Realtors in Visakhapatnam are demanding that the 10% mortgage norms be done away with. Under the norm, a developer has to mortgage 10% of a project area to the Greater Visakhapatnam Development Corporation (GVMC) at the time of getting the plan sanctioned.
They can release the mortgage area after they obtain a completion certificate from the civic body.
According to the developers, this norm prevents them to sell off the area at the time of construction. Moreover, even after construction and having obtained the completion certificate, it takes months to get the property released from court. As a result, they are compelled to sell off the portion at a depreciated rate, developers claim.
Koteswara Rao, president of the Visakhapatnam chapter of Credai (Confederation of Real Estate Developers’ Associations of India) said that if a developer is constructing 10 flats each measuring 1,500 square feet and 10 parking lots each measuring 120 sq feet. Then the developer has to mortgage one flat and one parking lot to the GVMC through the court at the time of getting the plan sanctioned.
He added that the developer can only release the area once the GVMC is satisfied with the construction and issues a completion certificate. Developers have a tough time selling the flat.
A GVMC official said that the norm is meant to ensure that developers do not divert from the sanctioned plan at the time of construction.
Moreover, they cannot sell the mortgage portion prior to getting the completion certificate. Therefore they try to complete the project on time. This helps buyers who had paid on advance at the time of construction.
An official from the building department of GVMC said that the norm has been in place for years. And it is because of this norm that diversion from sanctioned plan is very rare here. GVMC cannot dismiss such a useful norm overnight. Developers on the other hand maintain that often, in case of a big project, they start signing agreements with prospective buyers at the time of construction.
They use the advance received for the construction. But because of the norm, they cannot sell those portions mortgaged to the GVMC.
S Srinivas, a senior executive of a city-based real estate firm asked that often after construction, real estate firm manages to release the flats within a year. But then, it has to sell these flats at depreciated rates. Andhra Pradesh has introduced the Real Estate (Regulation and Development Act) which is quite stringent. Then what is the use of implementing another tough norm?
Source: ET Realty