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Realty reality: booking first,sanction later

With investor interest in the realty market down,developers are calling for bookings from buyers even before their projects have got approval.

Written by Shalini Nair | Mumbai |
March 7, 2009 5:11:59 am

With investor interest in the realty market down,developers are calling for bookings from buyers even before their projects have got approval.

On Friday,HDIL opened bookings for Premier Residences in Kurla. Against the prevailing rate of Rs 6,000 to 8,000 per sq ft,the project offers flats at Rs 5,251 per sq ft for the first 100 bookings. The response was overwhelming.

The Slum Rehabilitation Authority confirmed that plans for Premier Residences had still not been approved yet. The land where the project is coming up is part of the 53-acre plot acquired for rehabilitation of 20,000 families as Phase I of the Mumbai Airport Slum Rehabilitation project.

“Of the total 2.1 lakh sq m plot (52 acres),about 50,000 sq m is HDIL’s share that can be sold in the open market. We are aware that they have opened bookings but we have not approved the plans so far,” said a SRA official. The project can be regularised later once the developer pays a penalty.

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Sarang Wadhawan,HDIL managing director,said,“We have got approval from the government.”

Another listed player,Akruti City,opened bookings at relatively lower rates for their project at Akruti Greenwood at Pokhran road in Thane.

At the time of opening bookings on January 1,2009,the company had not received permission to convert their project into a residential one. According to an official from the city engineering department of the Thane Municipal Corporation,the developer had received permission for building an IT park; approvals for converting it into a residential project was granted only on February 13. Vimal Shah,managing director of Akruti,said permission was routine and hence the company decided to go ahead with bookings.

According to real estate sources,another developer known for his signature projects has also opened bookings at a Thane project before getting permission. “This is illegal. Under the Maharashtra Ownership of Flats Act,unless a commencement certificate is granted,any agreement with the buyer is invalid,” said Yashwant Dalal,president of Estate Agents Association of India.

“One obvious reason for developers following such unfair practices is a severe cash crunch. With investors out of the market,they are forced to market their projects by calling for bookings even before a single brick is laid or the necessary permissions are in place,” said a real estate consultant who did not wish to be named.

He added that with the financial year coming to a close,listed companies are especially under pressure to show healthy balance sheets. “Most of the listed companies have not shown a very good performance over the last year. Hence,when the financial year end results are out,they need to show some sales,” he said.

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