IRREGULARITIES, VIOLATIONS, MISREPRESENTATON OF FACTS & CONCEALMENT OF FACTS BY TOP BUILDERS AT BANGALORE


IT IS NOTICED THAT IRREGULARITIES, VIOLATIONS, DEVIATIONS, MISREPRESENTATION OF FACTS, CONCEALMENT OF MATERIAL FACTS AND IRRELEVANT DOCUMENTS ARE SUBMITTED TO THE GOVERNMENT AUTHORITIES AND ALL THE BOARDS ETC TO OBTAIN THE LICENSES, APPROVALS, NOC AND CLEARANCES HAVE BECOME A PART AND PARCEL OF THE REAL ESTATE AND CONSTRUCTION BUSINESS.  OF LATE, EVEN, THE SO CALLED, TOP  BUILDERS ARE ALSO INTO  THIS KIND OF ILLEGITIMATE PRACTICE.

UNSUSPECTING HOME BUYERS, UNAWARE OF THESE INTRINSIC DETAILS, HAVE NEVER GO FOR INVESTIGATIONS IN TO THESE APPROVALS, NOC, CONSENT AND LICENSES. THE BUYERS ARE HAPPY, IF THEY GET THE HOME LOAN SANCTIONED AND ARE NOT WORRIED ABOUT THIS IMPORTANT ASPECT OF THE PROJECT OR THE CONSTRUCTION.

IT IS ALSO FURTHER NOTICED THAT IT IS WITH CLEAR INTENTION TO DECEIVE OR TO COMMIT FRAUD, DETAILS ARE CONCEALED OR HIDDEN OR MISREPRESENTED TO OBTAIN THESE CLEARANCES.  IF THESE IRREGULARITIES/VIOLATIONS/FALSE REPRESENTATIONS ARE BROUGHT TO THE NOTICE OF THE AUTHORITIES, THE LICENSES/APPROVALS/CONSENTS/NOC FROM THE GOVERNMENT DEPARTMENTS STANDS AUTOMATICALLY CANCELLED OR STANDS WITHDRAWN.

THE PROPERTY BUYER, WHO LAYS THE EMPHASIS ON THE GOODWILL OF THE BUILDER, REALISES HIS FOLLY, WHEN SUCH IRREGULARITIES ARE BROUGHT TO THE NOTICE AND ACTION TAKEN.  BUT IT IS TOO LATE FOR THE BUYER TO GET OUT OF IT.

IMMEDIATELY UPON SUCH DISCOVERY, A GROUP OF THE AFFECTED BUYERS WILL FORM A GROUP TO FIGHT/CONTEST THE PROCEEDINGS INITIATED BY THE AUTHORITIES,  WITHOUT THE SIMPLE KNOWLEDGE ABOUT THE ILLEGALITIES/VIOLATIONS/BLUNDER COMMITTED BY THE SELLER/BUILDER/DEVELOPER , UNDER THE DISGUISED LEADERSHIP OF THE BUILDER`S/SELLER`S/OWNER/`S AGENT TO RESOLVE THE ISSUE.

Service tax on construction services-A clarification from the department


Circular No. 151/2/2012-ST F.No.332/13 /2011-TRU New Delhi, 10th February, 2012 Subject: Service tax on construction services — regarding. Many issues have been referred by the field formations, in the recent past, seeking clarification regarding the levy and collection of service tax on construction services [clauses (zzq),(zzzh) of section 65(105) of the Finance Act, 1994], in the light of varying business models. Across the country, divergent business models and practices are being followed in the construction sector. Some of these business models and practices could be region specific. 2. From the issues referred by the field formations, important ones have been identified model wise, examined and clarified as follows: 2.1. Tripartite Business Model (Parties in the model: (i) landowner; (ii) builder or developer; and (iii) contractor who undertakes construction): Issue involved is regarding the liability to pay service tax on flats/houses agreed to be given by builder/developer to the land owner towards the land /development rights and to other buyers. Clarification: Here two important transactions are identifiable: (a) sale of land by the landowner which is not a taxable service; and (b) construction service provided by the builder/developer. The builder/developer receives consideration for the construction service provided by him, from two categories of service receivers: (a) from landowner: in the form of land/development rights; and (b) from other buyers: normally in cash. (A) Taxability of the construction service: (i) For the period prior to 01/07/2010: construction service provided by the builder/developer will not be taxable, in terms of Board’s Circular No.108/02/2009-ST dated 29.01.2009. (ii) For the period after 01/07/2010, construction service provided by the builder/developer is taxable in case any part of the payment/development rights of the land was received by the builder/ developer before the issuance of completion certificate and the service tax would be required to be paid by builder/developers even for the flats given to the land owner. (B) Valuation: (i) Value, in the case of flats given to first category of service receiver, is determinable in terms of section 67(1)(iii) read with rule 3(a) of Service Tax (Determination of Value) Rules, 2006, as the consideration for these flats i.e., value of land / development rights in the land may not be ascertainable ordinarily. Accordingly, the value of these flats would be equal to the value of similar flats charged by the builder/developer from the second category of service receivers. In case the prices of flats/houses undergo a change over the period of sale (from the first sale of flat/house in the residential complex to the last sale of the flat/house), the value of similar flats as are sold nearer to the date on which land is being made available for construction should be used for arriving at the value for the purpose of tax. Service tax is liable to be paid by the builder/developer on the ‘construction service’ involved in the flats to be given to the land owner, at the time when the possession or right in the property of the said flats are transferred to the land owner by entering into a conveyance deed or similar instrument(eg. allotment letter). (ii) Value, in the case of flats given to the second category of service receivers, shall be determined in terms of section 67 of the Finance Act, 1994. 2.2 Redevelopment including slum rehabilitation projects: Generally in this model, land is owned by a society, comprising members of the society with each member entitled to his share by way of an apartment. When it becomes necessary after the lapse of a certain period, society or its flat owners may engage a builder/developer for undertaking re-construction. Society /individual flat owners give ‘No Objection Certificate’ (NOC) or permission to the builder/developer, for re-construction. The builder/developer makes new flats with same or different carpet area for original owners of flats and additionally may also be involved in one or more of the following: (i) construct some additional flats for sale to others; (ii) arrange for rental accommodation or rent payments for society members/original owners for stay during the period of re-construction; (iii) pay an additional amount to the original owners of flats in the society. Clarification: Under this model, the builder/developer receives consideration for the construction service provided by him, from two categories of service receivers. First category is the society/members of the society, who transfer development rights over the land (including the permission for additional number of flats), to the builder/developer. The second category of service receivers consist of buyers of flats other than the society/members. Generally, they pay by cash. (A) Taxability: (i) Re-construction undertaken by a building society by directly engaging a builder/developer will not be chargeable to service tax as it is meant for the personal use of the society/its members. Construction of additional flats undertaken as part of the reconstruction, for sale to the second category of service receivers, will also not be a taxable service, during the period prior to 01/07/2010; (ii) For the period after 01/07/2010, construction service provided by the builder/developer to second category of service receivers is taxable in case any payment is made to the builder/ developer before the issuance of completion certificate. (B) Valuation: Value, in the case of flats given to second category of service receivers, shall be determined in terms of section 67(1)(i) of the Finance Act, 1994. 2.3 Investment model: In this model, before the commencement of the project, the same is on offer to investors. Either a specified area of construction is earmarked or a flat of a specified area is allotted to the investors and as it happens in some places, additionally the investor may also be promised a fixed rate of interest. After a certain specified period an investor has the option either to exit from the project on receipt of the amount invested alongwith interest or he can re-sell the said allotment to another buyer or retain the flat for his own use. Clarification: In this model, after 01/07/2010, investment amount shall be treated as consideration paid in advance for the construction service to be provided by the builder/developer to the investor and the said amount would be subject to service tax. If the investor decides to exit from the project at a later date, either before or after the issuance of completion certificate, the builder/developer would be entitled to take credit under rule 6(3) of the Service Tax Rules, 1994( to the extent he has refunded the original amount). If the builder/developer resells the flat before the issuance of completion certificate, again tax liability would arise. 2.4 Conversion Model: Conversion of any hitherto untaxed construction /complex or part thereof into a building or civil structure to be used for commerce or industry, after lapse of a period of time. Clarification: Mere change in use of the building does not involve any taxable service, unless conversion falls within the meaning of commercial or industrial construction service. 2.5 Non requirement of completion certificate / where completion certificate is waived or not prescribed: In certain states, completion certificates have been waived or are considered as not required for certain specified types of buildings. Doubts have been raised, regarding levy of service tax on the construction service provided, in such situations. Clarification: Where completion certificate is waived or is not prescribed for a specified type of building, the equivalent of completion certificate by whatever name called should be used as the dividing line between service and sale. In terms of the Service Tax (Removal of Difficulty) Order, 2010, dated 22/06/2010, authority competent to issue completion certificate includes an architect or chartered engineer or licensed surveyor. 2.6 Build- Operate – Transfer (BOT) Projects: Many variants of this model are being followed in different regions of the country, depending on the nature of the project. Build-Own-Operate-Transfer (BOOT) is a popular variant. Generally under BOT model, Government or its agency, concessionaire (who may be a developer/builder himself or may be independent) and the users are the parties. Risk taking and sharing ability of the parties concerned is the essence of a BOT project. Government or its agency by an agreement transfers the ‘right to use’ and/or ‘right to develop’ for a period specified, usually thirty years or near about, to the concessionaire. Clarification: Transactions involving taxable service take place usually at three different levels: firstly, between Government or its agency and the concessionaire; secondly, between concessionaire and the contractor and thirdly, between concessionaire and users, all in terms of specific agreements. At the first level, Government or its agency transfers the right to use and/or develop the land, to the concessionaire, for a specific period, for construction of a building for furtherance of business or commerce (partly or wholly). Consideration for this taxable service may be in the nature of upfront lease amount or annual charges paid by the concessionaire to the Government or its agency. Here the Government or its agency is providing ‘renting of immovable property service’ (renting of vacant land to be used for furtherance of business or commerce) and in such cases the concessionaire becomes the service receiver. In this model, though the concessionaire is undertaking construction of a building to be used wholly or partly for furtherance of business or commerce, on the land provided by the government or its agency for temporary use, he will not be treated as a service provider since such construction has been undertaken by him on his own account and he remains the owner of the building during the concession period. At the second level, transaction can take place between a concessionaire and the contractor. Where the concessionaire himself does not have exposure to construction sector, he may engage a contractor for undertaking construction of a building on the land, in respect of which right to use has been obtained in his favour, from the Government or its agency. If the concessionaire is himself a builder/developer, this level of transaction may not arise. Where an independent contractor is engaged by a concessionaire for undertaking construction for him, then service tax is payable on the construction service provided by the contractor to the concessionaire. At the third level, the concessionaire enters into agreement with several users for commercially exploiting the building developed/constructed by him, during the lease period. For example, the user may be paying a rent or premium on the sub-lease for temporary use of immovable property or part thereof, to the concessionaire. At this third level, concessionaire is the service provider and user of the building is the service receiver. The concessionaire may provide to the users, taxable services such as ‘renting of immovable property service’, ‘business support service’, ‘management, maintenance or repair service’, ‘sale of space for advertisement’, etc. Service tax is leviable on the taxable services provided by the concessionaire to the users. There could be many variants of the BOT model explained above and implications of tax may differ. For example, at times it is possible that the concessionaire may outsource the management or commercial exploitation of the building developed/constructed by him, to another person and may receive a pre-determined amount as commission. Taxable service here will be business auxiliary service and service tax is leviable on the commission. (A) Taxability: (i) the service provided by the Government or its agency to the concessionaire is liable to service tax; (ii) the construction services provided by the contractor to the concessionaire would be examined from the point of taxability as to whether the activity is not otherwise excluded; (iii) the services provided by the concessionaire to the user of the facility are liable to service tax; (B) Persons liable to pay tax: Government or its agency and concessionaire are liable to pay tax on the services being provided by them. There could be several other persons liable to pay service tax, depending on the variant of the BOT model followed. 2.7 Joint Development Agreement Model: Under this model, land owner and builder/developer join hands and may either create a new entity or otherwise operate as an unincorporated association, on partnership /joint / collaboration basis, with mutuality of interest and to share common risk/profit together. The new entity undertakes construction on behalf of landowner and builder/developer. Clarification: Circular 148/17/2011-ST dated 13/12/2011, particularly paragraphs 7, 8, 9 apply mutandis mutandis in this regard.

3. This Circular may be communicated to the field formations and service tax assessees, through Trade Notice/ Public Notice. Hindi version to follow. (Samar Nanda) Under Secretary, TRU

SALE AGREEMENTS


ONE SIDED AGREEMENTS-UNFAIR AGREEMENTS-BIASED AGREEMENTS, ILLEGAL AGREEMENTS, UNFAIR CLAUSES – BY DEVELOPERS AND BUILDERS

IS YOUR BUILDER/DEVELOPER/MARKETING AGENCY COMPELLING YOU TO SIGN OR ENTER INTO SALE AGREEMENTS ON CERTAIN CLAUSES WHICH ARE AGAINST YOUR INTERESTS OR IN FAVOUR OF THE DEVELOPER OR UNFAIR OR ONE SIDED AGREEMENTS OR THE BUILDER DOES NOT AGREE TO MODIFY THE ILLEGAL CLAUSE AND IT IS IN TOTAL INTEREST OF ONE OF THE PARTIES (BUILDER) ?

YOU HAVE A SAY NOW!!!!

THE CCI HAS COME OUT WITH HEAVY PENALTY AGAINST DLF REALTY AND FINED THEM TO THE TUNE OF RS630 CRORES.

One sided contract and the consumer protection act- Most of the Sale agreements are totally one sided – Benefits the Builder


The government is set to overhaul the Consumer Protection Act, 1986 to provide for acting against unfair terms in contracts which are skewed heavily in favour of service providers or manufacturers or builders or developers. Government officials said discussions are on to bring in transparent rules on unfair contracts. Under the present laws, the contracts are unilateral and there is no protection against unfair contracts. The planned changes are likely to be introduced in Parliament soon. “Work is underway on the issue and we hope to bring the changes for debate soon,” a senior government official said. Often, service providers want consumers to sign on the dotted line even if the terms and conditions are stiff and give little leeway to consumers. Nearly five years ago, the Law Commission had said that in view of the need to protect consumers and particularly to grant protection from the disadvantages of extensive introduction of standard terms of contracts which are one-sided, it has become necessary to evolve general principles regulating unfairness in contracts. 

One Such case is M/s. ARATTUKULAM INFRASTRUCTURE CONSTRUCTIONS PVT LTD., A project coming up at Situated at Haralakunte Village, Begur Hobli, Bangalore South Taluk.The clause which is under dispute is read like this:

12. The purchaser understands and agrees that the builder/vendor at their discretion can make necessary changes during the execution including minor changes, dimensions specifications and/ or location within the project site. The purchaser is aware that the details furnished in the brochure given by the builder/vendor is only for information and not forming part of an offer whatsoever in nature and the purchaser covenants not to raise any objection or claims in future on this account. 

BASED ON THIS CLAUSE, THE BUILDER IS EXERTING MORE PRESSURE ON THE AGREEMENT HOLDERS TO ACCEPT AND AGREE TO THEIR CHANGED (UNAPPROVED) PLAN.  (Unfair clause)

HOME LOAN CONDITIONS- RBI-01-07-2011


A. Housing Loan for building construction

  1.        i.            In cases where the applicant owns a plot/land and approaches the banks/FIs for a credit facility to construct a house, a copy of the sanctioned plan by competent authority in the name of a person applying for such credit facility must be obtained by the Banks/FIs before sanctioning the home loan.

 

  1.     ii.            An affidavit-cum-undertaking must be obtained from the person applying for such credit facility that he shall not violate the sanctioned plan, construction shall be strictly as per the sanctioned plan and it shall be the sole responsibility of the executants to obtain completion certificate within 3 months of completion of construction, failing which the bank shall have the power and the authority to recall the entire loan with interest, costs and other usual bank charges.

 

  1.  iii.            An Architect appointed by the bank must also certify at various stages of construction of building that the construction of the building is strictly as per sanctioned plan and shall also certify at a particular point of time that the completion certificate of the building issued by the competent authority has been obtained.

B. Housing Loan for purchase of constructed property/ built up property

  1.        i.            In cases where the applicant approaches the bank/FIs for a credit facility to purchase the built up house/flat, it should be mandatory for him to declare by way of an affidavit-cum-undertaking that the built up property has been constructed as per the sanctioned plan and/or building bye-laws and as far as possible has a completion certificate also.

 

  1.      ii.            An Architect appointed by the bank must also certify before disbursement of the loan that the built up property is strictly as per sanctioned plan and/or building bye-laws.

C. Unauthorised colonies

No loan should be given in respect of those properties which fall in the category of unauthorized colonies unless and until they have been regularized and development and other charges paid.

D. Commercial Property

No loan should also be given in respect of properties meant for residential use but which the applicant intends to use for commercial purposes and declares so while applying for loan.

HOME LOANS-BANK SANCTIONS-DOCUMENTATION-UNDERTAKINGS-AFFIDAVIT- READ IT


HAVE YOU READ ALL THE CLAUSES AND CONDITIONS ON WHICH THE HOME LOAN HAD BEEN SANCTIONED TO YOU?

HAVE YOU EXECUTED AN UNDERTAKING OR AN AFFIDAVIT TO THE BANK REGARDING THE COMPLIANCE?

CHECK IT ONCE!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! THE UNDERTAKING EXECUTED BY YOU TO THE BANK?

WE ARE PUBLISHING ONE SUCH AFFIDAVIT WITH GENERAL CLAUSES EXECUTED ON OATH :

 

I, XXXXXXX, S/O/W/O, AGED ABOUT, RESIDING AT  XXXXXXXXXXXX, do hereby solemnly affirm on oath and declare as follows:

I am aware that a special condition is stipulated in the sanction letter for submitting an affidavit to the effect that there are no statutory violation and no violation of the bye-laws of the building society in the construction of the building.

In compliance of the above stipulation, I/we do hereby declare and undertake that I/We have verified all the records relating to the construction and declare that the built up house/flat is constructed is as per the sanctioned plan and in conformity with bye laws annexed to the plan.  I/We further declare that the building is constructed as per the sanction plan without violating the rules stipulated by Corporation/Municipality/panchayat or any other local bodies, who are competent to grant permission for construction of the flat/house.

I/we further declare that I/We are aware purchasing the building with our sole responsibility that there are no statutory violations and if it is discovered by the bank that the building constructed is not as per the sanctioned plan or is in violation of building bye-laws annexed to the plan, the bank shall have the power and authority to recall the entire loan with interest, costs and usual bank charges.

 I/We further declare that what is stated is true and true to the best of my/our knowledge.

                                                                                                                                                                 DEPONENT

WHAT WILL HAPPEN, IF THE UNDERTAKING MADE IS FALSE OR UNTRUE?

HAVE YOU THOUGHT ABOUT IT, BEFORE SIGNING IT?

THINK WELL BEFORE YOU INK

OCCUPANCY CERTIFICATE AND THE MUNICIPAL LAWS


In case of high-rise buildings falling within the jurisdiction of BBMP, be it residential or commercial, issue of Occupancy Certificate by the BBMP on completion of construction is a mandatory requirement under the City of Bangalore Municipal Corporation Building Bye-law 2003.

Bye-law 5.6 of the bye-law provides that every person shall, before the expiry of five years from the date of issue of license, complete the construction or reconstruction of a building.  Within one month after the completion of the erection of a building, the person shall send intimation to the Commissioner in writing of such completion accompanied by a certificate in Schedule VIII certified by a Registered Architect/Engineer/Supervisor and shall apply for permission to occupy the building.

The authority shall inspect the building, including whether the owner had obtained commencement certificate as per Section 300 of the Karnataka Municipal Corporations Act, 1976, and compliance regarding production of all required documents including clearance from the Fire Service Department in the case of high-rise buildings at the time of submitting application.

Then it shall intimate the applicant within 30 days of receipt of the intimation whether the application for occupancy certificate is accepted or rejected.
In case the application is accepted, the occupancy certificate shall be issued in the form given in Schedule IX of the Bye-laws provided the building is in accordance with the sanctioned plan.

The bye-law further provides that physical inspection means the authority shall find out whether the building has been constructed as per the plan and includes inspections by the Fire Service Department, wherever necessary.  Bye-law 5.7 provides that no person shall occupy or allow any other person to occupy any new building or part of it for any purpose whatsoever until an occupancy certificate to such buildings or part thereof has been granted by an officer authorized to give such certificate, if in his opinion in every respect the building has been completed according to the sanctioned plans and is fit for the use for which it is erected.

Exceptions
The authority may in exceptional cases (after recording reasons) allow partial occupancy for different floors of a building.
Bye-law 6 provides that (i) wherever any construction is in violation/deviation of the plan, the Commissioner may regularize such violations/deviations after recording reasons for the same, if he considers that the violations/deviations are within five per cent of

(1) the setback to be provided around the building

(2) plot coverage,

(3) floor area ratio, and

(4) height of the building and that the demolition under Chapter XV of the Act is not feasible without affecting structural stability, provided however that the:

(i) violation/deviation may be regularised only after sanctioning the modified plan recording thereon the violations/deviations and after the levy of fee prescribed by the Corporation from time to time.

(ii) Regularisation of violations/deviations under this provision are not applicable to the buildings which are constructed without obtaining any plan and also the violations/deviations which are made in spite of the same being specifically deleted or rejected in the plan.

Any prospective purchaser of a unit/s in any high-rise buildings should insist on the owner/builder furnishing an Occupancy Certificate to him/her before purchase. This is because

(a) in case the Occupancy Certificate has been issued by the BBMP, it can be safely presumed that the building constructed is in order and deviations, if any, have been regularized in legal and lawful manner or

(b) in case the Occupancy Certificate has not been obtained by the owner / builder or issued by the BBMP for any reason whatsoever in the case of a high-rise building, it could attract the consequences contemplated by the bye-laws including demolition of the unauthorized portion of construction, if necessary, by the authorities.

An important post-construction cost in connection with residential apartments is the obtaining of “Occupancy Certificate” from the Bruhat Bangalore Mahangara Palike. Only after issue of the certificate can an owner or builder is granted permission to occupy the building. The certificate is issued under the provisions of by-law 5.6 of the Bruhat Bangalore Mahangara Palike Building By-Laws 2003.
On intimation from the owner or the builder of the residential apartment complex that the construction has been completed and on his filing an application for the issue of the certificate, the BBMP authorities inspect the complex and confirm whether it has been completed in accordance with the sanctioned plan. If yes, they will recommend issue of the certificate. However, if the authorities find that deviations up to five per cent have been made from the plan, they will regularise it by levy of a compounding fee which will depend on the extent of deviation made. Once the fee is paid they will issue the occupancy certificate.

Further, the certificate will be issued only after obtaining clearances from the Fire Force Department and generally will be subject to the following conditions:
The car parking in the basement shall have adequate safety measures. It shall be built entirely at the risk and cost of the owner and the BBMP will not be responsible for any kind of damage, loss, risk etc., arising out of the same.
The owner/builder shall not add or alter the structure or a part of the structure without BBMP permission. If he does so, the BBMP has the right to demolish the deviation/altered/added portion without any prior notice.

Basement floor, ground floor and surface area should be used for car parking purpose only. Footpath in front of the building should be maintained in good condition. Rainwater harvesting structure shall be maintained in good condition for storing water for non-potable purpose or recharge of ground water at all times as per building bye-laws clause No.32(b)

If deviations have been effected from the sanctioned plan while constructing the building, the security deposit is forfeited.

The owner shall make his own arrangement to dispose of the debris/garbage after segregating it into organic and inorganic waste. He shall make suitable arrangement to transport and dump these segregated wastes in consultation with the BBMP Zonal Health Officer.
In case of any false information or pending court cases, the Occupancy Certificate shall be canceled. On default of the above conditions, the certificate will be withdrawn without notice.