Keep­ing the prof­its – how de­vel­op­ers do it

HT Estates - - FRONT PAGE - –Jee­van Prakash Sharma

The CAG re­port tabled in the Haryana As­sem­bly last week high­lighted losses to the state ex­che­quer through du­bi­ous land deals, but the state gov­ern­ment needs to ur­gently ad­dress the probl em of most de­vel­op­ers by­pass­ing rules re­quir­ing them to de­posit with the state trea­sury the ex­tra prof­its they make over and above 15% from hous­ing projects.

For in­stance, de­vel­op­ers are al­lowed to get their li­censes re­newed ev­ery five years and as many times as pos­si­ble. Also, there is no time limit for com­ple­tion of the project and for ac­quir­ing a com­ple­tion cer­tifi­cate. As a re­sult, projects which were started in the 80s did not get com­ple­tion cer­tifi­cates till 2011.

“De­vel­op­ers nor­mally take par­tial com­ple­tion cer­tifi­cates, 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 has not done so. How­ever, the ac­tual profit can be as­sessed only through a fi­nal au­dit re­port,” says San­jay Sharma, a Gur­gaon­based prop­erty con­sul­tant.

Says Ashish Kaul, an RTI (right to in­for­ma­tion) ac­tivist, “As per an RTI re­ply, no de­vel­oper has taken any com­ple­tion cer­tifi­cate till 2011. If he does so then he would have to sub­mit a full and fi­nal au­dit re­port to the Depart­ment of Town and Coun­try Plan­ning, re­veal­ing his to­tal earn­ings.”

In March 2011, the pre­vi­ous Haryana gov­ern­ment had amended the Haryana De­vel­op­ment and Reg­u­la­tion of Ur­ban Ar­eas Act, 1975, al­legedly giv­ing de­vel­op­ers an es­cape route from the 15% profit clause. The de­vel­oper now has the op­tion to ei­ther de­posit some­thing called an ‘in­fra­struc­ture aug­men­ta­tion charge’ of just ₹ 20 lakh per acre as ap­pli­ca­ble from time to time at any stage be­fore the grant of com­ple­tion cer­tifi­cate and get ex­emp­tion from the 15% profit re­stric­tion.

Sau­rabh Prakash, a Delhi High Court lawyer and a res­i­dent of a group hous­ing project in Gur­gaon, says “What is sur­pris­ing is that the max­i­mum amount for ₹ 20 lakh per acre for the in­fra­struc­ture aug­men­ta­tion charge is ap­pli­ca­ble with ret­ro­spec­tive ef­fect. Un­der the amended pro­vi­sion, de­vel­op­ers can now pay ₹ 20 lakh and not be held ac­count­able for prof­its they have made over and above 15% of the con­struc­tion cost of the project.”

To find out how many de­vel­op­ers took com­ple­tion cer­tifi­cates af­ter March 2011, Kaul filed an RTI ap­pli­ca­tion for the Depart­ment of Town and Coun­try Plan­ning, Haryana, but did not get a sat­is­fac­tory re­sponse.

“The pro­vi­sion has been made to help de­vel­op­ers get com­ple­tion cer­tifi­cates with­out de­posit­ing prof­its over 15%. This was done by the pre­vi­ous Hooda gov­ern­ment and we ex­pect the BJP gov­ern­ment to set aside the amend­ment in the in­ter­est of the home­buy­ers and the state,” says Kaul.

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