Saturday, July 4, 2015

BDA RE-INTRODUCES LEASE-CUM-SALE METHOD

BDA  RE-INTRODUCES  LEASE-CUM-SALE METHOD



Bangalore Development Authority Allotment of Site Rules 1984 has been amended and the Government of Karnataka has brought back the Lease-cum-Sale method.  Though Lease-cum-Sale method was in vogue for many years, the relevant rule (Rule No.7) was omitted by Notification No.UDD/411/MNJ/2000(P), dated 23-10-2000. But, the Government of Karnataka by its Notification No.UDD/59/MNJ/2005, dated 27-4-2005 has reintroduced the Rule No.7 with effect from 27-4-2005.

CITB  AND  BDA:

Many cities across the world have development authorities.  They are the Planning authorities also. They control and regularize orderly growth of cities.  Earlier, Bangalore had City Improvement Trust Board (CITB) which was replaced by Bangalore Development Authority (BDA) from 8-3-1976 by a separate Act “Bangalore Development Authority Act 1976(Karnataka Act 12 of 1976)”.

The objective of the Act is for development of Bangalore and areas adjacent thereto.  One of the major functions of BDA is to acquire land around Bangalore, form Layout and allot sites to the applicants.

What is Lease-cum-Sale:

Allotment of sites by BDA is not a commercial venture, but purely to serve the social cause of providing a shelter to the needy.  The Authority has to ensure that its purpose is not defeated by land grabbers, middlemen concerning the allotment.

Bangalore Development Authority (Allotment of Sites) Rules 1984 provides that any one or any member of whose family owns a site or an house or has been allotted a site or house by BDA or a Co-operative Society registered under Karnataka Co-operative Societies Act 1969 or any other authority within Bangalore Metropolitan Area is not eligible to apply for sites from BDA. This is to ensure that only persons, who do not own site or house in Bangalore Metropolitan Area, are provided with sites at affordable price much less than market value.

Lease-cum-Sale method further ensures that the allottees do not misuse the site and sell it to make a fast buck. The allottee will not get absolute ownership of the site. He will enter into lease-cum-sale agreement with the BDA and for certain period, he will be only a lessee of the BDA and does not have authority to sell the property.  Further, he has to construct a house as per the approved plan in the allotted site within specified period. Only after lapse of lease period and on fulfilling the conditions like construction of house, BDA will execute Absolute Sale Deed in favour of allottee. However, the user is entitled to avail Housing Finance for  the purpose of construction of house building.

As stated earlier, this method was omitted from 23-10-2000 and BDA was executing the absolute sale deed to the allottee immediately after the full payment made. This has reduced the work load procedure wrangles at BDA office and the allottee has an asset to fall back in case of necessity and emergency.

Misuse:

The abolition of Lease-cum-sale which was done to help the public was misused.  Though the Site Allotment Rules prohibits any one who owns a site or a house from applying for allotment, many landlords, middlemen, and real estateagents started applying for sites through proxy candidates or on their own name suppressing the facts.  There are many poor people, slum-dwellers who sign the applications for some money.  As soon as the allotment was done, the sites were sold at the prevailing market price making huge profits.  This is in a way contributed to price spiral apart from defeating the very purpose and social cause.

Reintroduction:

To avoid this blatant misuse of BDA sites, lease-cum-sale was reintroduced by Government Notification dated 27-4-2005. The reintroduced rule(Rule 7) reads as follows:

Rule No.7:  The site allotted under the rules shall be deemed to have been leased to the allottee on lease, unless the lease is determined or site is conveyed in the name of the allottee in accordance with these rules. During the period of lease, the allottee shall pay to the authority before commencement of each year, rent at the rate of Rupees Five per annum, where the area of the site does not exceed two hundred square meters,  Rupees ten per annum where the area of the site exceeds  two hundred square meters, but does not exceed five hundred square meters,  and Rupees Twenty per annum, where the area of the site exceeds five hundred square meters.

Procedure:

The procedure is as follows:

After the payment of the value of site, the Authority invites the allottee to execute Lease-cum-sale deed in the prescribed form within 60 days which will be registered in the registrar office.

The allottee will be put in possession of the site. The lease-cum-sale agreement contains various conditions like restriction or alienation of property, time-limit to construct house,ground rent payable.

The allottee shall construct a building as per the plans approved by the authority within a period of five years from the date of agreement.  The authority may extend this period at the request of the allottee.  If the allottee fails to complete the construction of house within five years or permitted period, the lease will be cancelled. The Authority forfeits twelve and half percent of the value of the site paid and refunds the balance amount to the allottee.

After the expiry of ten years of agreed lease period, the authority calls upon the allottee to get the absolute sale deed executed and registered provided that the lease has not been cancelled earlier.

Though absolute legal title has not passed to the allottee during the lease period, he shall pay taxes, fees, cess payable on site or building.

Restrictions, conditions on sale of sites:

The allotted site cannot be sold within a period of TEN years from the date of possession.  However, the site may be mortgaged in favour of Central/State Governments, Financial institutions to secure loan for construction of building.  If the site is sold within a lease period of ten years, the authority after due notice may cancel the allotment, resume the site and forfeit the amounts paid.

Surrender of site:

If the allottee opts to surrender the site during the lease period for reasons beyond his control like insolvency etc., the authority with the previous approval of the Government, will compensate the allottees as follows:

a)            In case of surrender of vacant site without building, the authority shall pay value of site paid by the allottee together with interest at the rate of 12% per annum.

b)           If the building is constructed on the site, the authority shall permit the allottee to sell the property provided he pays interest at 12% per annum to the authority on the value of the site paid.

Implications:
The revised procedure would curb commercial marketing of the site immediately after allotment and also partly controls the price spiral.  But, in case of absolute necessities and emergencies, the allottee will resort to alienating the property by executing Power of Attorney by which the purchaser would not get proper title.  Though the BDA rules has provisions to surrender the site, the returns are too meagre  in case of surrender of site. As the allottee has to pay interest to the BDA for permission to sell the site with building , he will look into other means.

Complication of Title:
Of course, the re-introduction of lease-cum-sale for BDA allotted sites is a right thing for the genuine end users.  However, looking at the modus operandi of the allottees, they will try to sell the properties by way of GPA/Agreements/ Affidavits/Undertaking etc., which will lead to complication of title.

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