‘There’s need for stringent laws against unscrupulous builders’

12 February,2022 08:11 AM IST |  Mumbai  |  Vinod Kumar Menon

Flat buyers have complained that there were unable to avail of stamp duty concessions; will initiate a campaign to create awareness about government schemes, says MahaSEWA president

Those who have purchased flats after January 14, 2021, should write to the builder seeking a refund of the amount of stamp duty. If they refuse, then, they can write to the Planning Authority. Representation pic


Hundreds of flat buyers have complained of not being able to avail of the stamp duty concession from the developers, in lieu of buying property post-January 14 2021. The state government had, earlier, issued a notification stating builders and developers can avail of compensatory floor space index (FSI) by paying a certain premium to BMC, on a condition that they would pass on the benefit to customers by paying the stamp duty for the property. This was done to boost the construction industry amidst the Covid pandemic. However, many developers have not adhered to the order.

Builders mark up flat prices

CA Ramesh Prabhu, founder President of Maharashtra Societies Welfare Association (MahaSEWA), said, "As per the BMC commissioner, around 2,800 proposals of buildings have been sanctioned with 50% concession in the various premiums payable to the government and civic authorities post January 14, 2021. To ensure that 50 per cent concession in premium is ultimately transferred to home buyers, a condition was imposed that the stamp duty applicable on such flats shall be borne by the builder."

"The builders are required to submit a registered undertaking to the BMC stating that the stamp duty on such projects will be transferred to the home buyers. Therefore, we have seen recently many advertisements from the builder that stamp duty is zero. On the other hand, there are many projects which do not have a 50 per cent concession, in that case, stamp duty has to be borne by the flat purchasers. If real estate sources are to be believed, nearly 1.40 crores square feet approval has been given by BMC with 50 per cent concession," said Prabhu.

He further added, "To retain the maximum benefit of such concessions, the builders are marking up the sales prices by adding the stamp duty amount payable by them. In other words, on paper, the stamp duty amount is borne by the builder but in reality, it is indirectly collected from the buyers."

Buyers need to be alert

When asked if MahaSewa has raised this concern? Prabhu replied in a negative. He said, "So far we have not raised this issue with the government or BMC. It is the buyers who have to be alert and aware of such misdeeds done by the builders. The MahaSewa will initiate a campaign to educate and create awareness." Prabhu elaborated saying, "Many developers do inform the buyers to pay a certain component of payment in cash so that the buyers will be able to save on GST of 5%. In turn, the liability of stamp duty payable by builders gets reduced. Any savings to the buyer encourages them to enter into such cash transactions. This is going to be dangerous for the buyers, as in case of delay, they will not be able to get a refund of cash payment and interest on such an amount."

Advocate Godfrey Pimenta said, "The total number of documents registered under Article 25 of Maharashtra Stamp Act, 1958, as on date, during the current financial year is 11,65,018 and the total stamp duty collected so far for the said period is Rs 18,540.36 crores. Almost 85,968 documents have been registered so far. A good majority of the buyers are not aware that there exists such a provision for stamp duty payments by the developers. Those who have purchased the flats after January 14, 2021, should write to the builder seeking a refund of the amount of stamp duty. If they refuse, then, they can write a complaint to the Planning Authority (BMC, MBMC, VVMC etc). Alternately the flat purchasers can also file a complaint of cheating with local police."

Need pragmatic solutions

Advocate Vinod Sampat, Founder of Flat Users Residents Welfare Association, said, "It has been known for decades that the builders have misused the faith put in them. An example of the same is a conveyance. The law stipulates that within four months conveyance has to be executed. Since 1947 we have been talking about abuse of power by builders. Even the Supreme Court has passed comments against builders in several judgements, including the Friends Colony Development Committee v/s State of Orissa and others Civil Appeal No. 12984 of 1999."

"The need of the day is to have pragmatic resolutions and a will to take disciplinary action against the builder, which is lacking in Maharashtra. One needs to have stringent laws including blacklisting builders and carrying out construction activities if they fail to comply with the various schemes of the government," Sampat said.

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