The built-up trap

Developers are taking advantage of there being no standardised means to measure common space value and the extra cost it imposes on the end-user

Building byelaws and regulations differ from state to state and even city to city. However,it invariably happens that property buyers are required to pay for construction that falls under FSI (floor space index) areas of congregation,passage and general convenience. In a typical project,these areas do not tend to constitute more than 15-20 per cent of the overall FSI. Nevertheless,what a buyer would only want to pay for is the exact amount of space available for personal use in the property. In other words,the carpet area. However,there is no contained space without walls,so the buyer winds up paying for the space those occupy too the built-up area. This is,of course,unavoidable.

What rankles many property buyers is the fact that the developer charges them on the basis of super built-up area this includes the carpet and built-up area as well as the area taken up by common spaces like the staircase,lobby,lifts and even the terrace and building maintenance room. There is no way of circumventing an additional load on this count,since the developer has doubtlessly incurred an extra expense. The problem lies in the fact that there is no standardised means of measuring the value of the common spaces component,and the justifiable extra cost it implies to the end user. There is no mechanism in place to determine how much cost the developer has incurred for these spaces in terms of construction materials and manpower.

TAKING ADVANTAGE

While constructing projects of a certain scale (such as townships) a developer is required by statute to provide certain facilities like a school,a hospital and a shopping area. The statutory requirements are in place to balance the consumption of large tracts of land with certain facilities of benefit to the neighborhood. Since this is required by law,the developer is justified in offloading the cost of such facilities on his buyers.

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This,however,does not take into consideration the fact that by adding such facilities,the developer is already enhancing the market value of his project and therefore his bottom-line. In other words,he recovers his cost even if he does not burden his clients with them. Nor,as mentioned,is there a satisfactory means of establishing to what extent he can offload the extra cost on his clients.

UNNECESSARY AMENITIES

In another twist to the situation,the developer adds facilities (read common spaces) that the law does not require him to. He adds these spaces because they enhance his project. For example,the law requires a residential building to have only one parking place for a certain number of flats. However,almost all prospective buyers in a metropolitan city would own cars,so the developer provides more than what the law requires. He offloads the enhanced cost on his clients,charging them for more than what they are getting.

In the current scheme of things,there is no clear way around this debacle. The government can certainly not keep modifying such norms constantly. Developers will merely juggle figures,selling by carpet area but charging more for it.

Is including everything in a project into the FSI area a solution? Probably not. Developers would merely cut corners in terms of wall width,open spaces,corridors and circulation areas,rendering their projects unsafe. The solution would lie in coupling total inclusion in FSI with a government directive that specifies minimum and maximum statutory parameters for such dimensions,and additionally ensuring that loading for these on buyers does not exceed 20 per cent,amendable on a case-to-case basis.

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 The author is local director (strategic consulting),Jones Lang LaSalle India

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