The recent announcement by the Confederation of Real Estate Developers Association of India (CREDAI), apex body of developers, to impose self code of conduct on its more than 10,000 members, in order to bring in transparency in real estate transactions, is a welcome step.
Though CREDAI has made it mandatory for its members to mention actual usable area (carpet area) of the property and compensation for project delays, yet the measure may fall well short of making much needed disclosures and empowering property buyers to ensure that they get a fair deal and their interests are well protected. Especially as lot of ambiguities persist among property seekers pertaining to rights of ownership, maintenance charges, regulations of statutory bodies and documentation modalities in general .
It is a common practice with builders to sell property on the basis of super built up area which includes open spaces like spaces for lifts, staircases, parking among other things. As such, the actual usable area (carpet area) which the property buyer gets is about 20-40 per cent less, depending on the loadings which are not uniform. In some cases, the loadings can be even more. Often builders are not disclosing the basis of calculating the carpet area. Recently, MRTPC had pulled up a leading developer of Delhi for this. They are also avoiding calculating it on the basis of Bureau of Standards (BIS) norms on the plea that these norms are not statutory.
Developers are also taking advantage of the fact that there are no standardised means to measure common space value and extra cost it imposes. There is a need for introducing a new system of calculating value of property on the basis of actual usable area.
What makes things really difficult for the property buyers is the ambiguity about carpet area in the property purchase agreement. In majority of cases, agreement does not go beyond stating that plan, design and specifications are tentative and the developer reserves the right to make variations and modifications. As such, the property buyer is totally clueless about the area of his property till possession.
Taking advantage of this ambiguity, often developers make buyers shell out additional money in the name of improved specifications. It’s therefore important that it should be made mandatory for builders that their property sale agreements carry detailed area statement to give a clear picture of the carpet area. There should be limit to loadings and what developers can charge from the buyers for the common spaces they use. Here, regulatory bodies like National Housing Bank and RBI can play a crucial role through a policy initiative that prescribes lower loan rates for those developers who sell property on the basis of carpet area.
Besides this ambiguity about what the buyers pay and what they get in terms of area, they are also often ignorant about the ‘hidden costs’ like Development Charges (EDC & IDC), Parking Fee, Club Membership, EEC (Extra Electrification Charges for Common Areas ), FFC (Fire Fighting Charges), PLC (Preferential Location Charges) and Interest Free Maintenance Security.
Moreover, there is no clarity as to how parking, club membership and maintenance charges are calculated. In order to ensure smooth, hassle-free maintenance of the property, it should be made mandatory for the builder to incorporate the association membership clause in the Agreement clearly stating that maintenance charge will be taken on pro-rata basis as per the area of the property.
A major grouse of the property buyers pertains to delayed projects. Most builder agreements don’t specify delivery date whereas this disclosure along with clause of compensation for delayed delivery should be a mandatory part of the Agreement. EMIs from buyers are an easiest and cheapest source of funding and builders can simply get away with project delays by paying a pittance (Rs 5 per sq ft per month).
Transparency in property transactions has a lot to do with documentation in the Agreement Documents like title deeds, possession certificate, no encumbrance certificate, sanction plan and up-to-date receipts of corporation tax, water tax and electricity charges should be perfectly transparent and without ambiguity. And to get over the problems related to quality of construction, specifications of raw material along with list of fixtures and amenities, should form part of the Agreement. Warranty by the developer could further prove to be a blessing.
And finally, the Self Code of Conduct proposed by CREDAI may not achieve the desired purpose of bringing in much needed transparency in property transactions especially as tens of thousands of developers are out of the purview of this apex developer body. The only lasting solution could be a regulation that could protect the property buyers by ensuring transparent and safe transactions.
The recent announcement by the Confederation of Real Estate Developers Association of India (CREDAI), apex body of developers, to impose self code of conduct on its more than 10,000 members, in order to bring in transparency in real estate transactions, is a welcome step.
Though CREDAI has made it mandatory for its members to mention actual usable area (carpet area) of the property and compensation for project delays, yet the measure may fall well short of making much needed disclosures and empowering property buyers to ensure that they get a fair deal and their interests are well protected. Especially as lot of ambiguities persist among property seekers pertaining to rights of ownership, maintenance charges, regulations of statutory bodies and documentation modalities in general . 
Taking advantage of this ambiguity, often developers make buyers shell out additional money in the name of improved specifications. It’s therefore important that it should be made mandatory for builders that their property sale agreements carry detailed area statement to give a clear picture of the carpet area. There should be limit to loadings and what developers can charge from the buyers for the common spaces they use. Here, regulatory bodies like National Housing Bank and RBI can play a crucial role through a policy initiative that prescribes lower loan rates for those developers who sell property on the basis of carpet area. 
