Buying a home is every common man’s dream but to convert that dream into reality, you either need to have a very fat salary or you need to rob a bank given the spiraling property prices in this country ! While that is something investors can tackle at their end, they often find themselves at the short end of the stick as far as real estate development approvals are concerned.
Generally, the real estate development approvals needed to land a residential housing project are so many and the process so convoluted that the developer can only find it viable if he starts selling the project as soon as the first approval comes in. The other approvals trickle in as and when required and the residential project continues to be built.
While this works great for the developer, it usually does not for the investor. That is because you are locking your money into a project which might find itself in litigations or denial of some approvals. Most of the investors want to book houses in the pre-launch phase – this is when the prices are very low and you could make a killing on your investment. But the developer might have just got hold of the land with no formal approvals in place to launch the project ! The question you need to ask yourself is – are you willing to take such a huge risk ?
Let us quickly look at the approvals required for a project.
Real estate development approvals at different stages
Usually, builders buy huge tracts of land, generally agricultural land to build their residential projects on. An approval that the agriculture land can be used for residential purposes is a must. So is the title deed.
A title deed demonstrates who owns the land and is provided by the sub-registrar’s office.
A non agriculture approval is provided by the state development authority and shows that the agricultural land can be used for residential purposes.
Both of these are critical as either can result into a complete halt of the project construction. In fact, absence of approval to use non agricultural land for residential purposes can result into tearing down the building as well !
During the construction phase, there are four real estate development approvals investors should check on. The first two are the building and floor plans.
The building plan essentially is a tick in the box to confirm that the building bye-laws of the city has been followed. A floor plan is essentially the layout of the apartments and common spaces in the project – this is what builders usually print in the brochures to showcase their project to you. Ask for both these documents.
Also, ask for the No Objection Certificates (NOC) from the builder. These are NOCs given by the local water supply board and the municipality board and some others as applicable.
Another important document is the commencement certificate which shows that the builder can start the construction, which in reality he does much earlier. This is provided by the local municipality board.
If any of the building plan, floor plan, NOCs and commencement certificates are found to be missing, then the construction work can be stopped. If approvals on the floor and building plans have not come then this amounts to unapproved construction and can be demolished !
Finally, the completion certificate is given to the builder if the municipality board is happy that the project is fit for residential occupancy. If your builder does not get this, the owners of flats and apartments will struggle to get the water and electricity connections.
Recap – Real estate development approvals you need
Here is a recap on the real estate development approvals you need to keep an eye on.
Pre – launch stage : Title deed and non-agriculture order.
Construction stage : Building and floor plans; NOCs from various authorities and commencement certificate.
Post completion : Occupancy certificate
If you have all these things in place, you can pat yourself on the back at having done a tremendous job in choosing the right project for yourself. In a sector where regulations are missing big time and builders take investors for a ride, being proactive and asking the above mandatory approvals from the builders will help you in not getting cheated.
Real estate is such a huge monetary investment for the common investor that you have to tread carefully to ensure that you are on the right track.
Are you aware of any other real estate development approvals I might have missed ?
Indeed one of your best articles- an eye opener.
I would also suggest to keep hold of the initial brochure presented by the builder as it promises what he is going to deliver (facilities and cosmetics). Many a times builders compromise here and save lacs by cutting corners – e.g. poor quality tiles instead of promised italian marble, poor bathroom/kitchen fittings instead of premium ones, etc.
Investors can use these brochures as benchmarks to compare the quality of the finished product offered by the builder.
Yes you are so right BFA. Thanks for your inputs.
Good points but seldmon these happen. Most cases its the investors who suffer. Many who have bought houses in pre-launch phase has to follow-up with builder to get the work then. In most of the cases the project gets delayed by six months to a year.
Or even more than that Rakesh, which is where the DRAFT regulations bill on real estate might help. More here – https://www.thewealthwisher.com/2011/11/15/and-here-comes-the-real-estate-regulator/