Most homebuyers are sure about what kind of apartment they need, their preferences like location, specifications, budget etc. It’s the legal area that causes palpitation, and raises suspicion prior to signing the purchase agreement. Investing in a home is a very emotional and expensive proposition. Home-buyers invest their life savings, and even take the burden of a loan to acquire their dream home. So, if a home purchase deal turns, the home-buyer runs the risk of losing money, and also get distressed. When legal & regulatory aspects are not in order, issues like delayed possession, legal battles, and sometimes even losing all your money can happen.
A home-buyer is often baffled with multiple legal papers/items and checklists to comb before buying an apartment. The question is: Which checklist should one go with? What are the relevant aspects when it comes to buying a house or apartment? What to do if the project is being built (on development basis) by a builder on someone else’s land? More importantly, how to do the detective role, and go about investigating and ascertaining truthfulness of the claims, documents, certificates, permissions and other relevant aspects?
Well, for the home-buyer, the answer to all these questions lies in understanding the regulatory or legal controls that already exist, and to evidence the extent to which the builder is abiding by them.
Two major check-points are most critical for a home-buyer, namely, 1. RERA registration, and 2. GHMC Building Permit (i.e. GHMC building permission). These two are given by the civic authority only after the builder has satisfied (abided by) the various criteria meant to safeguard the buyers’ interests.
RERA registration and GHMC Building permission comes through only after the builder satisfies/obtains an exhaustive list of approvals, follows pre-construction & post-construction processes/requirements, procures more a dozen No-Objection-Certificates (NOCs) post multiple inspections, and gets a plethora of other permissions. RERA registration and GHMC Building permission alone have created robust safeguards to protect the home-buyer’s interest, and to make the builder accountable with a strong deterrence-mechanism and provision of legal recourse to the home-buyer.
In this article, we shall understand these two most important elements viz. ‘RERA registration’ and ‘Building Permit’, as well as dwell into the subsidiary statutory or legal requirements. An indicative list of documents, statutory permissions, and approvals is needed to will be explained in the later half of the article to gain a reasonably well-rounded understanding of the legal aspects to stay safe while buying our dream home.
Understanding the Big TWO: 1) RERA & 2) GHMC Building Permit
RERA registered residential project: RERA stands for ‘Real Estate regulation Act, 2016’. This Act has been a savior for the home-buyers, and is intended to put an end to the woes of the home-buyers. In the absence of RERA prior to 2016, many builders have been seen playing with the lives and money of innocent home-buyers, and even duping them.
RERA has put a leash around the hitherto unregulated whims and fancies of the builders, and has institutionalized very stringent ‘measures and countermeasures’ to control the builders in their unabashed misuse of home-buyer’s money. With RERA provisions, the very possibility of issues leading to grievances has been scuttled to a very large extent.
- Owing to the transparency enforced upon the Real Estate sector through RERA, the interests of the consumers are being protected fiercely by standardizing transactions, setting-up grievance redressal forums, and enforcing a strong vigilance and deterrence mechanism to contain freewheeling & unscrupulous builders
- RERA acts as a ruthless filtration mechanism to weed out builders who do not comply with the guidelines of the regulatory body. Any builder whose RERA registration application is unsatisfactory gets rejected by RERA, and are NOT PERMITTED to build the project
Important provisions of RERA to safeguard the home-buyer are:
- For registration with RERA, a builder is mandated to submit multiple documents to substantiate upon their claims. This makes a ‘RERA registered’ project safe for the home-buyer from the legal stand-point. These include:
- Legal title, complete property details including title & mortgage, agreement of sale, PAN card of developer, list of individuals involved in the project, and Income Tax Returns of the builder
- The entire gamut of details related to project location, sanctioned plan and layout, facilities, amenities, tentative completion time, authenticated copies of all the permissions/approvals/clearances and much more
- Builder is made responsible for the overall maintenance of your apartment project
- Builders is accountable for any structural defects in the building
- As per RERA guidelines, builders are not allowed to use the home-buyer’s money for any purpose other than what it was taken for
- For registration with RERA, a builder is mandated to submit multiple documents to substantiate upon their claims. This makes a ‘RERA registered’ project safe for the home-buyer from the legal stand-point. These include:
- Seventy percent (70%) of the amount collected from the buyer is required to be deposited by the builder in their bank, and needs to be used only for construction purposes
- RERA Telangana is applicable on all the Urban Development Authorities, Municipal Corporations, Municipalities, and Nagar Panchayats within Telangana
GHMC Building permission: A ‘permit order’ to construct a residential or commercial structure is required before a builder begins construction. In Hyderabad, the Greater Hyderabad Municipal Corporation is the civic authority which monitors the construction activities in its jurisdiction. It’s the Town Planning Authority that grants the building permit after examining:
- Nature and type of building, whether or not the builder is abiding by the building permission rules
- Infrastructure related considerations like roads, parks, parking lots, bus-access, gardens etc. required in the vicinity to make it replete with social infrastructure
- Calculate and collect various fees and charges from the builder viz. admission fee, building license fees, scrutiny fees, demolition fee etc.
The GHMC building permit is given upon submission of an exhaustive list of documents. These include documents and approvals include:
A proper application by owner/builder, Auto CAD drawings of the building plans, fees, authentication of the builder/architect/structural-engineer, Parental documents copy (Ownership and linked documents establishing evidence of complete ownership of the property ensuring it is free from encumbrances), Encumbrance certificate, updated property tax receipts, Soil test report, Structure stability certificate, comprehensive insurance for 6 years, and various joint undertakings required by GHMC.
The building plans itself contains thorough details about the location & contour plan, site plan, detailed drawings of each floor and car-parking areas, terrace plan, building elevations, cross/longitudinal sections, sewage plans, and rain-water-harvesting-pits plan.
Sewage treatment plant and rain water harvesting are extremely important to obtain the building plan approval, especially for large residential projects.
Building permit: listing expectations, driving controls, issuing mandates
A building permit gives a list of more than 30 mandatory checks & balances to keep a strong tab on the builder while constructing the building. This includes:
- A warning that permission would be revoked if documents are fake or fabricated
- A mandate to begin construction within 18 months of permit being granted
- Following sanctioned plan strictly, and issuing a commencement notice to GHMC
- A warning not to offer occupancy without the compulsory ‘Occupancy certificate’
- Public amenities such and water and electricity being provided only upon submission of ‘Occupancy certificate’
- Restraining builder to make any modifications without prior approval of GHMC
- Mandating tree-plantation along the periphery of the fence of the project
- Providing ‘Tot-lot’ and maintaining it, making ‘percolation pits’ for rain-water harvesting, having a safe space to install ‘transformer’, providing for ‘garbage house’, using ‘stilts’ and ‘cellars’ approved for parking exclusive for the purpose it is meant for, having a strip of greenery on the periphery of site, ensuring free movement of public and vehicles, to provide for service road where required
- Execute services like sanitation, plumbing, fire-safety, lifts and electrical equipment to be done under proper technical supervision
- To ensure that registration authorities register only the permitted built-up area
- Construction to be covered under the ‘contractors all risk insurance’ till Occupancy certificate is issued
- It puts a joint accountability over the structural stability of the building on the owner, builder, architect, and structural engineer, and are mandated to strictly abide by the government order
- No lease or sale to be executed unless ‘Occupancy certificate’ is received by the builder
- Checks and balances like architect confirming that the building has been completed as per the plan, a provide site registers’ ensuring that ‘site inspections; have been done by the site engineer, structural engineer and the architect
- Have the insurance policy for the completed building for a period of three years post completion
- Structural safety and Escape safety norms are construed to the accountability of the owner, the builder/developer, the architect and the structural engineer; The fire-fighting installations to conform to the ‘National Building Code of India, 2016’
- Obtain ‘Occupancy fire NOC’ from Directorate Enforcement Vigilance & Disaster Management, Hyderabad
As evident, it is NOT an easy task to obtain a building permit, and to subsequently get to the stage of obtaining an Occupancy Certificate. Only post obtaining the OC, the building be made available to the individual allottees.
The big solace for a home-buyer today is that a ‘RERA registered’ and ‘GHMC approved’ building doesn’t come easy, hence a reason enough to be credible in terms of their legal/statutory adherence! The enormous amount of documents, mandates, restrictions, accountabilities and responsibilities require a rigorous process to be followed by the builder with an intention to secure the home-buyer.
IMPORTANT: Regardless of these statutory permissions, the home-buyer must remain vigilant about cross-verifying what the builder claims. It is necessary for the home-buyer to establish the veracity of the claim when a builder says that the project is RERA registered, and that GHMC building permit has been obtained.
The potpourri: a summary of permissions, approvals and certificates
Given below are some of the important statutory provisions to build upon your awareness, and tread safely while evaluating purchase of your residential property.
‘Conveyance deed’ or Title of the property: A home-buyer must have a clear title of the property being bought. This is a document sheds light on the ‘title’ (ownership) of the property being passed on from the seller to the buyer; It is meant to ensure that the property remains free from ‘encumbrances’. The sub-registrar’s office has a record of the current and previous owners. A home-buyer can even appoint a lawyer who go do a thorough check by seeking out the history of the property by way of establishing a link between the ‘chain of agreements’ for the past few decades just to be doubly sure. Besides this, a physical inspection or a visit to the venue of the property is important. As a home-buyer, we have everything to lose if the title is not verified, and worse still, we get stuck half way through having committed our money. This is why checking the original documents helps avoid frauds like using coloured photocopies or forged copies. Home-buyer must get the signatures/thumb-impressions verified with professional help, and ascertain the veracity of the documents provided by the builder as evidence of being the ‘rightful’ owner.
Parental documents copy: This is primarily to ascertain of the builder has legally obtained the property, and that it is free of any encumbrances or mortgages etc.
Encumbrance certificate: This certificate is issued by the sub-registrar which certifies that there are no legal dues and complaints against the said property on which the apartment is being constructed. The land on which the apartment is constructed must not be mortgaged or pledged with any bank or financial institution. Besides, home-buyer must inspect the plans of the building being constructed, verify documents to ensure that the stamp-duty has been paid. Incase the property belongs to a minor, prior approval of the court is required, else the sale is considered void.
Hence, while purchasing a property, adequate precautions may be taken by hiring a competent lawyer to conduct adequate precautionary measures before taking a decision to book an apartment; These measures include a thorough due-diligence, title and link-document check, checking occupancy certificate, checking if the apartment is mortgaged to the municipal authority, checking the carpet area, search for the records in the sub-registrar’s office to ascertain ownership, including obtaining certified copies of the back (link) documents from the sub-registrar’s office, and much more.
Development Agreement: Incase the apartment project is being executed jointly, then a Development Agreement indicates the terms and agreements is agreed upon between the land-owner and the builder (who jointly develops the property). Development Agreement is basis upon which the owner of the land gives permission to the builder to develop the property as per the terms and conditions. The builder (developer) is a third party who develops and builds the plot, and accompanies a General Power of Attorney in favour of the developer.
An exhaustive list of ‘No Objection Certificates’ required (NOCs) to get ‘Building Permission Plan Approval’ from GHMC: Builders are required to obtain No Objection certificates from departments like fire services, urban land ceiling, revenue, traffic police, Airports Authority of India, pollution board, Electricity department, and National Monuments Authority using the ‘single window system’ established by GHMC. In some states, NOCs may be required from over 19 Government departments before ‘building permit’ is granted. Fortunately, the obtaining of NOC has now been streamlined under the ‘single window system’ initiative by the GHMC.
All these NOCs are intended to ease the pain of subsequent issues that come up, and give sleepless night to the home-buyer. Besides, NOCs are a must for bank loans and registration of the property.
Commencement certificate: Commencement certificate is an important document given by the municipal authority such as GHMC. It is not just a permission to start construction, but has larger implications to ensure the builder stays committed to regulatory pre-requisites and regulations. The builder is required to spell out the ‘maximum time span’ to complete construction of the building, and to actually adhere to the stipulated schedule.
A commencement certificate cannot be obtained by the builder unless all the NOCs are cleared. Some of these critical NOCs include departments pertaining to fire, water, electricity and sewage. A home-buyer must know that if a builder does NOT possess ‘commencement certificate’, it means that the property may be illegal or disputed.
Water connection and Sewerage connection NOC: Hyderabad Water Metropolitan Water Supply & Sewerage Board (HWMWSS Board) grants the NOC for providing ‘water connection’ and ‘sewerage connection’ to multi-storey apartments above the ground level. This is done after a proper feasibility report is obtained by the civic authority. The HWMWSS Board put a caveat that this connection would be provided only after Occupancy certificate is obtained by the builder from GHMC.
Borewell Permission: Digging of borewell has been banned in Hyderabad, hence, Borewell permission is required from the Hyderabad Water Metropolitan Water Supply & Sewerage Board. Builders in Hyderabad are providing this as an added benefit/respite over and above water connection, in areas where the water table is found healthy.
Structural Safety Certificate: This rests the accountability of the safety of the building upon the owner, builder, architect, and structural engineer.
Commencement Certificate: This certificate puts the ball in the builder’s court in committing to a commencement schedule, and a tentative timeline for completion. The town planning authority (GHMC) issues this certificate, and is granted upon meeting all the legal requirements. A home-buyer must be very sure in asking about the availability of ‘commencement certificate’, without which the home-buyer runs the risk of opting for an illegal or disputed property.
Thus, Commencement certificate given to the builder is a legal ‘go ahead’ (or an assurance) from the Municipal authority to begin the project as per approved plan.
Completion Certificate: The builder applies for completion certificate upon completing the construction of the structure completely. The building is then inspected basis the approved plan to ensure that it meets the all the requisite criteria laid out in the building permit. Without the ‘completion’ and ‘occupancy’ certificate, the builder cannot obtain water and electricity connection.
Telangana Occupancy Certificate: Occupancy certificate issued by the GHMC is an important legal document issued by the municipal authority to testify that the constructions norms have been followed fully. This certificate serves multiple purpose: i) accords legal recognition to the property as ‘fit for occupancy’, ii) helps obtain water, sewerage, and electricity connection, iii) is a mandatory document for home loan purposes including sale of the property subsequently.
Occupancy certificate is an assurance to the home-buyer that the property now qualifies (or is eligible) for all the civic amenities and social infrastructure that a resident can expect such as water, electricity, sewerage and so on from the municipal bodies. Living in a property without ‘occupancy certificate’ is construed to be illegally occupied by the resident/buyer.
Hence, commencement certificate puts a stamp of legal approval pre-construction, and occupancy certificate put a stamp of approval post-construction. Completion certificate is the intermediary step which is required to obtain the necessary amenities post completion of the structure.
Purchase Agreement or Builder-Buyer Agreement: This agreement contains all the project related details like the project plan, layout & size, locations, specifications, construction standards, payment schedule, delay-related or other legal remedies in case of breach of agreement, completion timelines, the proposed penalties on both the builder and the buyer, details of the common areas, amenities, parking and all other terms and conditions. This agreement between the builder and buyer is proof of the deal between them where both agree upon the terms and conditions, and the buyer makes payments towards the property over the agreed timeframe. Payment schemes are also listed, which include construction linked payment plan, and other plans that the builder offers to the buyer. Sale agreement also makes sure that once the project is completed, it gets transferred to the buyer, and no further modifications or further construction is done by the builder. It also provides protection to both the buyer and the builder incase of breaches of the agreement.
Builders can sometimes make draft agreements that are extremely one-sided, with terms and conditions that are malicious in nature. A home-buyer must get the purchase agreement vetted by an experienced lawyer, and not put one’s own financial interests in jeopardy. The agreement must not unjustifiably pro-builder at the cost of the buyers’ interests.
The most critical elements to check while signing-up for purchase agreement (builder buyer agreement) are RERA registration, and Building Permit document issued by the GHMC. Plus, there commencement certificate that the builder obtains, which is the ‘construction timeframe commitment’ to complete the project; a builder who fails to produce commencement certificate may mean that the property is illegal or disputed.
Further, as construction reaches the closure stage, Occupancy certificate assumes great importance, else the building is considered to be occupied illegally.
Plus, there are multiple documents that go into obtaining the RERA certification and Building permission that ensure that the legality of the plot, the plans, the civic amenities, the NOCs and all other associated documents are in order. Based on the availability of all these documents, the home-buyer can ascertain the authenticity and genuineness of the builder’s claims and offering.
Some home-buyers depend on the banks to carry out the due diligence on their behalf, which is NOT a good idea. The builder may be reputed having multiple projects which might have been in adherence of all the regulatory parameters. What if the project chosen by a home-buyer may have some unaddressed loop-holes? Hence, it is wise to err on the side of caution, ask questions, and seek evidences and clarifications as an inquisitive home-buyer. Hiring an experience lawyer to vet the documents, and also the builder buyer agreement is a prudent move to safeguard yourself from being duped. Being aware of the legal aspects helps a home-buyer approach a lawyer at the pre-purchase stage confidently, and with a good understanding and implications of the statutory aspects.
Due-diligence done prior to signing-up for an apartment is better than going through troubled times later! So, remain inquisitive, raise objections, and get a clarity as a judicious home-buyer by fiercely safeguarding your interests! Without being fully satisfied & certain about the statutory aspects related to the residential project, a home-buyer must not sign on the dotted line, and regret later!