With 470 flats spread across 11 residential towers and 27 sprawling acres, Parsvnath Exotica in Gurgaon’s Sector-53 looks like an urban utopia in a concrete jungle—paved roads lined by ornamental and fruit-bearing trees, well-designed playgrounds, children’s parks and lots and lots of open spaces. But despite the facade of serenity, all’s not well in this residential landscape in Millennium City. Launched in 2005, it took six more years to complete 11 towers. The flats were handed over in 2010. The three convenience stores were sold to a private player.
The jolt to the buyers came two years later, when the stores were sold off to another person who merged them and turned it into an automobile showroom the same year. The Residents’ Welfare Association (RWA) complained to the authorities, the district town planner, but when nothing happened, they filed a petition in the Punjab and Haryana High Court. The matter is sub-judice. “Even if we keep the legal provisions aside, there is no logic that justifies this type of business activities in an area which is meant for convenience shopping for residents,” says Dinesh Tondon, president of the RWA. “We have requested the high court to direct the competent authority to get the car showroom closed. The three are meant for shops only.” Parsvnath representatives, however, say they have not violated any law as Haryana allowed developers to sell or lease out commercial facilities to private players at that time, when there was no central law to regulate real estate.
Therein lies the crux of the issue. The term “common area” has remained a grey zone despite the Centre and states drafting laws and bylaws to govern India’s burgeoning real estate business. Loopholes remain and it has often taken the judiciary to step in to help the buyers, always at the mercy of the builders. The Supreme Court’s recent move to bar real estate biggie Amrapali from selling a nursery school in one of its projects to a private party has once again brought into focus the ambiguity over rules governing common area. “The court observed that the school was meant for the residents as a community facility,” said M.L. Lahoty, a senior counsel who appeared for the Amrapali buyers.
The ground reality in most projects, however, is that most builders sell community and commercial facilities like convenience stores and schools meant for residents’ common use to private parties who bring their own rules into play. When the much-awaited law came into effect on May 1, 2017, it defined common area in favour of the buyers. Unfortunately, the ambiguity still continues.
In any real estate project, all the residents have undivided interest in the common area, which includes non-commercial parts such as parks, terraces, staircases and community halls besides commercial facilities like convenience stores, schools, covered parking etc. The residents in such projects claim ownership over both these constituents, but the builder typically doesn’t want to part with the latter due to commercial interests. Buyers argue that ideally the price of an apartment should factor in the cost of community and commercial facilities for the sake of transparency and once the project is ready, everything should be handed to the buyers’/residents’ association to lease them out according to their local needs.“What if the school or club, constructed in a middle-income-group complex, is leased out to a company which caters to the need of one section of the people?” asks Amit Jain, a real estate expert, as an example of the anomalies that could arise in such a situation.
For their part, builders argue that buyers’ associations cannot run these facilities and they will end up in disputes among themselves due to potential conflict of interests or personal differences. “Commercial facilities like schools, convenience stores, etc. are services that need to be provided and are as much a commercial venture as any other. It will sow the first seeds of dispute among the residents if handed over to them,” says Rajeev Talwar, chairman of the National Real Estate Development Council (NAREDCO), a body of realtors. Talwar adds, “Even in a DDA colony, there are shops which are not run by the residents. These are sold out to private parties and the income doesn’t go to the RWAs.”
Lahoty, however, does not agree. “When you buy a flat in a township or a big housing project, you are not buying an apartment in isolation like what you do in DDA flats. The builder allures you by showing various community facilities and you buy under the impression that you will get these facilities at an affordable cost.” In 2013, for the first time, the Supreme Court intervened in a case involving realty major, the DLF Limited, and said apartment owners can’t claim undivided interest in community and commercial facilities as these belong to the developers. But the judgment failed to end the controversy because the real estate project in question was a township developed in 130 acres—plotted colonies as well as group housing condominium. Buyers argue that the judgment is applicable only to those projects where plotted colonies as well as group housing condominium both exist. According to builders, it settles the dispute forever by giving right to the developers to define the common area and keep commercial facilities outside the ambit of common area.
Even as the debate raged, Parliament passed the much-awaited Real Estate (Regulation and Development) Act, 2016, also referred to as RERA, which came into effect on May 1, 2017. On the face of it, this almost reversed the SC judgment. According to RERA, all community and commercial facilities are part of the common area which developers cannot sell separately. However, many states, while framing their own rules, have deviated from the model act on various issues, including common area. For instance, rules notified by the Uttar Pradesh government state, “Community and commercial facilities shall include only those facilities which have been provided as common area in the real estate project.”
Rules framed by Haryana government say that ‘common area’ is those areas which are defined in their state acts. “Those state acts were already contested in the Supreme Court in the DLF Limited vs Manmohan Lowe case and the apex court’s judgment hasn’t brought any clarity,” says Jain. Many other states like Gujarat, Maharashtra and Bihar have not defined common area in their rules.
Builders justify contradictory rules framed by states by contending that, “RERA is only a model act and in the true spirit of federalism, states should have freedom to adopt what suits them the best according to their own need.” However, legal experts say that by introducing different rules, states are trying to bring back the pre-RERA regime that benefits the builders. Sidharth Luthra, former additional solicitor general, says that once a centralised legislation like RERA is enacted, albeit granting powers to the states to frame their own rules, such rules cannot detract from the main act.
- In most projects, builders sell community facilities to private parties who bring their own rules into play.
- Legal experts say that by introducing different rules, states are trying to bring back the pre-RERA regime.