Daijiworld Media Network - Mangaluru
Mangaluru, May 11: Real estate developers and builders play a pivotal role as the driversof economic and social growth by satisfying the infrastructural needs in terms of housing, office space, retail, entertainment and other public utility needs and also by generating employment and paying central, state and local taxes.
At the same there are many who say that real estate developers are sharks who squeeze the life out of our cities by creating concrete jungles and make huge profits. However life for builders and developers has its constraints in the absence of needed clarity on important policy and practical difficulties. Our Prime Minister has stressed on “Ease of doing business” but in case of real estate its only a mirage. There are many issues where the builders’ community and the public can fruitfully synergize.
For the intrepid well-informed and well-educated citizens of this city, armed with RTI, it takes anything between a year and more to get a license to build a house. The situation is similar when it comes to builders despite the builders having a formidable association in the form of - the Mangaluru chapter of Confederation of the Real Estate Developers Association of India (CREDAI). People in general lament about escalating cost of land and housing in Mangaluru without knowing the real reasons behind the factors that have triggered the escalating costs one of them being the delays in various approvals and sanctions. A significant part is the cost of land itself and the very high expectations of sellers, added to which are escalating costs of cement, steel, etc which finally reflects in the purchase price demanded of a buyer.
In a detailed interview with Daijiworld.com 'DB' - as Dharmendra B Mehta is known in social and business circles, took over as President of Mangaluru Chapter of CREDAI on April 6, 2015, spoke at length on various concerningthe real estate scenario of Mangaluru, the builders and developers and the general public. DB is known for his free and forthright views having a clear vision for the progress of his adoptive city Mangaluru on various issues and in this tête-à-tête, he has been very vocal in giving a clear picture about various issues concerning Mangaluru including the real estate.
Q. There is a feeling of elation in the real estate scenario that you have taken over as the President of CREDAI at a crucial time....
A. The real estate scenario in Mangaluru has by and large not been affected by the slowdown witnessed elsewhere. But we are facing a few challenges which concern not just the CREDAI but the people of this city. Usually an association is formed to protect the interests of its members and works to achieve their narrow ends. But CREDAI is looking at a broader picture. Real estate development means infrastructure development and infrastructure development will benefit everyone including CREDAI members.
Q. The general feeling is that real estate developers have created a concrete jungle in and around Mangaluru with scant regard for the environment....
A. The truth is that builders build because there is demand from actual users. But builders will have to work towards minimising the adverse impact on environment which can get a boost with some incentives from the government. For example in Noida for a green building the builders are given 5 per cent concession in Floor Area Ratio (FAR). In Pune and Cochin, the flat owners are given a concession in House Tax if the building has its own STP or Bio-Converters for Garbage. A similar incentive to builders here can go a long way in creating more environmental-friendly projects. Just like those who use solar energy are given some concession in their electricity bills builders should be encouraged through incentives to go for green buildings or have their own solid waste management facility. Only then can we have a paradigm shift in our efforts to safeguard environment.
Q. But now solid waste management is taken care of by outsourcing it. Where is the need for separate waste management facility?
A. I feel there should be transparency in sharing the relevant detailsby MCC so that the people are aware how their property taxes are used. After the outsourcing of solid waste management, most people are not aware that their cess payment for solid waste has gone up by 50% for residents and upto 500% for commercial establishments. This increase is included in the property tax for the current year.
But even if the builders use Solid Waste Converters in their buildings by spending Rs 10 to 15 lacs of rupees, the people who reside in those buildings are still not exempted from paying the SWM cess. Denying a rightful exemption means they are made to pay unnecessaily for a service which they don’t use. Finally the burden is on the people because the residents pay for this investment made by the builders. If builders install waste converters handling solid waste would become less cumbersome. CREDAI has launched a Clean City Programme in all their Chapters.
Q. Has CREDAI given any proposal to the authorities concerned in this regard?
A. We have brought this matter of using waste converters to the attention of the MLA J R Lobo and also to the attention of the City Corporation. We are waiting for a response.
Q. In the formal function when you took over as president you had urged politicians to include builders in the policy making process.
A. Involving us in policy making decisions would help overcome some of the contentious issues plaguing us, the impact of which will be felt or borne by the citizens. Any mistakes in policies can be corrected in the initial stages itself to avoid inconvenience to all. A good and unambigious law reduces corruption and inordinate delays.
Q. Isn’t the Real Estate Regulatory Bill approved by the Union Cabinet expected to ease some of these problems and concerns?
A. For this Bill to become a reality, should be passed by the Parliament and enabling law to be enacted and implemented by the government of Karnataka. Then it has to appoint Regulatory Authority within a year of the Bill’s enactment. This would also pave the way for online registration facility of all the projects which will remove a major bottleneck as far as procuring a license is concerned. The Bill will eliminate fly by night builders and the customer will be protected from the malpractices. CREDAI wants the Centre to accord the infrastructure status to the real estate which can bring down the cost for the purchasers.
Q. One of the major problems faced by the people and even the builders is the long delay in getting the licenses. Is the delay in getting license lead to escalation of prices?
A. Slow approval process by local authorities like MUDA and the City Corporation is a major hurdle. The government could have adopted Sakala Services Act to Licensing, which could streamline and expedite processes. It is a functional lacuna that the city corporation does not have building bylaws though we have been asking for this framework for many years.
Getting licence from authorities concerned is a prolonged process even for the common people because it takes a minimum of one year and spills over well beyond. The delay in getting license will certainly add to the final cost because the builder who invests in the land will have to pay interest and incur higher input costs and the more the delay the greater will be the loss. This loss has to be borne by the buyer of the property or the house. Today if I am able to get a license within two months I can sell an apartment at Rs300 less per sq feet. Contrary to the general belief, in MUDA and MCC the builders are at the receiving end. Of course, some do take advantage because the system is porous.
Q. Which are the other bureaucratic wrangles that add to the increased rates of real estate costs?
A. There are several problem areas. For example, another factor that burdens the purchaser is the non-refund of the security deposit paid by builders to the corporation. Builders pay security deposit to get licensed which may vary from Rs 10 to 15 lacs depending on the size of the project. Once the builder is given the occupation certificate the money has to be refunded. But the corporation is neither refunding the security deposit nor is adjusting it towards the builders’ next projects. There is tremedous delay in getting the occupation certificate as well. The burden will have to be passed on to the consumer ultimately.
Q. There has been a big hue and cry regarding the discrepancies in the guidance value which has come into force recently having a direct impact on properties of individuals and builders?
A. In 2006 we had submitted a draft committee report on guidance value without getting any favourable response. I believe the authorites have to be reasonable when it comes to valuing a property for the purposes of stamp duty. There is plethora of discrepancies in the latest guidance value report. The major discrepancy is concerning the value fixed for a property situated in by-lanes on par with a property on the main road. While the valuation of this roadside property fixed for stamp duty is on the higher side, those in the by-lanes in reality may fetch much lesser rate than what is stipulated in guidance value. For example a property in KS Rao Road is valued for stamp duty at Rs 28 lacs per cent. But a property owner having his property in the 4 feet by-lanes of KS Rao Road will be able to get only Rs 8 lacs for the property or even less, but will have to pay stamp duty at KS Rao Road valutation. But the real problem is that when he sells the land for an amount less than the guidance value both the buyer and seller will have to pay 30% income tax interest and penalty on the difference between the actual sale price and the guidance value.
Q. How come such discrepancies have crept in only now?
A. The government fixes targets for officials on revenue collection through stamp duty every year which goes on increasing. City tahsildar who heads the guidance value committee find it convenient to meet the targets by increasing the guidance value of land indiscriminately to increase revenue through stamp duty. If this committee arrives at inappropriate values, it can cause serious financial losses due to higher stamp duty and Income tax.
Q. Does CREDAI have an alternative to overcome this log jam?
A. There is a reasonable solution to every problem. What CREDAI suggests is there is no need for the government to lose revenue through stamp duty. A scientific system will eliminate leakages in revenue and there will be no loss of stamp duty to the State. We have suggested that there are some areas in Mangaluru like MG Road, which are undervalued where the government value is much lower than the actual rates and the properties on lane and by-lanes are over valued. In fact, by increasing the value of some of the important junctions which are quite undervalued and by bringing down the guidance value of by-lanes which are valued on par with the main roads, the officials can be reasonable especially to small land owners, who are put to great hardship due to this unrealistic guidance value.
Q. What is the role of the technical section in MCC whose recommendation is made mandatory recently before the license is issued?
A. This will further compound the existing delay, as the technical section is to look into aspects like water connection, underground drainage and other technical details of the projects. Earlier, this was done internally by MCC but now the builder has to get it done which will unnecessarily prolong matters. That theprocedure is redundant is evident from the fact that so far it has not given any negative recommendation to any project.
Q. Real estate developers also pay to MCC what is known as Premium FAR for the widening of roads. How is this money being used by the Corporation?
A. This is something of which the general public may be unaware. You will not believe that about Rs 100 crores in the form of premium FAR lies unused in the coffers of the Corporation. The City has concrete roads but there are no storm water drains and footpaths. People have no opeion but to walk on these roads which has increased the deaths due to accidents. Further rain water flows through the concrete road which is eroding the top layer of concrete. No one wants to take responsibility for this unused money and take up work to improve the much needed infrastructure. Builders pay the money to the corporation to improve infrastructure. But it goes unused.
Q. There was a time when builders and developers were constantly facing threat from the underworld goons. How is the situation now?
A. Fortunately the situation has improved a lot following the police crackdown during the period of police commissioner R Hitendra. He dealt with the problem with an iron hand by rounding up 50 locals who were the henchmen of the underworld dons operating here namely Bannanje Raja and Ravi Poojary. With the arrest of Bannanje Raja in Morocco that threat also has receded. Police commissioner S Murugan is also very strict in dealing with this menace of underworld goons. The law and order problem has seen tremendous improvement. The political leaders have shown the will to bring an end to the underwold menance once for all and district administration has been very cooperative.
However, the builders under the guidance of the police commissioner would be inititating safety measures by installing high definition cameras in and around their premises with direct wireless access to police department to keep a watch. This will be of great benefit to the general public as it would act as a deterrent for those indulging in crime and other dangerous acts.
Q. Finally, does CREDAI has any specific plans to improve infrastructure and job opportunities in Mangaluru?
A. We have lot of plans and want to work with a sense of purpose to improve Mangaluru as a tier II IT city by bringing in more IT companies. We want to work in close association with the Kanara Chamber of Commerce and Industry and want to propose aPPP model of development wherein the government can play the role of a mentor and provider. The government can come out with a policy and identify areas for developing an incubating centre for the Startups and promote a Software Technoloy Park on a PPP model.
Creation of jobs should be one of our top priorities because as of now what we see is brain drain out of Mangaluru. All youngsters go out in seaach of a career. If this trend continues Mangaluru will become a city of old people. We don’t want that to happen to our beloved Mangaluru and CREDAI will do everything possible to make Mangaluru a growing and vibrant city.
Q. How would it benefit a buyer to purchase a property from a CREDAI builder?
A. A CREDAI member builder has necessarily to adhere to a code of conduct regarding quality, timely delivery etc. which comes with its assurance to a buyer. In case of stray cases of errant builders, a Customer Grievance Cell in CREDAI itself will examine an issue backed with supporting evidence brought to it by an aggrieved customer, and ensure that justice is done. CREDAI can even suspend or expel a member if he is found guilty and does not comply with the decision of the Customer Grievance Cell.
Q. How does CREDAI involve itself with society at large?
A. CREDAI has been responsive to the requests of the district administration for various causes. Prominent examples are its role in the Karavali Utsav and the recent Federation Cup which have put Mangaluru city in the spotlight.