Know your space

TYING THE customer UP IN KNOTS

The problem occurs because a wide variety of terminologies are used within the sector: carpet area,plinth area,built-up area,and super-built area. Most homebuyers are not aware of the meanings of these terms,and the difference between them. Developers,instead of clarifying the issue,take full advantage of buyers ignorance.

Further,no clear regulation exists in most states. The law does not make it mandatory for developers to use one standard terminology while referring to area at the time of selling their projects. So different developers use different terminologies and take buyers for a ride. With different developers using different definitions,comparison of different projects also becomes difficult.

When a developer refers to area,in a lot of cases he is referring to the super built-up area,though he does not explicitly say so. He includes common areas such as the lobby,lift,etc in the area of your flat and charges you for them. Market experts say that on an average the carpet area of a property is 20 to 40 per cent less than the super area.

Being charged on the basis of super area works to the disadvantage of the buyer in several ways. One,the area that he will be living in turns out to be much less than promised. And two,being charged a uniform rate for the built-up area and the common area works to his disadvantage since the construction cost of the built-up area is always more than the cost of construction of common areas.

It is not as if the developer is not entitled to charge for the common areas. After all,the buyer is going to avail of these facilities. But these different costs need to be made explicit.

The end result is that the buyer ends up paying a much higher rate per square feet than he had bargained for. Suppose that a buyer buys a flat of 2,000 sq ft which he believes will be the carpet area of the flat at the rate of Rs 2,000 per sq ft. He pays a price of Rs 40 lakh for the flat but the actual usable area turns out to be 1,500 sq ft. Thus the actual cost of the usable area of the flat amounts to Rs 2,666 per sq ft.

LEGAL PRECEDENCE

A judgement passed by the Maharashtra State Consumer Disputes Redressal Commission in a dispute between a property buyer and a developer provides a solution to the issue. In 2001,Allwyn Fernandes,a Bandra resident,filed a case against a local developer,Sydney Lobo of Trison Builders. While dealing with this case,the consumer commission provided a clear cut definition of carpet area,built-up area,and super built-up area.

In its order,the Commission said that the area within the outer walls of an apartment would be the built-up area. The area within the inner walls would be the carpet area. It further said that the built-up area should be the carpet area plus 26 per cent of the carpet area. It added that the built-up area should be distinguished from the super built-up area. The latter would include common areas like the passage,staircase,lift,etc.

In its judgement,the Commission held the developer guilty of deficiency in service as he had passed off the super built-up area as the built-up area and had given the buyer less space than had been mentioned in the agreement. The Commission directed the developer to pay to the buyer a penalty of Rs 10.25 lakh along with an interest of 9 per cent on the amount of penalty.

Further,the Maharashtra Ownership Flats Act Regulation of the promotion of construction,sale,management and transfer Act,1963,has made it mandatory for developers in Maharashtra to sell flats on the basis of carpet area for all proposals submitted after May 12,2008. Other states would do well to emulate this norm.

WHAT NEEDS TO BE DONE?

Clearly,there is a need to develop standard norms so that developers cannot obfuscate in this matter. Says PSN Rao,founder-chairman of National Realtors Association NAR-India: Any product must have a clearly defined method of measurement,so that consumers are able to make informed decisions. For instance,in a departmental store,we are able to see the product,read its contents,know its weight or volume,price,and so on. Only then do we decide whether to buy it or not. In case we have doubts,we can actually have a check conducted. Even in real estate we need a statutory framework to ensure that all the specifications are clearly mentioned. And secondly,we need random checks at periodic intervals to make sure that the regulations are adhered to in practice. Unfortunately,all this is not done in the real estate sector at present.

Further,says Rao,legislation needs to be passed that provides for compulsory standard disclosure norms. The legislation should define these terms and should mandate their usage in a manner that is easily understood. This,he says,would go a long way towards protecting consumer interests.

Till all this is done,enterprising businessmen could take advantage of the situation. There is a great business opportunity for entrepreneurs to offer a measurement certification service after the project is completed. With the help of such a service the buyer will be able to satisfy himself that he has got the product for which he paid when it was still at the drawing board stage, says Rao.

BUYER BEWARE

Till state governments undertake the necessary reforms,it is up to the buyers to be on the alert. Before they set out to purchase a house,they must familiarise themselves with these terms and be able to tell the difference between one and the other. Further,they should ask specific questions and seek clarity from the developer: which area is he talking about? Which area is he referring to in his sales brochures?

Experts also suggest that buyers should insist on having a look at the building plans to get an estimate of how much common area is included in the space being sold. Says Pradeep Bhatia,a Delhi-based real estate agent,Housing options should be compared on the basis of the carpet area,irrespective of whether developers are quoting rates on the basis of the built-up area or the super built-up area. However,one should remember that the quality of the common areas like staircases,elevators,lobbies,etc also have a bearing on overall living conditions. Therefore,one should consider these amenities as well before taking a decision.

As a rule of thumb,experts recommend that the carpet area should be 74-80 per cent of the super built-up area for office space,and 68-74 per cent for residential apartments.

Finally,instead of relying on the developers promise,a buyer needs to get everything incorporated in the agreement of sale. Then if the developer reneges on his promise,the buyer will be able to approach a court of law for redress. l

praveen.singhexpressindia.com