NOC on resale: Crucial issues unresolved
Unless penalties are put in place and banks roped in,decision may not achieve much.
The Maharashtra governments decision to abolish the requirement of no objection certificate NOC from a developer at the time of resale of a flat is a long overdue step that would reduce the time taken for resale transaction and also eliminate the harassment that buyers routinely undergo. It is also a major relief coming at a time when the cost of property is reaching stratospheric levels.
The practice is prevalent in other states too,and the Maharashtra example would hopefully be emulated in due course.
Need for NOC
The rationale behind the NOC is actually very simple. It gives the land-owner or society the opportunity to know the new buyer and also ensure that the seller has settled all existing dues before the sale. It is like a bona fide certificate for the seller and a surety about the seller that the land-owner gives the buyer. It can also be understood as a status report about the premises and the legal position of ownership to the government,and the banks for loan processing etc.
The rider,however,is that no money can be charged for this procedure. That is not how it has worked.
Navin Shah name changed had to sell his newly bought 1 BHK flat of 460 sq ft at Goregaon,Mumbai. To get the sale registered,he had to get the NOC from the developer,as the housing society was yet to be formed. The developer charged Rs 600 per sq ft,calling it transfer charges to be paid in cash. Shah had no recourse but to succumb to this demand and pay up Rs 2.76 lakh.
If the flat is in a registered society,which also owns the land,then the NOC from the land-owner i.e. the society is required. No money is usually demanded for this NOC. However,once the sale agreement is registered and submitted,most societies charge Rs 25,000 as transfer fee to make the new flat-owner a member of the society. This is valid. However,many societies also charge an additional amount from the seller or the buyer as donation.
In Shahs case,the developer could charge because that project had not become a society then,which meant that the developer was the landlord. According to the Maharashtra Ownership Flats Act MOFA 1963 and 1964,the developer has the responsibility to issue the NOC,but has no right to charge for this service.
Developers found a way out labelling it as transfer charges. There are other fancy names such as client servicing or transfer handling or customer care charges to escape the illegality.
The Problem
The charge for the NOC under any label in Mumbai is from around Rs 500 to Rs 1,500 per sq. ft. depending on the location and quality of the project. For example,the building with 20 flats each admeasuring 1,000 sq. ft. has say 20 per cent resale of flats within the first two years of its possession i.e. four flats with a total 4,000 sq. ft. area. If the NOC charge is say Rs 1,000 per sq. ft.,then the total amount the developer would get is Rs 40 lakh for signing four fill-in-the blank type of ready-format letters.
The argument by the developers is ridiculous, says Rajesh Ranka,a broker in Kandivali a western suburb of Mumbai. These developers feel that the flat-owner is selling at a better price than the rate at which he booked the flat. Since the seller is booking a huge profit,he should not mind sharing some with the developer. If a seller can pay the broker,the registrar,and the advocate,then why not pay the developer? Is this any logic? They have come down to the level of agents seeking commission.
The extortion for NOC happens in the fully-completed ownership buildings. The modus operandi is simple. As per law,after selling all the flats,the developer has to form a society in the stipulated period and then in the given time-frame he must convey the land i.e. transfer the ownership of the land to that society. Once this is done,he has no jurisdiction over that project. So,despite selling every inch of the project at the market price,some developers continue to eye spoils of the sale.
That is why,they will try to delay the formation of the society. If the flat owners are aware of their rights and put pressure as per the regulations,then he may form the society but would delay the conveyance by creating legal or technical hurdles. In short,the developer tries to remain the land-owner of the project to control the plot,the society and the members in order to make the same flat buyers cough up additional money through all possible ways. NOC is one of them.
It is a distressing fact: several societies in the Mumbai Metropolitan Region MMR are not being conveyed the land by developers for decades together. This is a key requirement for redevelopment,which is the need of the day in land-stressed Mumbai. This remains an illegal control mechanism in the hands of the developer.
Unsolved issues
On receiving hundreds of complaints regarding non-conveyance and NOC charges the Maharashtra housing department announced new norms to help flat-owners. Now,owners of newly developed flats need not take the NOC even if the society is not formed.
The Inspector General of Registration and Stamps,Maharashtra is been asked not to demand NOC. In addition,if any government official insists on it and stalls the registration process,the seller can report the case to the housing department.
On the conveyance front,the official communication says,If the developer fails to provide conveyance certificate within four months of possession of the flat,a Deemed Conveyance Certificate can be obtained from the local District Deputy Registrar DDRs office.
Experts feel the decision could have been more comprehensive in scope. There are mainly three issues.
Senior Advocate Anil Harish,says,The new norm addresses the issue of ready flats but no provision is made for the flat buyers who would like to exit from the project when the building is still under construction. They would also need NOC in case they wish to sell or transfer the flat at that stage.
This norm does not speak of any penalty for the developer who charges NOC illegally. No punishment,no fear. The harassment will continue. If the government says that they received many complaints,then let people also know what action has been initiated against those culprits. If not,then this is nothing more than a political stunt. says Ashok Vadilani,a broker from south Mumbai.
The other issue that remains unaddressed is the insistence of the NOC by banks to sanction loans. The state government is silent on this issue. Unless banks are instructed to refrain from demanding NOC,the matter comes back to square one. Developers will continue to make hay.
anshumali.ruparelexpressindia.com
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