Itís not the slums. Owners of several apartment blocks do not have occupancy certificates. Weak laws, a political tussle empower unscrupulous builders
Geetanjali Minhas | March 7, 2014
Rekha Parikh, 58, and her husband Ashok bought a flat in Orchid tower of Campa Cola compound, Worli. It was 1991, and the couple moved into their 14th-floor flat a couple of years later. The builder, Rekha says, had promised them an occupancy certificate (OC) but it remained only that – a promise.
Two decades on, as the Parikhs look at an uncertain future in the central Mumbai complex. The legal battle has reached the supreme court, which asked them to settle the dispute amicably with what the residents claim is a “hostile” Brihanmumbai Municipal Corporation (BMC) or face demolition of the illegally raised floors, that occupancy certificate is among the documents foxing them.
The Parikhs are not alone. Thousands of homeowners face a similar quandary. The alphabets ‘OC’ have become a life and death situation. Almost. Ever since the apex court temporarily stayed demolition of unauthorised floors in buildings of the Campa Cola compound and asked affected families to vacate the flats by May 31 – the court subsequently asked the families and BMC to reach an amicable solution by March first week – there is a rising concern about OC.
Nearly 50,000 buildings in the metropolis, including 70 percent of the buildings built after the Maharashtra government introduced transfer of development rights (TDR) in the city to develop slums in 1990, do not have OCs. Though the building plans are approved, they have been denied an OC due to other violations. The situation in adjoining Thane is worse – 70 percent buildings there have been constructed without approved plans, effectively making them illegal.
Obtaining an OC is a requirement under the Maharashtra Ownership Flat Act (MOFA), 1963. The law says one cannot legally move into a building unless the developer has got the occupancy certificate from BMC. The corporation can ask flat owners to leave such illegally occupied flats or impose heavy penalties.
So why are such “illegal buildings” mushrooming in Mumbai? Chandrashekhar Prabhu, director-general, Maharashtra Economic Development Council, puts it down to a failure to implement policies: “Effective governance comes with the realisation that consumers should be troubled the least, and under the given situation provided with maximum possible benefits. Government policy implemented by those with vested interests for malafide purpose is ill-intentioned.”
The problem, say experts, is that in the absence of well laid-out regulations a person can get into real estate business and start construction of a project without licence, technical knowledge, or experience. He/she doesn’t need an office, supervisors or contractors. Result: many brokers and those with loose cash turned ‘builders’ overnight.
The problem compounds when the builder’s ‘official firm’ changes with each project. This effectively means the company formed for construction of a certain project is often closed after its completion and a new firm formed to take up a fresh project. So in case the project goes wrong, no one can be held accountable because of a simple reason: the company has closed and its directors resigned.
Many errant builders and developers have, over the years, gone scot-free for this, say those who know the sector.
“While inhabitation is a social issue and the person (homeowner) may be the actual victim, the law stipulates prosecuting the inhabitant, and he/she may be penalised by the courts,” says Shirish Sukhatme, president of Practising Engineers Architects and Town Planners Association (India). “The builder is the real culprit. But who will nab him if he does not possess a licence and cannot be blacklisted?”
Experts and activists expect such malpractice will be curtailed after the real estate (regulation and development) bill, 2013, is implemented. They believe it will reign in the strong builder lobby, even if it cannot be controlled completely. Though less stringent than the law proposed by the centre and yet to be passed by parliament, the Maharashtra Housing (Regulation and Development) Act, 2012, recently approved by the president, is one step ahead. It gives the regulatory body the powers of a civil court that can sentence errant developers to a prison term of up to three years and impose fines of up to '1 crore. “But this is on paper. We will have to wait and see its implemenation,” says Sukhatme. [The state government plans to set up the housing regulatory authority by June.]
Standard cheating procedure
While each violation by a builder is unique, there are patterns to etch a modus operandi: unscrupulous builders often begin construction without approved plans and issue bogus receipts, detected only at the audit stage, in an effort to increase profits. As a result, the civic body is bound to deny the builder an OC, and refuse water and other civic amenities. It is illegal for buyers to move in in such cases.
In other instances, unscrupulous developers flout other laws – they do not submit basement plans, do not provide adequate parking space, increase the balcony area, the number of floors (as in the case of Campa Cola compound, to take just one example) or their height, cheat on refuge floors, sell ducts and terraces, convert stilt parking into office and sell them, and so forth.
It many cases builders submit building plans to get Intimation of Development (IOD) from BMC, only to violate other conditions.
There are several examples of builders disappearing without giving the OC and legal water connection to the housing society. Hoping – often against hope – that they would get the OC, and also apprehensive of losing their homes, people move into their flats and pull water provided for construction activity through pumps and pay double the rates to BMC for it. Since such water connections are illegal, the civic body can disconnect them any time.
“Many builders don’t form a society and disappear after construction. Others who form a society don’t give OCs because besides paying hefty bribes to BMC officials several conditions need to be adhered to,” says advocate VC Singh. “Though builders collect this money from buyers, they do not pay it to the BMC. In many other cases, unscrupulous BMC officials, in collusion with builders, overlook mandatory site visits to check compliance – or the lack of it – by the developer concerned.”
“Builders must pay a heavy penalty, including compensation of '5 lakh per flat, to the corporation for giving unlawful occupation to people (once the new law is implemented). This will compel developers to comply with the law. (As part of penal provisions) their other projects should also be stalled for flouting laws,” says Sukhatme.
Half of Mumbai will have to be vacated if BMC takes action as per only the law regarding illegality of staying in flats/buildings without OC, he adds.
Why builders get away
Though MOFA stipulates criminal cases against builders who fail to form a society (like a cooperative or an RWA) within a period of four months after the flats are sold, advocate Singh says buyers usually shy away from taking the legal route because it would imply long-drawn battles and require time and money to pursue.
Seeking amendment, experts say the Maharashtra Housing (Regulation and Development) Act is diluted and rendered toothless, and that it applies only to new projects. Though the Act requires disclosure of building plans, the law is pro-builder. It allows errant ones to go scot-free and does not give the real estate regulator powers to check contents of agreement and see if clauses are being followed, experts and consumer rights activists allege. Claiming that the clauses are dictated by developers, they say the earlier law imposed a penalty of '10 lakh on builders for violations, but the new law stipulates only Rs 10,000.
The new law, they say, has no provision for criminal action against errant developers, let alone the power to reject their architectural plans, that it cannot verify authenticity of the submitted plans, and will not help buyers control malpractice.
Pankaj Joshi, executive director at the Mumbai-based Urban Development Research Institute (UDRI), explains that unlike the Campa Cola compound case, there are few cases of such blatant violation for which OC was denied. He says most instances of violation are those of the Urban Land Ceiling (Regulation) Act (ULCRA).
The builders flouted rules in the 1960s and ’70s and they remain in infringement despite the Act having been repealed since. This, he emphasises, remains the primary cause of buildings being denied OCs for reasons like non-payment of charges for development plans (DP), road widening, construction of road to avail TDR, or incorrect calculation of road-widening charges, and issues regarding reservation, non-fulfilment of all DP requirement, among others.
Since the BMC charges almost double the rate of actual water charges for buildings that do not possess OC, there is an argument that regularisation of these buildings would drastically reduce BMC revenue, which would force it to increase other taxes.
But UDRI’s Joshi says no city should thrive on penalties paid by illegal buildings. “With many people coming forward to obtain OC, it will bring in a lot of revenue for the government and the BMC will be more than happy to regularise these buildings,” he says.
It is a common view in Mumbai that the political tussle between the Shiv Sena-controlled BMC and the Congress-NCP state government is an obstacle. If the state government resolves the issue, the BMC, it is argued, will take the credit, and giving 50,000 OCs will translate into risking more than half a million votes.
A way out?
Most experts Governance Now spoke to favour a retrospective and comprehensive policy to regularise buildings without OC. Architect and urban planner PK Das says that if developers are not coming forward to complete formalities and get OCs for their buildings even after all these years, then cooperative societies and occupants must be allowed to approach the BMC and apply for OC. For this, the corporation must play an active role in facilitating the process, he says.
“The civic body cannot sit back and wait for people to approach them – they have to initiate processes to complete these formalities,” Das says. “There are court orders relating to OC being granted to resident associations in case the developers have failed to do so. But the problem is that since the developers are not coming forward, people will find it tough to do all this on their own.”
Das says cooperative societies and occupants will voluntarily approach the corporation to get their OCs if BMC initiates a facilitating drive and makes it people-friendly. “When authorities are aware of irregularities they cannot sit back. Steps have to be taken to overcome the illegalities,” he stresses.
Emphasising on a comprehensive policy that considers all aspects, Joshi says, “Ninety percent of the buildings where the OC is held back have not violated the FSI (floor space index) and the issue can be easily resolved if both the state government and the BMC zero in on a strategy to resolve the issue. Minor issues can be sorted out through an amnesty scheme approved by the state government.
The BMC had earlier come out with an amnesty scheme to give OC but the state government did not give it consent. As a result, only 15-20 buildings received OCs under the scheme. “But any amnesty format must strictly refuse OC to buildings violating FSI, as that is illegal.” Das also says it does not make sense for buildings more than 20 years old to get an OC now.
Like Joshi, Prabhu too recommends a comprehensive policy and says it must provide for creating a large supply of affordable houses to bring down demand for houses and weed out systematic corruption. “On the contrary, the intention (of the authorities) appears to benefit the builder and not to increase (real estate) stock for affordable housing,” he alleges.
Recommending a retrospective law for buildings without an OC to be given a deemed OC, Prabhu suggests that all buildings must be broadly divided into three categories:
a) those without major violations should pay penalties to BMC and must be immediately regularised with OC;
b) buildings with violations not of serious nature can be regularised by penalising residents; and
c) for structures that are completely unauthorised and illegal some other solution should be contemplated.
Advocate Singh says once a building plan is in place, a change in law with a deeming provision must provide for construction to be completed within a certain time, and within three months of that the builder should apply for OC. Alternatively, after buyers come together and apply to BMC for OC, either the civic body should give reasons for rejecting it or it must be deemed to be granted within three months, he says.
“If the government takes care of ULCA and BMC takes care of minor violations of development control rules and development plans and demands an effective amnesty scheme, the issue can be easily sorted out,” says Joshi.
Asked about his view on the fact that BMC can ask the government for amendments to the present DC rules, Shiv Sena MLA Subhash Desai says, “The government is dragging its feet over the issue. It is not inclined to bring in amendments, so we cannot do anything about it. If people vote us to power in the next elections, we will bring in the changes within a few months.”
And on it goes, political one-upmanship, bureaucratic corruption, red tape, lack of interest in implementing the law – all leading to a win-win situation for unscrupulous builders. And a nightmare for flat buyers.
(This story appeared in the March 1-15 print issue)
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