Personal Finance

How green rulings can put you in the red

Meera Siva | Updated on August 07, 2021

Home buyers must pay heed to the risks arising from NGT rulings

Receiving environmental clearance (EC) for a residential project is often seen as a routine formality. But recent judgements by the National Green Tribunal (NGT) have hung a huge question mark over this assumption. The Tribunal had, in the last nearly 18 months, revoked ECs granted, imposed hefty penalties and even ordered the demolition of construction completely.

Hence, it is high time for home buyers to understand why EC has come under the spotlight, so that you can potentially weigh and mitigate such risks in your purchases.

Key rulings

While there are a few interesting rulings, the recent high profile one is that of Godrej Reflections, a high-rise residential project in Varthur, Bengaluru. The project had received EC on January 10, 2018 and was registered with RERA in March 2018. Bookings were opened to home buyers after that. But based on a petition filed, challenging the EC, the NGT cancelled the clearance in February 2020 - stating that there was construction in the buffer zone of a lake, which would be in violation of zoning plan.

The ruling was challenged in the Supreme Court and in August 2020, it was ruled that the NGT would reconsider the decision, but that no construction shall happen until the issue is resolved. Based on additional inspection reports submitted to the NGT, it ruled in July 2021 that the project was in violation. The constructions made on the site was ordered to be demolished and the habitat restored. Besides fine for the builder, it also imposed a fine of ₹10 lakh on Bruhat Bengaluru Mahanagara Palike (BBMP) for illegally allowing alterations of the storm water drain passing through the project site.

The order also noted that construction had commenced even before grant of consent to establish (CTE) by Karnataka State Pollution Control Board (KSPCB) and in violation of conditions of EC. It added that the committee which made inspections and submitted the report was not the one constituted by it and the Environment Ministry.

Buyers beware

Why are the facts of this case important? The import of the judgement, particularly as it involves a reputed builder, can be huge for those who purchase under-construction homes.

For one, while issues with violating green norms are not new, the impact has lately been tougher on the buyers. While this is a welcome move - as compliance is better enforced -, it is a big shift from the past where the rulings often only required payment of a fine by the builder. For example, in the case of Sushant Lok project in Gurugram, the builder was asked to pay a fine for flouting various norms. Likewise, Goel Ganga Developers based in Pune was asked to pay a fine of INR 195 crores in 2018 for multiple issues. Now, given that more is at stake, buyers can avoid projects in environmentally sensitive zones, advises Vijay Kumar, Advocate, who specializes in RERA related cases.

Two, this is the not an isolated case of EC being revoked by the NGT. In January 2020, the NGT had stopped work on a project by Young Builders in Delhi. This was based on questions raised on the validity of the EC – that it could only be granted by the Ministry of Environment and Forests and not by SEIAA - as the project is within 10 km from a Critically Polluted Area. Likewise, Falcon View, a residential project in Mohali, was asked to stop construction by the NGT as the EC it had obtained for a mixed-use development did not cover the housing project.

Given the repeated history of EC being inadequate, buyers must inspect this aspect closely – get advice from environmental lawyers to ensure the validity of the clearance and any possibilities of it being challenged. “Check land usage restrictions and land conversion approvals. Be sure to also inspect the city master plan to understand the nature of projects approved in that land/area”, advises Vijay Kumar.

Three, the process seems to be a roller-coaster ride with long delays. For example, in both the Delhi and Bengaluru cases, the builder challenged the order in the apex court, which set aside the order and required the NGT to consider reports from a new committee. However, the NGT had, after some delay in getting the report, stood by its decision to revoke the EC. In the case of Godrej Reflections, the first NGT order was made nearly two years from the start of customer bookings and the second order was after more than 3 years. If you do book early, make sure you check the clauses in the agreement that relate to exiting and be open to exercise it if there are early roadblocks such as lawsuits filed.

Four, despite the comfort provided by RERA, there is no assurance of completion for a project. And prerequisites for getting RERA, including the EC, may be revoked, adding to the risk. The implication is that RERA must not be seen as a guarantee and the truly safe option is to buy completed projects – preferably those with Occupancy Certificates. The OC is proof that the project meets the applicable building codes, regulations and laws, thereby avoiding completion and various legal risks.

The author is an independent financial consultant

Published on August 07, 2021

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