RTI Activist's Drafts Out PIL Against Re-Developers - Demand Appointment of Regulators for Redevelopment Industry

Mumbai, India (PressExposure) March 14, 2011 -- For the common man, a house is not just the place where he lives. People's houses are their entire life savings, and the foundation of domestic harmony. It is their security, and the economic foundation on which they base their entire life. The livelihood of many families, the quality of the children's education and the peaceful lives of retired people, are entirely dependent on their houses. So houses are a matter of life-and-liberty.

In the name of de-licensing and liberalization, the government over past decades has withdrawn from its role of providing affordable housing, and has given free play to private developers whose projects are driven purely by profit motive. Also, it has abdicated from its supervisory and regulatory role, and allowed private builders to overwhelm and pervert the systems in the following ways:

(a) Exerting a constant inflationary pressure on the economy by actively quoting higher rates every year, and the downward movement of prices even when supply exceeds demand. Builders are doing this because their primary beneficiary and customer base are the multi-crore investors and money-launderers. The actual users of flats are secondary users, who buy these houses on second sale.
(b) Actively building a black economy, where every real-estate deal involves 10 to 40% component of unaccounted "cash", thereby forcing honest flat-buyers and sellers to create and hoard "cash".
(c) Corrupting and sabotaging the licensing bodies and organs of administration like BMC, MMRDA etc. for getting undue approvals, or regularization of their unlawful constructions
(d) Building extremely bad quality housing for the poor under SRA schemes, and exploiting the TDR mechanism in ways that cause deterioration of the city as a whole.
(e) Taking advantage of the corrupt tendencies of some managing committee members of cooperative societies, in order to push through their profiteering agenda
(f) Playing a predatory and bullying role in the lives of ordinary flat-owners.

The government, by neglecting to set up effective regulatory mechanisms and fast-track courts, has abdicated its constitutional duty to protect the right to life and liberty of ordinary citizens. It has thrown the ordinary citizen to the wolves, and allowed the city administration to go to the dogs.

Even worse, the government has allowed builders to subvert the basic bricks of our democracy - the managing committees of cooperative societies - and turn them against their members. The government has created an economic environment where managing committee members automatically become the enemies of flat-owners through conflict of interests. Managing committees are bullying, ragging and terrorizing flat owners into submission, and there is no effective grievance-redressal forum that flat-owners can turn to. By failing to set up mechanisms to act against such elements, the government has taken away right to protection of life and liberty of individual flat-owners.

DETAILED ARGUMENTS

Our home is a comfort-zone where we regain peace of mind, away from the rat-race of the world. It is the refuge where we feel secure, and cherish good memories with our families. Our house is also our entire life-savings, or a very substantial chunk of it, and the anchor of our financial security. Except for those who buy a house as an investment, a flat is a home, and not just an asset that appreciates and depreciates.

And so the thought of losing control of our homes makes many of us very insecure and afraid.

Not all of us wish to enter into a deal with a redeveloper who promises 10 to 30% more built-up area. Why? Because experience has taught us all to be wary of dealings with builders, who are disproportionately more influential and powerful than us, and are known to use goondas.

But, against our wishes and against our common sense, we are compelled to enter into such deals. We are forced to gamble with our homes, our life-savings. We are persuaded and coerced into such dealings by the managing committee of our own building societies. These managing committees are elected for the limited purpose of taking routine day-to-day decisions for the smooth running of our homes; but they end up making life-altering decisions on our behalf. They have neither legal responsibility and accountability, nor the authority to dictate the course of our lives... but they do so nonetheless. Legal mechanisms are inadequate to curb their bullying ways.

By exploiting the arm-twisting power of managing committees, redevelopers force us to enter into a business dealing that is to their advantage, and our great disadvantage.

When a redeveloper sees our 20-year old building, he does not see an abode of peace where many families are living peacefully and children are playing. He only sees the real estate values - current and projected - and quickly draws up a plan to reap profits by taking advantage of the difference. He sees a plot of land with X amount of FSI, and he sees the opportunity of building Y number of square feet and selling them at a huge profit. In his eyes, our existing building is only a nuisance that he must demolish in order to reap these profits. And in his eyes, we, our family and our neighbours are bakras who must be forced to sign an unfair agreement and enter into an unequal deal.

And so, redevelopers do what it takes to gain possession of this plot of land, by moving us and our family out of the way. They have a deep understanding of the flaws of human nature, born out of their experience. They know how to get things everything done in a methodical, cold-blooded way that appears peaceful and legal, but is actually a human-rights violation.

Redevelopers or estate agents send out feelers to our society's managing committee. Redevelopers rarely approach us directly, because according to the law, we are not the owners; we are only shareholders in our building society. The society is the legal owner. So if our managing committee is convinced - rightly or wrongly - we don't have to be convinced.

What is needed to convince our building society chairman, secretary and treasurer? Logic? A good sales pitch? The promise of an extra-large flat? Commission of a few lakh (or few crore) rupees, with part-payment in advance? As there is a "cash" component of 10 to 40% in every real-estate deal, underhand dealings are easily doable, and practically impossible to prove. Managing committees of cooperative housing societies (and pretty much every civil-society organization - even trade associations, business chambers and NGOs) are easy to "manage" with the sort of money-power and persuasiveness that builders have.

What is the managing committee? It is the weakest link of democratic self-government - a body where people are elected by a mere show of hands at annual general meetings. Cooperative societies are the legal owners of our flats, and therefore should be the strongest brick of democratic self-governance. However, it is an open secret that there is only politics and no democracy in them. Managing committees are a law unto themselves. Members are political-minded generally form cliques and gangs, and take over the management by a mere show of hands, and no proper election are held. People who question the legitimacy of these gangs that have usurped power are socially isolated and made to feel like outcasts.

Family members of people who oppose redevelopment start facing all kinds of unpleasantness in their daily lives, such as eve-teasing, bullying, mischievious damage to cars and scooters etc. etc. These households may start receiving inexplicably large maintenance bills, or show-cause notices for frivolous reasons. Their visitors and house-guests are questioned and insulted. At the society's general body meetings, they are hooted, silenced, roughed up and slandered. They are denied access to the society's records. Even a request to see the records is greeted with abusive language. (e.g. "What, you don't trust us? Are you accusing us of being thieves? What do you mean you want to see the signed vouchers? You ma****r-c**d, how dare you call me a thief?")

Frightened into silence by such bullying tactics, most society members go into building redevelopment without any protest, like sheep being led to the slaughterhouse. The majority of society members, who are "decent people minding their own business", see the fate of those who oppose, and they prefer to go along with whatever the managing committee decides. As resolutions are put to vote by open show of hands, and not by secret ballot, people raise their hands even when they don't exactly wish to. "Jo sabka hoga, wohee hamara hoga," they console themselves.

Although the redevelopment deal contains very few real guarantees to safeguard their rights, flat-owners give themselves the hope that in the end, they will get a house that is slightly bigger, and a building that is new and of better quality. They pacify themselves that their managing committee has a bank-guarantee for an amount with which the building can be rebuilt in case things go wrong. Usually, the bank guarantee is a pittance, a small fraction (20% at most) of their building's total market value, and quite inadequate to protect the dis-housed flat-owner and his family in case the redevelopment project goes sour.

In this way, the builder succeeds in getting vacant possession of the plot of land of which we are part owners, without actually paying a single paisa to us. He gets our signature on an agreement that authorizes him to demolish our house, without putting any real collateral in our hands. The redeveloper and the managing committee dispossess the flat-owner and evict him from his house with a piece of paper in his hands, and a heart full of prayers and hopes.

Sometimes flat-owners are lucky, and at the end of 18 months or so, they get to move back into the new house that the builder promised them. It may have one extra bedroom, marble flooring, nice lift but... surprise! Surprise! It comes with a steep rise in property taxes and monthly outgoings. Their building compound now feels smaller, as it is now shared with a many new neighbours and their parked cars. Maybe the builder has sold the terrace, the refuge floors and the stilt parking, but everybody says, "Be grateful, because you have your new house!" They have to be satisfied with whatever the builder has given them, because remedies like courts are not really available to us.

But not everyone is so lucky. Not everybody gets to move into a new house in 18 months. Some, who are unlucky in their dealings with builders, have endless years of struggle - living in leave-and-license houses, filing innumerable RTI applications and appeals, going for hearings, daily following up with the builder and the managing committee members, searching for cheap and affordable advocates, going in and out of courts, seeking advice from all and sundry...

Quite a few flat-owners are unlucky. And why is that so? Don't builders want to complete their projects, sell all the flats and recover their funds? Why should builders - especially reputed ones - default on their contractual obligations and risk their reputations? The answer lies in two parts:

A) Reputed builders are not necessarily honest
B) Honest builder have many reasons to fail to complete a redevelopment project

A. REPUTED BUILDERS ARE NOT NECESSARILY HONEST.

* Being socially reputed has nothing to do with being honest. People with money and influence always smell of roses and are well-liked by society. Cutting corners is a way of life for major builders like Niranjan Hiranandani, Mangal Lodha, K Raheja and Shahid Balwa. Unless they are actually arrested by the police, their reputation stays untouched because in Indian society, it is widely understood that "Jo jeeta wohi Sikandar"; if you are successful, you must be right. Super-rich, super-influential builders can stand up in five-star gatherings and give sermons to the government on how to eliminate corruption, even after constructing mega-crore scams.

* The system rewards cleverness and not correctness. Every politician, bureaucrat and official with discretionary powers is an entrepreneur at heart, and entrepreneurs support one another. So, on the way to becoming big and successful, a builder is likely to bend every law that can be bent, and flout every rule that can be flouted, and this will in fact make him the friend of many top bureaucrats, ministers and police officers.

* The chances of being exposed are, let us say, 5%. If exposed, the chances of being held accountable by law is minimal - say 5% again. Five percent of 5% is 0.25%, or a 1-in-400 chance. On the flip side, the chances of unauthorized constructions being regularized by a legislative decision or a court decision are outrageously high - something like 98 per cent.

* Even if a builder is caught and jailed for a couple of years, the chances of a builder's ill-gotten wealth being confiscated are zero, because the present legal framework is not built for this. It is legally easy to take away a farmer's ancestral land and pay him a tiny compensation, but it is extremely complicated to confiscate the money that someone has made through corrupt means! Investments of thousands of crores made in the names of wife, son, brother etc, and the trusts and companies owned by them are almost totally impossible to track down and confiscate by law. As Arvind Kejriwal ironically puts it, "I wouldn't mind being jailed for some months or years, if my family gets to keep Rs 3,000 crore that I earned through corruption. Would you?"

B. EVEN HONEST BUILDERS HAVE MANY REASONS TO FAIL TO COMPLETE A REDEVELOPMENT PROJECT:

* We, the flat-owner, are virtually the builder's business partner, but we are a partner in loss only. If there is a loss, we will share in the loss, or bear the loss entirely. However, if there is a profit, the builder will take all the profits and deliver to us only what the contract says he must. As the builder's unofficial business partner, we are forced to carry all sorts of business risks that apply to the construction business.

* If there is a temporary slump in the real-estate market, which makes it unprofitable or difficult for the builder to get investors (i.e. working capital) for the sale component, the chances are that he may just stop work, and wait until the market picks up again. If that happens, there is very little that we can do about it.

* If there is a liquidity shortage or a sudden rise in interest rates for any reason, our building project may become unviable. If there is a sudden rise in the prices of sand, cement, steel, etc., the project may become unprofitable, and the builder will lose any reason for completing the project. With a few lakhs, he will buy up our managing committee members, who will then not even be willing to cash the bank guarantee. In any case, the bank guarantee would be woefully inadequate for rebuilding our house, and so what can we do? Nothing.

* The ultimate profitability of a building project depends on a very large number of factors, such as policy environment (e.g. state and central budget, RBI credit policies), changes in international environment (e.g. wars, economic recessions in USA, EU or China), changes in laws, rules, regulations, policy decisions or even anti-corruption movements (e.g. Since the Adarsh scam, the BMC's Building Proposal Department has not stopped clearing files, leading to a stoppage of new projects.)

* We, the flat-owner, are forced to even carry the builder's personal risks. Even if his business partner leaves him in the lurch, or if the builder suffers large losses in the stock market, we face an uncertain future. For example, if the builder dies, his family will collect insurance, but we won't. Our project may be stalled for months, or stalled indefinitely. Of course we have recourse to the law. Of course we can move the Courts for enforcement of our rights under the contract. The problem is, we will probably be aged before we get any sort of order - favourable or otherwise. Because that is the ground reality about the judiciary!

* If we, or our managing committee, has a dispute with the builder, then he has a whole legal team on his payroll, and we (and the managing committee who will be living scattered throughout the suburbs) will go hunting for an affordable advocate to take up our case. The builder's lawyers will seek adjournment after adjournment, tareek pe tareek. Also, the builder can "buy up" our advocate... and then where are we? In the middle of nowhere.

* In case of such a dispute, we can't do anything to the builder, while the builder can send a few toughs to the rented house where we are staying, and bang down our door in the middle of the night.

It is unrealistic to talk about dragging the builder to court. Once we have signed on the dotted line and vacated the house, we are completely at the redeveloper's mercy. And once our building has been torn down, the redeveloper can do as he pleases. Thanks to friendly officials in Building Proposal and other departments, he can even go beyond the approved plan, and individual flat-owners have no power to do anything except wait and watch. Even the power to drag a redeveloper to court vests in the society's managing committee, and not with the individual flat-owner.

SUMMARY & CONCLUSION

The common man is naïve in his understanding of the market risks and other invisible risks that he is forced to bear in a redevelopment scenario. The common man's access to the judiciary is extremely limited. Compared to the builder, who has dozens of lawyers and consultants to advise and protect him, the common man's access to relevant knowledge, information and judicial forums is zero. The cooperative society's managing committee is not a mechanism explicitly built for taking such major life-altering decisions, but flaws in the legal system have empowered it to do so, without checks and balances.

Under such conditions, allowing powerful and influential builders to directly enter into redevelopment deals with cooperative societies is like allowing the wolves to move freely among flocks of sheep. By allowing this in the name of liberalization, the government has set the stage for widespread abuse of human rights. By not appointing a proper regulator for the Building & Redevelopment Industry, the government is failing in its constitutional duty to protect the life & liberty of citizens, which is a duty cast upon it by Article 21.

PRAYERS:

1. In case of ongoing redevelopment projects where buildings have been demolished, the court must appoint a committee to monitor progress on a month-by-month basis to ensure that redevelopment happens as per agreement without delay. In case of any deviation from the agreement, this committee must award very substantial compensation to flat-owners within 60 days.
2. Where existing buildings have not been demolished, direct the state government to halt all redevelopment projects and restore vacant possession to flat-owners.
3. Direct the state government to:

(a) Set up a regulatory body to closely supervise each stage of the redevelopment project, with adequate powers look into complaints and to intervene

(b) Amend the Cooperative Societies Act to give it more teeth to hold Managing Committee members accountable and answerable to individual flat-owners. Elections must happen only by secret ballot, supervised by the Deputy Registrar of Cooperatives.

(c) Clean up the office of the Deputy Registrar of Cooperatives. Cooperatives Department is reputed to be corrupt, and offers no meaningful remedies to flat-owners.

(d) Set up an effective grievance-redressal and arbitration cell to receive and hear complaints from flat-owners against managing committee members. This should be a quasi-judicial forum aimed at preventing bullying and "ragging" of cooperative society members.

1. Set up a fast-track court to try cases pertaining to builders.
2. Conduct a drive to clear the backlogs of the Cooperatives Court. Currently, even the first hearing comes only after five years, rendering it a useless forum for grievance-redressal.

Press Release Submitted On: March 14, 2011 at 7:08 am
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