Development Control Regulations

1. Introduction :

1.1 The erstwhile Press Note 2 of 2005 and para 5.23 of the
current Circular 1 of 2010 on Foreign Direct Investment issued by the Ministry
of Commerce are some of the most contentious Press Notes. S. 80-IB(10) of the
Income-tax Act, 1961 has given rise to some of the most interesting issues.
Article 25 of Schedule I to the Bombay Stamp Act, 1958 witnesses the maximum
debate. What do all these laws have in common ? They all deal with Real
Estate ! ! If there was a competition for the one sector in India which is
regulated by the maximum laws, then Real Estate would win hands down. It is
regulated by several laws, both Central and State and often there is no
co-ordination of definitions used under one law with those under another law.
This leads to confusion, ambiguity and litigation.

1.2 The Development Control Regulations for Greater Bombay,
1991 (‘the DC Regulations’) are one of the several laws which impact real
estate development in Maharashtra. These Regulations have been framed under the
Maharashtra Regional and Town Planning Act, 1966 (‘the MRTP Act’). As the
name suggests, these Regulations are applicable only for the city and suburbs of
Mumbai. The MRTP Act provides for the town planning and the development of land
for public purposes within the State of Maharashtra.

1.3 The importance of these Regulations stems from the fact
that they define several terms which are not defined elsewhere under other laws,
but are nevertheless used under those laws. Thus, the definitions under these
Regulations could serve as a guide in dealing with complexities under those
laws. This Article examines some of the key provisions of the DC Regulations.

2. Important definitions :

2.1 The DC Regulations lay down some important definitions
which one often comes across when dealing with real estate.

2.2 Building — A building means a structure
constructed with any materials for any purpose. The definition also includes a
part of a building. This is the most important definition since a good part of
the DC Regulations revolve around the construction of buildings. Thus, the term
‘building’ includes, those used for residential, office, educational, etc.,
purposes. A high-rise building is defined to mean a building which has a height
of 24 meters or more above the surrounding ground level.

2.3 Built-up area — It means the area covered
by a building on all floors including the cantilevered portion, if any. A
cantilever in common parlance means a projecting structure, such as a beam, that
is supported at one end and carries a load at the other end or along its length,
e.g., a beam supporting a balcony. Areas specifically excluded are not
counted for built-up area calculations.

2.3.1 Some of the exclusions from the definition of built-up
area are :

2.3.2 The definition of this term is useful not only under
the DC Regulations, but also under the Stamp Act. Stamp duty on a conveyance is
payable on the built-up area of the property transferred. As per the Stamp Duty
Ready Reckoner if the built-up area is unascertainable it is presumed to be 20%
more than the carpet area.

2.3.3 For the purposes of FDI in real estate, the minimum
built-up area must be 50,000 sq. mts. The issue which arises here is that what
is the meaning of the term ‘built up area’ ? The DIPP Circular does not
define this term. One of the conditions under the Circular is that the project
shall conform to the norms and standards, including land use requirements and
provision of community amenities and common facilities, as laid down in the
applicable building control regulations, bye-laws, rules, and other regulations
of the State Government/Municipal/Local Body concerned. Hence, it stands to
reason that the definition of this term should be understood in the context of
which it is approved by the Municipal/Local Authority which sanctions the
building plans. E.g., land development in the city of Mumbai is regulated
by the Development Control Regulations of 1991. Thus, if the DC Regulations
treat something as a part of the built-up area, then it stands to reason that
the same should be so counted even for the purposes of reckoning whether the
project is FDI compliant.

2.4 Carpet area — This is the net usable floor
area within a building excluding area covered by walls. It also excludes any
area specifically excluded from computation of the floor space index. The
Maharashtra Ownership of Flats Act, 1963 requires every Flat Ownership Agreement
and every advertisement for the project to mention the carpet area of the flat
sold.

2.5 FSI — The term FSI means Floor Space Index.
FSI has been defined under the Regulations to mean the quotient of the ratio of
the combined gross floor area of all floors in a building to the total area of
the plot. However, the areas which are specifically exempted under the
Regulations are excluded from the computation of the FSI. Thus, FSI would be
computed as under :

Total Covered Area on all floors

Total Plot Area

Hence, the FSI quotient denotes the total constructed area
which is possible on a given plot of land. For instance, if the area of a plot
of land is 100 sq. mts. and the prevailing FSI quotient for that area is 1.33,
then the total possible constructed area on that plot would be 1,330 sq. mts.
The FSI computation and the permissible FSI varies depending upon the location
of the plot, the nature of intended use, etc. For instance, additional FSI is
allowed for Slum Rehabilitation Projects, redevelopment of cessed buildings,
hotels, etc.

2.6 Plinth — One often comes across this term in the real estate sector. It means the portion of the structure between the surface of the surrounding ground and the surface of the floor immediately above the ground. Plinth area on the other hand means the built-up covered area measured at the floor level of the basement or any other storey.

2.7 Plot means a parcel or piece of land which is enclosed by definite boundaries.

    Construction process:

3.1 In a variety of laws, such as S. 80-IB(10), Circular 1/2010 issued by the DIPP, etc., one comes across terms like the commencement of the project, completion of the project, obtaining of all statutory approvals, etc. Hence, it becomes important to understand the process involved in constructing a project, what steps are involved and what approvals are required.

3.2 Given below is a brief description of the processes and the approvals/certificates required for projects in Mumbai:
   a) Plan submission: The initial plan is submitted to?the?BMC?to?obtain a No Objection Certificate or approval based on guidelines laid down under the DC Regulations. A notice is to be given to the BMC along with a host of prescribed documents, such as the title documents, site plans, layout plan, building plan, etc.

 b)   Intimation of disapproval: This permission is an in-principle approval with respect to the plans submitted subject to conditions set out in the plans. The Intimation of Disapproval or IOD is worded in a very unique fashion. It gives an impression that the development has not been approved. However, actually it means that the development would be approved if the objections specified therein are addressed. Following compliance with these conditions, a Commencement Certificate is granted at various stages set out in the conditions. The IOD allows the developer to vacate and rehabilitate existing tenants and demolish existing structures. The developer is required to submit drawings of the proposed building for a project, together with details of the plot survey and survey drawings to the concerned planning authority.

 c)   Commencement certificate: The CC is required to commence work. The builder submits various documents as evidence of compliance of the conditions set out in the plans delivered with respect to intimation of disapproval at the time of applying for this certificate. Examples of such documents include no objection certificates from relevant authorities for cutting trees, from the Airport Authority of India for height clearance with respect to airport distance, structural design and drawings submissions and temporary structure permissions. Further, approvals for parking layout and a soil investigation report, for example, are also required to be in place at the time this application is made for obtaining a commencement certificate up to the plinth level. The CC is valid for 4 years, but needs to be renewed every year.

 d)   Further/full commencement certificate: This certificate is an endorsement with respect to the commencement certificate. This endorsement to undertake construction above the plinth level for which there are formal inspections by the officials of the BMC. It may be obtained either in phases or at one time for the entire project.

    e) Building Completion/Occupancy certificate: The Occupancy Certificate or OC is granted on the completion of the project and is required for occupants to move into their respective apartments. Some of the documents required to obtain this approval are?: a Structural Completion Certificate, a Lift Completion Certificate, a No Objection from the Fire Department and a Storm Water Drain Compliance Certificate. On receipt of these documents, the BMC inspects the work and issues a Certificate of Acceptance of the Completion of the Work. Once this Certificate is received, the builder submits the Development Completion Certificate along with the completion plan to the BMC. If the BMC is satisfied that there is no deviation from the sanctioned plans, then it grants an OC within 21 days or it may refuse to grant the OC. There are a good number of buildings in Mumbai where even though all flats are sold, the OC has not been obtained. The grant of the OC signifies the completion of the project.

   f)  Permanent electricity and water connection: This certificate is obtained after the occupancy certificate has been awarded.

    Consequences of violation:

4.1 In cases of DC Regulation violations, i.e., where the constructed area exceeds the maximum FSI permissible under the Regulations and/or allowed under the DRC, the BMC has power to demolish the illegal construction. It can also recover the costs of such demolition from the accused. In addition, a penalty for unauthorised development/use of a property otherwise than for the purpose it was planned may be imposed in the form of an imprisonment and a fine.

4.2 A very famous case in this respect is that of Pratibha Co-operative Housing Society Ltd. where the Society violated the FSI laws by constructing an unauthorised additional area of up to 24,000 sq.ft, equivalent to 8 additional areas. Ultimately, the matter went to the Supreme Court which upheld the demolition of the illegally constructed floors. While concluding the Supreme Court observed that “this case should be a pointer to all the builders that making of unauthorised construction never pays and is against the interest of society at large”.

4.3 Recently, an important decision was rendered by the Bombay High Court in the case of a writ petition filed by Sudhir M. Khandwala, writ petition No. 1077 of 2007. The case pertained to the demolition of illegally constructed Gaurav Gagan building and the petition was filed by the flat owners seeking re-spite from the BMC’s Orders. The High Court refused to stay the demolition and refused to regularise the unauthorised construction.