1.85 lakh crore scam?

The in­abil­ity of the Haryana gov­ern­ment to im­ple­ment a 15% profit clause in the De­vel­op­ment and Reg­u­la­tion of Ur­ban Ar­eas Act, 1975, could have led to mas­sive losses for the ex­che­quer

HT Estates - - FRONT PAGE - Jee­van Prakash Sharma

Should an in­ves­ti­ga­tion be ini­ti­ated by the Comptroller and Au d i t o r G e n e r a l (CAG) of In­dia, the mother of all scams is likely to be un­earthed in Haryana’s real es­tate sec­tor. This is be­cause suc­ces­sive state gov­ern­ments, after 1981, when the first li­cence was granted un­der the Haryana De­vel­op­ment and Reg­u­la­tion of Ur­ban Ar­eas Act, 1975, have failed to in­voke a li­cense clause stat­ing that de­vel­op­ers can make a max­i­mum profit, after taxes, of just 15% on a project. Any ex­cess amount has to be de­posited within two months in the state gov­ern­ment trea­sury by the owner or spent on build­ing ameni­ties/fa­cil­i­ties in the colony for the ben­e­fit of the res­i­dents.

As the clause has not been im­ple­mented, a sim­ple cal­cu­la­tion as­sess­ing losses in­curred by t he state ex­che­quer i n Gur­gaon from 2007, till this year, be­cause of non-de­posit of prof­its by de­vel­op­ers, could add up to ₹ 1.85 lakh crore.

“If this as­sess­ment is done from 1981 and all other ar­eas such as Farid­abad, Sohna, Dharuhera etc are to be in­cluded for as­sess­ment, the amount could be mind- bog­gling. It’s im­por­tant to re­mem­ber that the 2G spec­trum loss was es­ti­mated at ₹ 1.76 crore and the coal block al­lo­ca­tion loss was about ₹ 1.85 lakh crore,” says San­jay Sharma, MD, Qubrex, a prop­erty con­sul­tancy and bro­ker­age firm in Gur­gaon.

Be­fore a de­vel­oper gets the li­cense for con­struc­tion of the group hous­ing project, he signs a bi­lat­eral agree­ment with the Depart­ment of Town and Coun­try Plan­ning (DTCP) agree­ing to sub­mit a cer­tifi­cate from a char­tered ac­coun­tant declar­ing that the over­all net profit, after taxes, has not ex­ceeded 15% of the to­tal project cost. This cer­tifi­cate has to be sub­mit­ted within 90 days of the com­ple­tion of the project.

Another clause states, “The owner while de­ter­min­ing the sale price of the apart­ment in the open mar­ket shall com­pute the net profit at the rate of 15%, the de­tails of which, in­clud­ing the cost of ac­qui­si­tion of land, shall be sup­plied to the di­rec­tor (DTCP) as and when de­manded by him. The to­tal project shall mean a de­fined phase or a com­pact area of the colony, as ap­proved by the di­rec­tor.”

Ex­perts be­lieve that de­vel­op­ers ex­ploit the loop­holes in the li­cense agree­ments and the Haryana De­vel­op­ment and Reg­u­la­tion of Ur­ban Ar­eas Act, 1975. For in­stance, a de­vel­oper can get the term of his li­cense re­newed ev­ery five years and as many times as pos­si­ble. Also, there is no time limit for com­ple­tion of the project and for ac­quir­ing the com­ple­tion cer­tifi­cate. As a re­sult, projects which were started in the 80s did not get com­ple­tion cer­tifi­cates till 2011.

“De­vel­op­ers nor­mally take par­tial com­ple­tion cer­tifi­cate, and not the full and fi­nal com­ple­tion cer­tifi­cate, for which a fi­nal au­dit re­port has to be sub­mit­ted. Some de­vel­op­ers have sub­mit­ted the an­nual au­dit re­port but a majority have not. How­ever, the ac­tual profit can be as­sessed only through a fi­nal au­dit re­port,” says Sharma.

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