Land for development

suneetha Jain (Querist) 07 May 2020 This query is : Resolved
Sir, We have 300 sq yards of land in Visakhapatnam. We would like to give it to development to a builder for the construction of apartment. What are the precautions to be taken by us so that the entire process is completed without any issues??

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If you own land and wish to partner with a builder for apartment construction, it's crucial to take several precautions. Ensure a robust legal agreement is drafted by a senior advocate, clearly outlining all clauses, ownership shares, and project timelines. This agreement must be registered. Furthermore, understand the extensive approval process, including land title clearance, zoning, building plan sanctions, and obtaining completion and occupancy certificates. Thoroughly vetting the developer's background and potentially structuring the deal through a company can also safeguard your interests.

Guest (Expert) 07 May 2020
A good Legal agreement to be made mentioning all the clauses for the completion of the Project and ensuring your Legal Safety to be mentioned in the agreement and agreement to be Registered also. Discuss with a Good Civil Side Senior Advocate at Vizag. and proceed and it would be safer for you in the long run.

kavksatyanarayana (Expert) 07 May 2020
Yes. And the owner's share with his flat numbers with measurements and like that the builder's share with his flat numbers with measurements shall also be noted with the terms and conditions in the Development Agreement. The orders of VUDA shall also be noted in the D.A. The Development agreement shall be registered before the SRO concerned.

Raj Kumar Makkad (Expert) 07 May 2020
Here is a detailed procedure required to get approvals and sanctions for building procedure:

A) Land Title:

First and foremost, the builder has to get clear title for the land or plot. Clear title ensures that the property is clear, marketable and it traces any charges or encumbrances created on the property and its present status. It enables a prospective buyer to know the chain of holdings, transfers over a period and check any dispute on the ownership of the property. The best possible scenario is that the builder buys the land first and then start the project. In Maharashtra, builders prefer upfront purchase of land whereas in Delhi and Karnataka Joint Development Agreement is route normally taken.

Here while deciding to buy a property a basic check can also be done by the buyer, by pulling out Encumbrance Certificate ( hyperlink) from local sub-registrar office to check ownership / lien status of land.

B) Land Clearance:

On account of urbanization agricultural land is sometimes converted into Non – Agricultural land which can further be used for constructing building for residential or commercial purpose. In such cases a developer needs to get approval from concerned authority to convert agricultural land to non-agricultural (NA) purpose.

Approval for change in land use of the plot is required from local body and the State Ministry of urban Development (UD), when the land use shown in master plan / zonal plan (where the plot is located)/ land allotment letter is to be changed (as the same is not permitted / not compatible with master plan/ zonal pan). The land use plan for land area is to be notified by the State Ministry of UD after the same is approved by local body.

C. Zonal Clearance:

After the land title & clearance, builder is required to take zoning approval from the local body / authority.

The revenue department provides the ownership certificate for building permit under the provisions of Local Body Acts.
The state town planning checks regarding city development with the planning board and forwards the proposals to the various other concerned authorities in the city as required for issue of case specific approvals/ NOC before granting zoning approval. As per data collected by CII on the overall approvals required in most of the housing projects in Delhi, Haryana, Noida / Greater Noida, Rajasthan, Punjab and Maharashtra, it has been observed that as per the following table, 51 approvals are required by housing projects that vary from approvals required for land to approvals for putting in place basic amenities like electricity, water, connecting roads, etc.

D) Building Approval:

The next step requires an approval from authority for sanction of building plans/ building permit under the provisions of Building Byelaws, Master plan and Local Body Acts. The Building approval comprises of the building plan and the layout approval for the construction of the building.

1) Building Plan:

A builder should submit building plan before starting the construction activities. Building plans are a graphical representation of what a building will look like after construction.
Building plan ensures that building complies with building laws.
Once the building plan is approved, the builder should commence construction work within two years and there should be no deviation from the sanctioned plan.
2) Layout approval:

The builder has to get approval of layout plan from concerned authorities before starting construction of residential or commercial building.

Approved Layout Plan is as per approved FAR (Floor Area Ratio) or FSI (Floor Space Index).
Constructing building on unapproved layout will not be given permission to be occupied or such layout plots will be treated as unlawful and exemplary penalties will be levied as per Municipal Laws.
Land which is sub-divided into plots without permission from authority is considered illegal or unapproved layout.
No facilities such as roads, drainage, street lighting will be extended in such areas.
3) Intimation of Disapproval

Intimation of Disapproval or IOD basically states conditions that needs to be complied with during different phases of Under Construction Project. Intimation of Disapproval in some places is also i known as Building Permit. These conditions are normally divided into 3 parts:

(i) Immediately before commencement of construction work
(ii) During the construction period
(iii) After the construction is completed

4) Commencement Certificate in layman terms, is the permission to start construction from local development authority. Please note that the builder cannot lay the “Foundation Stone” & “Build Boundaries” in the absence of these 2 critical documents.

E) Completion Certificate:

After the construction is completed, Completion certificate is mandatory for building constructed before selling the building.

The completion certificate is issued after the inspection process. Issuing of Completion Certificate will ensure that the builder or owner has constructed the building as per approved plan.

F) Services & Utilities Installation:

The builder should get approval from concerned authorities for electricity, gas and water for potable and non-potable use. The building should comply with building laws for sanction or approval of basic amenities. The builder has to get NOC from pollution board on the project. Builder has to get NOC from municipality or respective authority for digging bore well. It is essential for the approval for sewer or water supply.

G) Occupancy Certificate:

Lastly, an occupancy Certificate is required from local body/ authority before occupation of a building or part of a building for any purpose. The local body forwards the proposals to the various other concerned authorities in the city as required for issue of case specific approvals/ NOC before granting Completion-cum-Occupancy Certificate.

Rajendra K Goyal (Expert) 08 May 2020
Contact some expert local Advocate to get the agreement drafted so that all your interests are intect.

After draft, you must go through deeply each word of agreement and in case of need can change the terms before finalization.

Following main points need to be clarified, clearly mentioned:

Who would be having ownership of land after development?

How the cost of development would be contributed / shared / paid?

How, when development would be completed. Process of getting map approval, necessary completion, getting amenities connections responsibilities.

Terms on Standard of construction/ area/ type / covered area / open area/ parking / basic needs fitting standards i.e. water, electric, sewerage etc.

Above are very brief description, your lawyer can draft all necessary terms in detail.

T. Kalaiselvan, Advocate (Expert) 08 May 2020
Land owners who have mostly inherited their properties have no insight into the legalities involved. They get into joint venture agreements based on faith, relying on the words of real estate developers and many a times find themselves in trouble. There are numerous instances of land owners being left in the lurch after entering into joint venture agreements. Their lands are locked for many years with no signs of the proposed development projects taking off. Land owners can neither sell their lands to other prospective buyers nor get into new joint venture agreements.
A Joint venture is an association between two or more participants for a specific business purpose and for a limited duration
A joint venture agreement includes details of construction, profit sharing in percentage, and time-frame. The land owner usually provides his land and provides no further investment. All other aspects of construction, investment and obtaining the required approvals is the responsibility of the real estate developer. Profit is shared such that it benefits all participants.

Dr J C Vashista (Expert) 08 May 2020
Very well explained by experts Mr. Raj Kumar Makkad and Mr. Rajendra K Goyal, I agree and appreciate.

T. Kalaiselvan, Advocate (Expert) 08 May 2020
Tips for land owners while getting into a real estate joint venture agreement

1. Background check of developers needs to be done to verify their credibility and success rate in previous projects.

2. Register a new company as a private limited company and transfer your land to the books of this company. This needs to be done before entering into a joint venture agreement with the builder's company so that the agreement is between two companies where one provides the land and the other provides investment and expertise.

3. Decide on the profit sharing ratio with your developer. Usually the percentage of profit sharing in India is 1/3rd and 2/3rd, where 1/3rd of the cash inflow from the sale of housing units is for the land owner and 2/3rd is for the developer. A better bargain is to get the appropriate number of housing units assigned to you in the joint venture agreement along with a clear mention of the number of units, floor and size of the units

4. Seek the services of a legal company with the right expertise to represent you.

Raj Kumar Makkad (Expert) 08 May 2020
I pay my regards towards Sr. expert Shri J C Vashishtha for agreeing with my reply.

Dr J C Vashista (Expert) 09 May 2020
Dear Makkad ji, you are most welcome.

Rajendra K Goyal (Expert) 09 May 2020
Humble thanks and regards to expert Dr. J.C. Vashishta ji for agreeing.

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