Keeping the profits – how developers do it
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.