Before You Pay Any Money to a Builder, Get
Copies of the Following Documents
I. BLANK FORMAT FOR YOUR AGREEMENT WITH THE BUILDER. THIS IS
NORMALLY BASED ON MODEL AGREEMENT PROVIDED UNDER THE
MAHARASHTRA OWNERSHIP OF FLATS ACT (MOFA). It is important to have your
agreement scrutinized by a lawyer or a knowledgeable person, so that the builder does not
include clauses that are to his advantage and your disadvantage. If it contains any such
unacceptable clauses, please have them struck out or suitably modified before you sign the
agreement. Do not make any payments unless this is done. Things to watch out for:
a) THE AGREEMENT MUST NOT CONTAIN ANY ILLEGAL CLAUSES e.g. sale of
parking, terrace, staircase, landing and other common amenities that belongs to the cooperative
society collectively, and not to the builder.
b) IT SHOULD MENTION ALL COSTS AND CHARGES UP FRONT I.E. NO HIDDEN
COSTS. For example, many builders illegally charge exorbitant amounts as “transfer fee” if a
flat owner sells his flat before the cooperative housing society (CHS) is formed. The builder is
not authorized to charge transfer fees, and only the CHS can charge Rs 25,000 maximum. But
there are many cases of flat owners being forced to pay the builder as much as Rs 30 lakhs on a
flat costing Rs 1.2 crore i.e. 25% of the value of the flat.
c) IT MUST NOT CURTAIL YOUR LEGAL RIGHTS AS A CONSUMER WITH ILLEGAL
CLAUSES e.g. “After taking possession of your flat, you have no right to seek redressal against
any perceived shortcomings in common amenities provided.” Another example is builders who
illegally impose a two-year lock-in period on flat owners, forbidding them from selling their flats
during this period.
d) IT SHOULD MENTION THE ACTUAL MEASURABLE DIMENSIONS OF THE FLAT
i.e. Carpet Area, excluding non-FSI elements such as flower beds and dry-balcony.
e) THE DIMENSIONS AND SPECIFICATIONS OF THE ENTIRE BUILDING, ITS
COMPOUND AND ALL COMMON AMENITIES MUST BE MENTIONED, because that is
what you are paying for (and not just your flat). The agreement must mention specific details of
each and every amenity promised. It cannot just say, “Clubhouse admeasuring 4,000 sq ft.” Insist
that specifications of each facility such as central air-conditioning, gymnasium, pool table,
swimming pool, children’s playground, parking lot, etc. should be mentioned, with as many
details as possible. For example, don’t be content with “airconditioned clubhouse”. Insist that the
agreement should mention minute details such as the brand of air-conditioner, how many tons
capacity etc.
II. COPIES OF THE BUILDER’S PROPOSALS AND PLANS, AND ALL
PERMISSIONS AND CERTIFICATES from the licensing authority (Municipal corporation
or MMRDA). Depending on the stage of construction, you should get the below outlined
documents.
a) PROPOSAL / LETTER OF INTENT (LOI) submitted by builder to licensing authority e.g.
MCGM’s Building Proposal Department, or MMRDA
b) INTIMATION OF DISAPPROVAL / INTIMATION OF APPROVAL (IOD/IOA) given to
builder by the Licensing Authority. Legal conditions that the builder must fulfill are mentioned
in this document. [Note: Builders start booking flats at this stage itself, without getting any
further approvals. They fence off the plot of land, put up banners and advertise in newspapers,
and collect tokens and advance payments from investors. In case the project fails to materialize,
this money is unlikely to be returned. This is illegal.]
c) NO-OBJECTION-CERTIFICATES (NOCS). NOCs specified in IOD/IOA must be
collected by the builder from several authorities such as police and fire brigade, and submitted to
the licensing authority.
d) COMMENCEMENT CERTIFICATE (CC) is received by builder from licensing authority
after the IOD/IOA conditions are fulfilled. CC authorizes the builder to commence excavation
and foundation work. He can build upto plinth level i.e. ground level, even before getting
approval of the plan layouts. [Sometimes, builders continue to put up slabs for 1st floor, 2nd
floor etc. even without getting their plan layouts approved. They are confident that it will be
regularized afterwards. This is illegal.]
e) APPROVED PLAN LAYOUTS. The plan layouts submitted by the builder and architect are
studied by the licensing authority. After required changes are made, these layouts are approved.
[Quite often, builders deviate from the approved plan layouts and build extra floors. This is
illegal.]
f) AMENDMENTS TO APPROVED PLAN LAYOUTS. The builders commonly submit
amendments after getting plans approved, and thus they add extra floors to the already submitted
layouts. [Much mischief is played at this point. In the initial plans submitted, the builders adhere
to Development Control Regulations concerning Floor-Space-Index and the ratio of open-spaces
in the compound, which should be one-third the height of the building. Through the
amendments, they break the DC Regulations with the connivance of licensing authorities.
Builders also use amendments to alter the common amenities promised to buyers at the time of
booking; spaces initially shown as clubhouses or playgrounds may be used for putting up another
residential wing in your compound, and flat owners come to know only after they have been
built and sold.]
g) COMPLETION CERTIFICATE FROM PROJECT CONSULTANT. Quite often, an
“independent” project consultant is appointed by the licensing authority to oversee the
architectural, financial and legal aspects of the project. This agency is however paid for by the
builder himself. [Often, the project consultant colludes with the builder and issues false
certificates.]
h) BUILDING COMPLETION CERTIFICATE (BCC) FROM THE LICENSING
AUTHORITY. This is issued after receiving the Project Consultant’s completion certificate.
[Often, buyers on the lower floors are allowed to move into the building even while construction
is in progress. Not only illegal, but also dangerous!]
i) OCCUPATION CERTIFICATE (OC). This is the final certificate from the licensing
authority. This certificate is crucial for you. Without this certificate, the Municipal Corporation
normally will not give a water connection to your new flat. Also, it is necessary for sale or
transfer of the flat. [Builders commonly allow buyers to move into the flats before getting OC.
This enables the builder to continue doing residual work on the terrace, in the compound, refuge
floors etc. Under their very noses, the terrace is often sold as a penthouse!]
j) CONVEYANCE. This signifies transfer of the plot of land to the cooperative housing
society after it is registered. The ownership of the land is transferred in the Revenue records.
[Until convenance is given, the builder retains a hold over the land for years or decades after
giving possession of flats. This enables him to use residual FSI or additional TDR to build more
floors or add new wings to the building, using the open spaces. According to a new amendment
to Maharashtra Ownership Flats Act in 2005, builder can be jailed if they fail to promptly give
conveyance. Read this: [Link] ]
PLEASE NOTE: If you book the flat really early, when the excavation work or foundation work
are in progress, only Commencement Certificate may have been issued. This means that the
builder is booking flats without approved plans – probably an offense under Consumer
Protection Act, and other laws too. But if you book at progressively later stages, you should get
the other documents also. Quite often, builders give possession of the flat without getting
Occupation Certificate (OC), or even Building Completion Certificate – a patent illegality.
Conveyance documents may only be available many months or even years after the builder has
completed the project.
III. COMPLETE PAPERS FOR THE LAND TITLE OF THE BUILDER OR PRESENT
LAND-OWNER:
a) Full chain of land transfers and owners, with all papers including registered agreements,
stamp-duty payments, inheritance etc., advertisements and gazette announcements etc.
b) Complete revenue records of land, i.e. 7/12 extracts (saat-bara utara) etc.
c) Conversion from agricultural to non-agricultural, de-notification of Adivasi land etc.
d) City Survey Plan indicating the boundaries of the plot or plots of land
e) If any land-owner inherited the land, then Will/Testament & Probate in favour of the
inheritor
f) If there was any dispute about ownership at any point (i.e. present owner or previous owners,
then copies of the final court judgment.
g) If land was mortgaged to any bank or financial institution, then all papers of the bank etc.
relinquishing the lien in favour of owner
h) If land was leased by the government, then lease agreement and receipts of lease rent
payments
i) Registered agreement between the builder / promoter and the land-owner. For more
information, also read: [Link]
clearances-required-for-urban-property-transactions-sale-purchase/
REASON FOR THIS: If the land title is not totally clear, even of the previous owners, then legal
problems can arise for your property also. No one can indemnify you against faulty title.
IV. COMPLETE PAPERS OF THE BUILDER’S FIRM OR COMPANY i.e.
Memorandum of Partnership, Memorandum of Association, Audited Annual Reports of all
previous years etc.
REASON FOR THIS: Depending on the form of ownership and the relationships involved, you
– the flat-buyer – will have to bear various invisible risks. Examples:
a) If the builder is not an individual i.e. but part of a partnership firm, then in case of a dispute
between partners, your project may get stuck.
b) If the builder (the individual you are dealing with) is director or employee of a private
limited company of builders, then you need to know the legal powers of that individual. For
example, you are at risk if he is signing papers that he is not legally authorized to sign; if so, all
documents signed by him are of doubtful legal value for enforcing your rights in a court.
V. DETAILS OF YOUR BUILDER’S DEBT-EQUITY RATIO, EXPOSURE TO
OTHER RISK-FACTORS i.e. other construction projects, speculative investments in stocks
and commodities, etc. (These may come from indirect sources such as newspapers, internet
research and word-of-mouth.)
REASON FOR THIS: If your builder is taking heavy financial risks on other fronts, then failure
on those fronts may leave him unable to complete your building project. If your project gets
stuck halfway due to his financial failure, it becomes your problem. Examples of such risks:
a) Is your builder low on working capital, and therefore dependent on large borrowings from
private lenders? If so, then project delays (your project or some other projects) can raise the
interest burden to crushing levels, and he may lose all interest in your project.
b) How much of your builder’s money is tied up in speculative investments such as
derivatives? In that case, extraneous factors like fluctuating foreign exchange rates or oil prices
can threaten his viability and your building project.
c) Is your builder diverting funds from other illegal activities into the construction industry? Is
he a matka king, or a money-launderer? Is he handing underworld funds? Is he handling “hot
money” from abroad? Beware, your project can be halted by numerous external factors such as a
crackdown by arrests, Income Tax authorities, Economic Offence Wing (EOW).
d) Is your builder already in trouble with the law? Has he been charge-sheeted for fraudulent
dealings with government agencies like MHADA, for instance? If so, then he may fail to get
various permissions and certificates.
e) Is your builder a film producer? If so, find out more about the film that he is currently
shooting. One flop may be enough to put your building project into cold-storage.
f) Is your builder a first-timer or small-timer? Is he a small-town building contractor trying to
become a big-city builder with the help of friendly investors? Watch out: one small dispute with
his lenders can rock his tiny boat and put a question-mark on your investment.