In order to ensure transparency, the real estate sector has several statutory compliance and approvals, which need to be cleared and approved by the developer even before starting construction of the project. Even before the RERA Act 2016 was passed, these statutory clearances were compulsory even then, but this newly introduced act brought a major improvement by establishing the guidelines, allocating funds & management, completing the project time limit, etc., and brought an extraordinary amount of clarity and transaction structure.
There is still a strong demand for property from a reliable builder who is renowned for quality construction. Buyers pay a premium in exchange for -Peace of mind that all permits are in place, but the contractor would need to have a collection of approvals and sanctions from all the authorities involved for every building to be completed. In the form of fines and even prosecution, buildings that arrive without these permits would call for penalties. India's real estate sector is booming and, after the agricultural sector, has become the fastest growing industry. In order to ensure accountability, this sector has many regulatory compliance and approvals, which need to be cleared and accepted by the developer even before the construction of the project begins. Even before the RERA Act 2016 was passed, these statutory clearances were compulsory even then, but this newly introduced act brought a major improvement by establishing the guidelines, allocating funds & management, completing the project time limit, etc., and brought an extraordinary amount of clarity and transaction structure.
This approval and statutory clearance process can be very exhausting and thorough, as multiple approvals such as ownership certificate, building layout approval, non-agricultural permission, various NOCs, NHAI permission, energy, water & firefighting department approval, beginning certificate, and much more are required to start construction that can usually take 1-2. Even if there is a 2/3 day delay, it may cause delays to a greater degree, thus dampening the overall delivery of the project. In the form of fines and even prosecution, any project launched without these approvals would call for retribution. Based on the project phases, these approvals can be divided into 3 groups.
- The feasibility stage
- The sanction stage
- The completion and post completion stage
A thorough procedure stage wise required to get approvals and sanctions is mentioned below:
Land Title and its Clearance
Land title and land clearing are the initial stage of development, since the developer first purchases the land and then starts working on the project. Therefore, having the simple title for the plot where he has to start his project is very important for the creator. The plain title of the plot ensures that the current status of the property is clear, marketable and free of any burdens, there is no mortgage, lien, third party right generated on the property, and the developer has a free right to build the project without any lawsuit on the same. It helps a prospective buyer to define the chain of holdings, transactions over a period of time and, if any, control conflicts regarding the ownership of the land.
- Even before purchasing a house, the developer may also verify the basics of the property by withdrawing the Encumbrance Certificate from the office of the sub-registrar, i.e. ownership/lien of land/plot.
- In order to know whether or not the title of the land is clear, the developer by Advocate or Attorney will send an RTI request to the relevant authority in relation to the related records, i.e. 7/12, mutation entries, etc. and any other documents they feel are necessary (period of 30-60 years). The developer's Advocate will check those documents and a title certificate will be on its letterhead or on the stipulated period by Patwari/Tehsildar based on it.
Clearance of Land
When the title procedure is over, the developer needs to begin the process of land clearance approvals and sanctions. Depending on the location or town, the land may either be agricultural or non-agricultural land. It needs to be transformed into non-agricultural land due to agricultural land, by gaining permission from the appropriate authority, which can be used further, for the development of the project to be developed for residential or commercial purposes.
Approval of the local authority and the State Ministry of Urban Development for the change in land use of the parcel is also needed if the land use shown in the master plan or zonal plan (where the parcel is located)/land allocation letter is to be modified (as the same is not permitted/not consistent with the master plan/zonal plan). The land use plan for the land area is to be notified by the UD State Ministry after approval by the local authority.
What is Zonal Clearance?
When the land title and land clearance process is over, the developer is further responsible for receiving zonal approval from the authority concerned. The revenue department will provide 7/12 or the ownership certificate to the developer for the project plot, following the clearance of the zonal stage. If the Town Planning Authority has completed this process, the authority will review the development plan as per the zonal city, then the planning board will validate this plan and then forward it to the other concerned authorities for further NOCs and any other relevant approvals if necessary even before the zonal approval is granted.
Building Plan Approval and its Clearance
All buildings to be built by any party need prior permission from the Local Authority to construct the buildings. This control is placed in place to ensure that, in compliance with the bylaws, the buildings and structures built are secure and in suitable locations and in habitable places for work and dwelling. Building plan is a text containing a minute detail about the structure to be designed in the form of drawings made by trained architects and engineers. There are various reasons that a development plan has to be updated before it is submitted to the local authority.
- To comply with the Local / Subject Authority rules and regulations.
- Adding or deleting any details related to in the plan.
- To correct any details wrongly provided to the authority in question.
There are many forms of schedule to be considered during submission:
- Plan for Sketch
- Plan of site
- Plan for Location
The approval submitted for the building plan takes approximately 6 months from the date of submission of the forms and proposals required by the state/local/concerned authority's bye laws.
Intimation of Disapproval
Intimation of Disapproval (IOD) notes conditions that need to be obeyed in the construction of the project across various phases. The IOD is released according to three conditions:
- On or before work has begun.
- In between or after a time of construction.
- On building completion.
In layman terms, the beginning certificate is the approval from the local development authority to begin construction. IOD and CC are very significant documents; once these documents are released, the developer will not lay foundation stone or construct boundaries or walls around the demarcated area.
Services & Utilities Installation
The developer is responsible for obtaining approval for lift construction, fire, electricity, gas, sewer or water supply and/or water for drinkable and non-drinkable use from the concerned authorities. The developer should receive NOC for digging a bore well on the project from the pollution board, municipality and/or corresponding authority.
When the construction of the project is finished, the appropriate authority issues the Completion Certificate (CC) once they have completed the inspection process. This certificate is mandatory for the project of the developer since the premises or project can be sold to prospective buyers only after obtaining CC developer. This certificate assures the prospective buyer that the project's construction is in compliance with the approved plan of the authority concerned.
This is the last certificate to be issued by the authority before its premises or any part of the building is taken over by prospective buyers. Before issuing the completion certificate and/or occupancy certificate to the developer, the authority concerned can verify the documentation and consult with other local authorities in the event of any pending approvals/NOCs.
On average, developers need to receive more than 70 government permits, which can often become a tedious task. The government needs to concentrate on how the developer can alleviate this tedious job. In relation to the Single Window approval for statutory clearance, the nod granted by the UP government must also be welcomed and approved by other states. All this red tapism also leads to projects being delayed because the contractor does not complete the construction on time, which is further delayed in giving the prospective buyers ownership. These buyers prefer to file suit against the developer, being aggrieved by the delayed possession, which in turn creates complications in the relationship between them and has a negative effect on this field. The cost effect is greatly influenced by paying interest on the loans taken to complete the project by the developer. Thus, the country's single window approval mechanism is appreciated, which will simplify these complexities at reduced financial cost as well as less physical and mental burden and help developers complete their project over the specified period.
#tags: Real Estate India, Projects, Licenses
February 24, 2021