The housing department of the Maharashtra government is initiating various rules to create more transparency in the real-estate industry. Sitaram Kunte, secretary, housing department, government of Maharashtra, explains to Pallabika Ganguly on how he plans to usher in these steps
Pallabika Ganguly (ML): What is your view on the increasing prices of residential properties? Do you feel the market sentiment has improved? Who is pushing up the prices?
Sitaram Kunte (SK): We foresee recession withering away from the real-estate industry. Prices of properties are rising. This shows that the demand is increasing in the real-estate sector and in the next six months the industry would see a positive trend.
ML: According to various reports by different agencies, real-estate sales (in the quarter ended March 2010) are down by 35% compared to the last quarter (ended in December 2009) in various categories. Do you still feel recession has withered away?
SK: There is an imbalance between the luxury segment (above Rs1 crore) and the affordable segment. There is an oversupply in the luxury segment and undersupply in the affordable segment. In the luxury segment the prices were high and will remain high. Sales are not taking place in this segment.
There is a great demand in the affordable segment, which we can see by the Maharashtra Housing and Development Authority (MHADA) affordable house lottery (held on 19 May 2010). We had 4,000 flats but we got 4.33 lakh applicants for the lottery. We are trying to equalise the imbalance by persuading the Maharashtra Chamber of Housing Industry (MCHI) to increase the supply of affordable housing.
ML: How are you planning to ensure five lakh affordable homes in the Mumbai Metropolitan Region (MMR), as a memorandum of understanding (MoU) with MCHI for affordable housing?
SK: We are initiating the process for affordable houses by bringing in more private land. All the five lakh homes won't necessarily be constructed on government land. We are encouraging private developers to actively participate in it. We are incentivising the developers who are bringing in private land by regulatory concession-granting them 2.5 FSI. We foresee through this process we will be able to increase the supply of affordable homes.
ML: Does the Maharashtra housing department have the data of how many under-construction and new projects are initiated every quarter? Can you share the current statistics?
SK: Data in the housing sector has always been an issue. At the State level, we are very close to setting up a statistical cell in Maharashtra. MHADA is compiling a huge statistical database on prices, number of completed projects and number of projects which have received permissions, among other details. It will be a four-member team headed by the joint director and an officer from the statistics department. The team would compile data from different authorities who are closely monitoring this sector. For example-the number of building that have received the Brihanmumbai Municipal Corporation (BMC) permissions, the number of buildings ready for occupation, how is the housing start up index moving, etc.
We are planning comprehensive data collection and utilisation through this cell. In the next six to eight months the cell would be operational. We would also like to incorporate data from the private players.
Most of the data would be collected from different regulatory bodies-like data on the number of buildings being granted development permission. Banks would provide data on home loan offtakes, the registration department will provide the figure for sales taking place during certain tenure, the price trend and the number of leave-and-license agreements signed during a period. The cell will have authentic data.
ML: Conveyance is an issue and not more than 5% of the buildings in Maharashtra have got conveyance. How do you plan to solve this problem?
SK: Conveyance has to be given because all property buyers have paid their share of money. The buyers are entitled to receive full property rights on whatever they have paid. There is a statutory obligation of developers as per the Maharashtra Ownership Flats Act (MOFA).
We have come up with the concept of deemed conveyance and we are in the process of finalising the rules for the same. After the rules are finalised, we are going to submit it for approval to the government and as soon as they permit, the authority will be armed with the power to grant deemed conveyance.
According to MOFA, after 60% of the flats are sold, the developers have to form a legal entity-a cooperative society. Once the cooperative society is formed, within four months it is obligatory for the developer to give conveyance of property. But this procedure is not followed by most of the developers.
If the developer does not give conveyance after four months, the society can approach the district deputy registrar of cooperative societies for deemed conveyance. Deemed conveyance is as good as normal conveyance. It won't have any title issue.
ML: What action has been taken by you on developers selling properties on super built-up area? In November 2008, it was proposed in the housing policy that all properties would be sold on carpet area, why is it still not a law?
SK: There is no standard definition of carpet area. Every developmental control regulation has a different definition of carpet area. We are going to standardise the definition of carpet area by including it in MOFA itself.
The Municipal Corporation of Greater Mumbai (MCGM) commissioner is also actively participating to curb the problem of super built-up area. The MCGM will soon implement a regulation according to which developers are supposed to mention the actual carpet area and useable area separately while approaching the authority for approvals of their project plans.
Developers are supposed to mention the actual carpet area while getting all the three certificates-the Intimation of Disapproval (IOD), occupation certificate and building completion certificate. The authority will also scrutinise the actual sale agreements of the buyers (which have to mention the actual carpet area and super built-up area separately) before issuing occupation certificates to developers.
ML: What is the logic behind charging service tax? The house is sold as any other product sold in the market. Developers are not delivering any service, the consumers are already paying stamp duty, why a service tax?
SK: There are too many taxes on the buyers. Consumers have to pay service tax, stamp duty, value-added tax (VAT) and even labour welfare tax. Already prices of properties are sky high and on top of that the consumers have to pay 11% tax.
Consumers are getting crushed between high prices of the properties, heavy loading from the developers and a number of taxes from the government. We are in talks with the government to rationalise the taxes.
ML: When can we see a regulator for this industry?
SK: Enforcement is an issue in this industry. We are trying to bring in a regulator for this industry. We are in the final stage of completion of a Bill for a regulator. In the next fortnight, the drafting of the Bill will be completed. Then, it all depends on the legislature and political executive to decide when to place the Bill.
Earlier, only the State government was taking the initiative to bring in the regulator. Now, the government of India is actively participating to speed up the process. We should soon see the regulator.
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