Real Estate

Only 32 realty projects registered under Delhi RERA

BL New Delhi Bureau | | Updated on: Jan 06, 2022
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The homebuyers are not getting protection because of grey areas in the law.

The RERA has not been as effective in protecting home-buyers interest in Delhi compared to elsewhere. There have been just 32 project registrations in Delhi RERA, against 71,307 projects registered in November 2021. Developers are also taking advantage of loopholes in Delhi RERA, thereby impacting homebuyers.

“This number of RERA registered projects in Delhi is not only amongst the lowest in any Union Territory, it also falls dismally short when compared with RERA registered projects of cities like Mumbai and Bengaluru,” a white paper released by IndiaSotheby’s International Realty (ISIR) said.

Delhi has a per capita income considered the second-highest in India and nearly three times the national average. The per capita income of Delhi during 2020-21 is estimated at ₹3,54,004. The total purchasing power of Delhiites has grown by 37 per cent in the last ten years.

Developers gain

India Sotheby’s International Realty claims Delhi’s real estate is a redevelopment market where older homes of single or two-floor residences are converted into four floors as a the latest FSI norms allow.

The homeowner, in many cases a senior citizen, ends up collaborating with a builder to retain a few floors, and the builders acquire the rest for sale. The builder promises construction following specific standard and specifications.

The builder structures the transaction, which offers no protection to the original home/ landowner, the white paper claims and adds that these transactions are done via a General Power of Attorney (GPA) to take full control of the property, including selling rights, leaving the original owner with no rights.

“In such sale of builder floors in Delhi at early stages, the builder further sells un-constructed floors to new sellers and takes large advances mis-using the GPA, as high as 85per cent of the floor value. This structure exposes both the original owner of the home and the new home buyer to an extremely high level of risk,” the white paper states, adding that, in case of any delay, siphoning of money by the builder, or a delinquency, the entire risk rests with the two categories of homeowners.

Majority of delayed projects and complaints on non-completion of homes in the national capital fall within this complicated one-sided builder- buyer agreements made through GPAs.

Stamp duty avoidance

The GPA transactions are undertaken to largely avoid stamp duty and GST payment to the state. This is a huge revenue loss.

Sotheby’s white paper further adds that cash in the Indian economy has doubled from ₹16 lakh crore to about 29 lakh crore; post-demonetisation thereby indicating that real estate transactions are being closed at much lower values than the actual transaction price, particularly in thefFarmhouses area, and Category B and lower colonies.

“This again results in massive loss of government revenues from registration, stamp duty and income tax on capital gain,” it added.

Loopholes in the laws

According to the white paper, present RERA rules provide an exemption from registration for the development of up to 500 square meters and fewer than eight apartments. Developers have begun using this loophole by ensuring that the number of units under development are less than five.

Banks and financial institutions approve loans to home buyers on non-RERA registered floors, without adequate scrutiny.

“A vicious cycle is created wherein unregistered projects attract unregistered agents. Since RERA registration of agents is required only for RERA registered projects there is a policy change required here,” India Sotheby’s International Realty has urged.

Published on January 06, 2022

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