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Last month I was working for a company on a new project in Pune and I

was given responsibility of handling telephonic inquires. As the target


segment was Middle Income Group, I was continuously receiving more
than 100 calls each day. My morning would start with a call and I used to
get into bed saying goodnight to a customer. One night at around
11:30pm I was fast asleep and I received a call asking me for information
about our new project. The voice was of an old man and I gave him all
the information because I believe that this segment is of the real home
buyers who work hard, save every rupee for their dream home. This old
man thanked me for the information and hesitantly he asked me, Sir,
please answer my one more doubt that who or what decides the loading
on the area of the flat? my eyes were wide open, as even I didnt know
the exact answer. I told him that I will find out the answer and give him a
call. Next morning I woke up early searched internet and all my law
books and I found out this.
In this mad real estate rush, builders often bombard you with brochures,
flyers, flashy presentations and smart sales pitch prepared with some
buzzwords. For a new buyer, all this might be overwhelming and even
confusing. One such thing is the area of the house. Real estate firms
often use three different concepts (carpet area, built-up area and super
built-up area) to convey the area of the house and the buyers must be
aware of what the builder or seller implies when he talks about the area
of the house.
Carpet Area: This is the area that is within the walls of your home. It
gives you an idea of how much space is enclosed by the walls of your
home. Note that this does not include the area occupied by the walls. In
other words, if you were to lay out a wall-to-wall carpet in your home,
this much is the area you carpet has to have.
Built-up Area: Built-up area includes the area enclosed by the walls and
the area occupied by the walls. This would be higher than the carpet area
as it is the sum of carpet area and the area of the walls.
Super Built-up Area: Most builders and developers often use this term
to convey the area of the house or apartment. Super built-up area
includes carpet area, the area occupied by the walls and your apartments
proportionate share of the common spaces of the building such as the
lobby, lift, staircase and corridors. Some builders even include the
terrace, pump house, security room, the area occupied by the compound
wall of the building. The total area of these is divided by the number of

flats in proportion to their size and the result is added to the super builtup area.
Always check with your builder or seller what exactly he means by super
built-up area and how he calculates that figure. Then make comparisons
between various houses you are considering to buy. Do not compare
carpet area to built-up area or built-up area to super built-up area, etc.
To get the best value for your money, stick to one concept of area of the
house.
In Maharashtra Ownership Flats (Amendment) Act, 2008 dated 12 thMay
2008 intends to make mandatory provisions for Builders to sell Flat on
the Basis of carpet area. By amending section 3 of the MOFA sub-section
2, clause (n): sell flat on the basis of the carpet area only: Provided that
the promoter may separately charge for the common areas and facilities
in promotion to the carpet area of the flat. Note- for the purpose of this
clause, the carpet area of the flat shall include the area of the balcony of
such flat.
Explanation: Is specified in this clause that the Builder is required to state
the exact carpet area of the Flat and on that basis, the Purchaser of Flat
will have to pay to the Builder. Also the provision allows Builder to
separately charge for common areas and facilities in proportion to carpet
area of each flat.
Prevalent practice of Builders
The present practice of Builders is to charge the rates on basis of
saleable area. However, under the present provisions of Sec. 3 of the
MOFA, 1963, balcony and other areas are to be shown separately in the
Plan. However, the price was charged on the basis of carpet area of Flat
but inclusive of all areas except balcony, flowerbeds and certain portion of
common areas. Till now, the Builders can charge 25% to 30% extra price
on built-up area, which includes Super Built-up area also. But with the
introductions of provision i.e. amendment of 2008, the purchaser of the
Flat will have to pay additional amount for common use areas and
facilities provided by the builder. The provision empowers the Builder to
charge Flat purchaser for the common areas and facilities in the
Residential Complex i.e. stair case of building, lift space, lobby, open
spaces, flowerbeds and balcony of the Flats.

In the provision of sec.3 (2) (m), it is specifically provided that when the
Flats advertised for sell, it is necessary to disclose in the Advertisement
the following particulars.
(a) The extent of the carpet area of the Flat (including the area of the
balconies to be shown separately)
(b) Price of the Flat (including proportionate price of common areas and
facilities to be paid by the Purchasers of the Flat)
(c)
In Model Form V titled as Model Form of Agreement, the
Agreement to be entered into between Promoter and Purchaser of Flat,
the explanatory note specifically states that the Model Form of Agreement
is required to be modified and adapted in each case in accordance with
the facts and circumstances of such case. However, Clause 6, 7, 14 to 21
are to be modified according to the facts of each case but Clause 1 to 5, 8
to 13 and Clause 22 of the Model Form are statutory and mandatory.
(i)
In Clause 2, which is, mandatory, specifically provides that
that the carpet area is inclusive area of balcony and the price to be stated
specifically on the basis of carpet area in sq. meters including the
proportionate price of common areas and facilities appurtenant to the
premises.
(ii)
Every Flat Purchaser at the time of Agreement has to pay
to the promoter balance amount of purchase price for construction of
plinth, slab, walling, doors and windows, flooring, plaster (internal and
external), sanitary fittings and plumbing and rest of the amount to be
paid at the time of occupation of the Flat.
(iii)
In Clause 4 of the Model Agreement, it is compulsory for
Promoter to state or specify FSI available for the land on which building is
to be constructed. (FSI in sq. mtrs). If, FSI is used by promoter
elsewhere, he has to specify the details in respect of such utilization of
FSI.
(iv)
It is also specifically stated that residual FSI in the Plot or
the Layout, which is not consumed will be available to the Promoter till
the Registration of the Society but once registration is completed, the
residual FSI will be available only to the society.
Presently, many Builders charging Consumers for extra area, which is not
part of the Purchasers transaction of the Flat. Very often, a consumer

who pays for a 500 sq.ft. Flat receives possession of just 350 sq.ft. in
carpet area. Thus the balance 40% of the area generally Builders
describes as Super Built-up area is used in landings, lobbies etc.
Effect of amendment of 2008: Builder will have to state exact areas as
the carpet area, common area and other facilities in approved Plan: No
escape for charging more money for money for imaginary FSI/Super
Built-up area: Total area has to be calculated on the basis carpet area:
Stamp duty to be paid accordingly.
In other words, in addition to recording all transactions of sale and
purchase of flat with the Collector of Stamps and with Registration
Authorities on the basis of carpet area, the Builder may charge extra for
common areas and facilities etc. which was excluded earlier like area of
flower beds and balconies. The explanation to Sec.3 specifically provides
that the common use areas i.e. staircase, lift space, lobbies, open spaces,
parking spaces, recreational facilities, area of flower beds and even the
balcony will be separately charged.
Thus for balcony, the builder will get free FSI and now this area is
included in carpet area. Not only that the builder was getting free FSI on
above referred areas, which is treated as Super Built-up area. Thus, the
only difference after Amendment 2008 is transparent that each Flat
Purchaser will come to know about the area for which he has been
charged separately other than the carpet area of Flat. Also, the Property
Tax will depend upon such areas stated in the Certificate issued by the
Builder pertaining to carpet area.
High- Rise Buildings will be charged extra amount for modern facilities
like vacant Refugee area on 8th Floor, basement parking, multi-storey
parking system or lift parking system by the builder officially regularized
by the present Amendment.
There is ambiguity i.e. whether Sec 7 is also required to be amended if
any additions are made by the promoter subsequently under the grab of
providing additional facilities.
Thus, so far the restrictions on extra payment of 25% to 30% on built-up
area, which was inclusive of super built up area was permitted and now
Builder will charge even for all the facilities like swimming pool,
gymnasium, garden, jogging space, providing common worship places
like temple in the premises of Society or guest rooms/ small gathering
hall for the purpose of Society members.

It appears that the Amendment has not made any attempts to regulate
the rates of the Flat. In fact, it is necessary to place restrictions on the
payment of charges as construction cost. Thus, it is necessary to
prescribe limitation on the promotion of charging purchase price of Flat
with reference of carpet area and cost of construction. In all probabilities,
he Builder will specify the carpet area of the Flat and accept cheque for
that amount but he will raise the amount to be paid for other amenities.
However, there is no provision made in the Act to issue certified copy of
the Building Plan approved by the Local Authority (BMC/PMC/PCMC),
which indicates the exact area of the Flat as well as common use area of
the building.
If such provision is made by fixing or finalizing the common area of the
Housing Complex, then rate for each Flat Purchaser can be fixed in
proportion to the size of his Flat. But such provision is not made
therefore, it is heaven for the Builder to fix the rare of the Flat on the
basis of carpet area thereafter, he can decide which area to be included in
the carpet area and as common use area. Thus, there is every possibility
that the price of Flat on Ownership basis or Apartment basis will be
shown as reduced on paper but by way of charging more on common use
area. Thus builder will benefit in un-proportionate manner.

FUNGIBLE COMPENSATORY FSI A STEP TOWARDS


TRANSPARENCY

The Government of Maharashtra issued a Notification on 6 January 2012 bearing No. MH/MR/South346/2011-13 ("said Notification") to amend certain provisions of the Development Control Regulations
for Greater Bombay, 1991 ("DCR"), which regulates the building activity and developmental work in the
areas falling under the jurisdiction of the Municipal Corporation of Greater Mumbai ("MCGM").
The Government of Maharashtra vide the said Notification enables Builders/ Developers to avail of
compensatory Floor Space Index ("FSI") (also referred to as Fungible Compensatory FSI) by paying a
certain premium to MCGM. The aim and object of the said Notification is to modify and amend certain
provisions of the DCR to bring about greater transparency, to counter malpractices indulged in by certain
scrupulous Builders/ Developers and boost developmental activities in the Island city and Suburbs of
Mumbai.

CONCEPT OF FUNGIBLE COMPENSATORY FSI


The Floor Space Index is defined in the DCR as "the quotient of the ratio of the combined gross floor area
of all floors, excepting certain areas specifically exempted under the DCR, to the total area of the plot,
viz.:
FSI = Total covered area on all floors / Plot area
Simply put, FSI is the ratio that determines how much can be built on a plot. It is clear from the above
definition of FSI that certain areas are specifically excluded from the computation of FSI, which means
these are "Free of FSI" areas.
Prior to the said Notification, areas covered by balconies, flower beds, individual terraces, ducts, voids,
niches, refuge area, new or additional lifts, staircases, swimming pools, fitness centres in Cooperative
Housing Societies, sun decks, clubhouse, ornamental projections etc., were not included while computing
FSI. Thus, these areas were known as "Free of FSI".
It is pertinent to note that the carpet area of a flat is the net useable area or the habitable area of the flat.
In other words, the carpet area is the area of a flat, which can be covered by carpeting from wall to wall.
The Built Up area of a flat is the gross area of the flat i.e. the carpet area together with the area covered
by wall thickness and ducts. The Super Built Up area, as per the current trend, is the saleable area of a
flat, which includes the Carpet area, Built Up area and common spaces/ amenities and ornamental
features. Thus, Super Built Up areas also includes areas that are non habitable for consumers.
Although certain areas as mentioned above were "Free of FSI", the same were included in computing
area of a flat by Builders/ Developers and sold to the consumers at a market price under the garb of
Super Built Up area or Useable area or Saleable area of a flat, or by whatever name given. These areas,

under the name of Super Built Up area or Useable area or Saleable area, were included in the area of the
flat while selling the same to the consumer.
Section 4 of the Maharashtra Ownership of Flats Act, 1963 ("MOFA") makes it mandatory for Builders/
Developers to mention the carpet area of a flat in any agreement of sale to be executed with prospective
flat purchasers.
Hence in an attempt to put a final halt against these practices, the said Notification provides that these
areas shall no longer be exempted from the computation of FSI and shall no longer be available as "Free
of FSI" areas.
In order to compensate for the loss of "Free of FSI" areas, Builders/Developers may now avail of Fungible
Compensatory FSI, which may be used like regular FSI. Fungible FSI is made available to
Builders/Developers to the extent of 35% for Residential projects and 20% for Industrial and Commercial
projects on payment of premium. The premium to be paid by Builders/ Developers is calculated at the rate
of 60% for Residential projects, 80% for Industrial projects and 100% for Commercial projects at the
prevailing Ready Reckoner Rates ("RR Rates").
Thus, the said Notification is a step towards curtailing malpractices propagated by Builders/ Developers
by envisaging a compact plan where all areas are included for the computation of FSI and a cap of 35% is
fixed (in case of residential projects) so that there is no room for the Builders /Developers to manipulate
the rules by creating excess non-habitable areas and overcharging consumers. Fungible Compensatory
FSI may also be used to construct larger dwelling units and/or to construct additional dwelling units.
Hence, it may be used in the same manner as regular FSI.
However, it should be noted that projects that are already approved would not be affected by the said
Notification issued by the Government of Maharashtra.
It is pertinent to note that there is no clarity as far as the application of Fungible Compensatory FSI is
concerned for construction in areas falling under Coastal Regulation Zones ("CRZ"). However, MCGM
has requested the State Government to pass necessary notification(s)/ guidelines so as to make Fungible
Compensatory FSI applicable to CRZ areas also.

PROTECTION PROVIDED IN CASES OF REDEVELOPMENT


In cases of redevelopment of properties, the Fungible Compensatory FSI admissible on the rehabilitation
component shall be granted to Builders/ Developers without charging premium. In order to protect the
interest of existing tenants/ occupants, the said Notification clearly states that Fungible Compensatory FSI
admissible on the rehabilitation component cannot be transferred to the free sale component. Such
Fungible Compensatory FSI can only be used to give additional area, over and above the eligible area, to
existing tenants/occupants. Thus, in a residential redevelopment project, Builders/ Developers will have to
provide an additional 35% i.e. 105 sq ft to the existing tenants/ occupants. This benefits many families in
the city where 300 sq ft of space is the minimum area made available by Builders/ Developer in
redevelopment projects. Builders/ Developers would be free to use "Transfer of Development Right"
(TDR) option in addition to the Fungible Compensatory FSI subject to the relevant permissions and
sanctions obtained from MCGM.

Thus, the provisions in the said Notification prevent Builders/ Developers from misusing the Fungible
Compensatory FSI availed by them for the rehabilitation component by extracting additional profits to the
detriment of existing tenants/ occupants. This will encourage occupants of cessed buildings to opt for
redevelopment, hence benefiting a large number of families in the city.

IMPACT:
More Transparency in the system: The "Free of FSI" areas are now included in the computation of FSI,
thus bringing in greater transparency. Builders/ Developers will have tp pay a premium for availing
Fungible Compensatory FSI. This will curb Builders/ Developers from making exorbitant profits at the cost
of consumers.

Faster Clearance of Projects: The said Notification will result in faster clearance of plans, approvals and
projects. The discretionary powers given to authorities will come to an end and there will be more
consistency by providing a level playing field to all Builders/ Developers.

Advantage to consumers: The said Notification will enable consumers to calculate the total area of the
flat/ unit sold to them and the exact price they pay for such area.

Conclusion:
The said Notification is a step towards greater transparency and will benefit home buyers as well as
provide a level playing field for all Builders/ Developers, which will boost redevelopment and infrastructure
projects in a city where shortage of homes and urban development is a growing concern, however, the
practical implementation of the said Notification and whether it results in overall development of the city is
yet to be seen.
- By Nirav Jani

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