptune 100 Above Buyers’ Welfare Association, set up by 53 home buyers who had booked apartments in Neptune Eleve’s B wing in Kanjurmarg in suburban Mumbai, had filed a complaint with MahaRERA that despite paying 10 to 30 per cent of the flat cost between 2010 and 2012, the developer had entered into registered agreements and had failed to give possession promised in 2014.

During the first hearing of the matter last month, the developer Neptune Ventures and Developers Private Limited had sought time to settle the matter amicably with the buyers. At the second hearing, the developer said that after discussions with the buyers, he had agreed to shift all 53 buyers to Neptune Eleve’s C and D wings which are likely to be completed earlier than the remaining wings in the project.

The association members agreed to option given by the developer withfour conditions. They demanded that the developer should not demand any fees for transferring their flat to a higher floor. They also demanded that the promoter should charge the money as per the subvention scheme he had advertised, and not impose additional costs.

They also demanded that the input credit on GST paid should be passed on to the association when the money comes to the promoter’s account, and that the developer should prepone his revised possession deadline from December 31, 2025 put on the MahaRERA website to June 2021.

MahaRERA adjudicating officer and chairperson Gautam Chatterjee then directed the developer to shift the home buyers’ flats to C and D wing of Neptune Eleve, and asked him to execute and register the agreements for sale as per RERA provisions before effecting any payments from them. He also directed that the future payment schedule should also be in accordance with the model form of agreement prescribed by RERA. As per the model agreement, the developer has to place 70 per cent of the project cost in an escrow account, and withdraw funds for the project in line with the construction schedule with the requisite certification by the structural engineer, the chartered accountant, and the architect.

Chatterjee also directed the developer to handover possession of the apartments by June 31, 2021 failing which the developer would be liable to pay interest to the buyers from July 2021 till the actual date of possession on the entire amount paid by the buyers. He also directed that the developer should not charge any extra money for floor rise if the buyers are shifted within 4 floors of the originally allotted floor or if shifted to a higher floor due to non-availability of apartments in Wings C or D. He also directed the developer to pass on the GST input credit to the home buyers after it is credited to the promoter’s account.

Source – Mumbai Mirror