Imaginary spaces - 29th July 2006 . Times Property (Times of India)
"None of the international investors or funds
is used to such
disparity in area calculations. You get what you pay for not what
you
have to imagine"
– Chetan Narain
The issue of 'super built up area' affects every buying
decision, and it's time the government acted to resolve the issue
.
We often hear of deals in South Mumbai at astronomical prices, but
have you ever thought for a moment that those prices / rates per square
foot are calculated on 'carpet area' (usable space) since that was
the way property was bought/sold and documented. The prices seem even
higher because we now compare them to super built up areas, at which
properties are sold.
Let's say, for example; an apartment in a premium older building,
with carpet area of three thousand square feet is sold at Rs 50,000
per square foot, which equals to Rs 15 crore. The same property in
a newly constructed building is sold at `three thousand' plus fifty
per cent super built up (which I like to call – "imaginary areas")
and adds up to 4,500 square feet. Now if you divide Rs 15 crore by
4,500 square feet, you get a rate of 33,333 per square foot.
Similarly, I live at Lokhandwala Complex, Andheri; in a building which
was developed around 1985. The carpet area of the house is 1560 sq.
ft, and the built up area we bought it at is 1825 sq ft. The difference
from carpet to built up is seventeen percent. Whereas in the same
neighbourhood newly constructed buildings with similar carpet area
are selling with an addition of 40 to 50 per cent. We found it convenient
to buy the apartment below us when our need for space grew, because
none of the other options made sense due to the carpet area to super
built up difference.
I know of many families who are stuck because of these issues while
buying and also sellers because they are lost on how to sell what
is not documented. For example, if the price in my neighbourhood was
Rs
5,000 per sq ft when I bought the house below ours, the seller sold
us what was documented; 1825 sq. ft. (not 2,250 which would have been
the case in the new building offering similar carpet area).
We have a housing ministry, stamps and registrar's collection office,
the municipality which collects huge property taxes over and above
the deposits etc collected from developers before sanctioning plans
for development. All I hear is about collection and collection, but,
what does a consumer get in return for paying stamp duty and registration
fees? The buyer has already paid for his apartment, legal fees and
brokerage; for which he has got value in return. The five odd per
cent stamp duty' gives no value and simply acts as an indirect tax
on your tax paid money; while the registration fee gives value to
the extent of getting the buyer and seller's photo identity on the
document and government authority stamping, thereby binding the seller/developer.
Quite cleverly and conveniently all documents lately have been registered
on `carpet areas' by developers and the buyers are explained the entire
mathematics and made to buy based on super built up area (which not
mentioned anywhere officially). The big issue will be resale, because
what is documented is what is believed and is what you can sell. The
developers don't give in writing what they are finally charging for.
I know a lot of straightforward developers who don't like to charge
super built up areas to recover the market price or worth, but they
have to succumb to system that exists. Some have gone to the extent
of telling me that, when they have tried to be honest with rates based
on nominal built up or carpet areas, clients just don't bite.
The point that I am trying to make is that government intervention
is required to standardise a norm on area calculation. That is the
least
they can do if they expect a five per cent fee for the purchase that
you are making. Also, if they expect FDI in India to be successful
and effective they will have to pull up their socks.
As a company, we represent a few renowned international developers
who want to come into the country through the hundred per cent FDI
route and few local / international funds / investors. None of the
international investors or funds is used to such disparity in area
calculations. You get what you pay for not what you have to imagine.
I sincerely urge one and all: buyers, sellers, brokers and developers
who feel that have been affected in one way or the other because of
this issue to campaign against it and find a possible solution.
Some solutions
A few solutions to protect consumer interest could be:
· Freezing the final municipal plans for development as sale plans
with an acceptable difference of genuine built up area of approximately
18 to 20 per cent.
· The same plan should be attached to the agreements for sale while
paying stamp duty and registration.
· This way both the municipality and the Stamp and registrar's office
are in the loop of what is being bought and sold (read: area) to protect
consumer interest.
· To be fair to the sellers and developers the market should accept
the rates quoted on revised area calculation and a general public
awareness program should be initiated by the housing ministry. As
tax payers we deserve all this.