INDIA BUSINESS WORLD - AUGUST 2006
THE MONTH THAT WAS...

BUYING A FLAT? PAY ONLY FOR CARPET AREA

BUYING property will never be the same again if the government has its way. If the proposed legislation is passed, space occupied by walls, terraces and porticos will come for free. The urban development ministry is considering to regulate property transactions by imposing a new system of calculating real estate value on the basis of actual usable area (carpet area). Currently, property value is computed on the basis of both carpet area and super area.

According to experts, on an average, carpet area of a property is 15-20% lesser than the super area. Property owners charge the same rate for carpet area as well as super area and tend to cheat buyers. In fact, the cost of carpet areas is far high than super area.

If the proposal is implemented, a two-bedroom flat in high end localities in metropolitan cities would come cheaper by around Rs 6-8 lakh, they said. “We are doing a comprehensive research on the overall impact that this legislation may have on property prices. Our intention is to safeguard customer's interests,” said an official in the urban development ministry.

“At present, there is no legislation to determine if this practice is justifiable or not. This is an area of top priority that we want to address,” he added. The government has taken the initiative after having received several complaints from civic groups and NGOs. They highlighted certain cases in Delhi and Mumbai where renowned developers charged for even common facilities such as lift and garden.

“In the absence of any defined legislation or yardsticks, most transactions take place on the basis of complete area, many parts of which do not have any use to the end-consumer. This practice must stop,” Realty Verticals director Rajan Ahuja said.
Recently, the MRTPC had issued notices to some developers in Delhi for charging hefty amounts in the garb of super area. But no punitive action was initiated in the absence of a concrete legislation.