Shri Yogi Adityanath, Chief Minister, Uttar Pradesh has played a financial masterstroke. His decision to make registration of Builder-Buyer Agreement (BBA) after payment of just 10 Percent of the property value will not only boost the coffers of state government but put a full stop at profile funding, check the fraud of selling one flat to multiple buyers, facilitate home loan at all the projects, do away with anxiety of registration and timely completion of projects and prove a deterrent for benami property buyers. Let us discuss all these points in detail.
Little scope of Profile Funding: Noida Authority and Yamuna Greater Noida Industrial Development Authority (Authority) have decided to register builder-buyer agreement at initial stage itself. Once a buyer pays 10 percent of the property value to the builder, he will be eligible for registration. There will be a tripartite agreement among builder, buyer and Authority. This agreement will be registered and stamp duty will be paid. It will make Authority a Party to the agreement and make it sacrosanct. Till now, the builder buyer agreement was between two parties – the builder and the buyer. This agreement was just a piece of paper and the builders were tempted to go for profile funding through multiple clients. Profile Funding is a process of getting funding through profile of decoy customers. The profile owner takes home loan is his name and gives home loan amount to the builder for a fee. The builder pays EMI of the loan as well as fees for using profile. This leads to the fraud of selling one flat to multiple customers. Authorities’ decision to register builder buyer agreement at the initial stage itself will do away with this menace because home loan will require tripartite agreement signed with Authority. Builders’ document won’t be sufficient to get home loan.
Home loan will be available for all the projects: The Home Finance Companies (HFCs) prefer financing to registered properties. Generally, they finance 80 to 90 percent of the property value. Since the property will get registered after paying 10 percent of the property value, all the properties will become eligible for home loan. Since, Authority itself will be a part of builder buyer agreement, financing will get easier and cheaper. Since, properties would become loan-worthy, it will attract more buyers and create boom in the property market. Yogi ji has done away the fear of realty market crash through his masterstroke.
Difficult to delay and defraud: Apna Ghar has been the dream of every middle-class family. But budget constrain, fear of getting cheated, delayed projects, lack of registrations was keeping the buyers away from the market. Advent of RERA has almost done away with the menace of delay in projects and cheating by the builders. RERA registration has been made mandatory and diversion of funds have been checked to a great extent. Inclusion of Authority along with RERA in realty deals will boost confidence of home buyers and lead to increase in demand.
Benami property will get a name: Benami property has been a big drawback of realty sector. Buying property in fake name without KYC or buying property in the name of driver, maid-servant, gardener etc. has been rampant in realty sector. Government’s initiative to digitize land and property records has been able to check the menace of benami property to some extent. The inclusion of Authority in tripartite agreement at the initial stage itself would prove a deterrent for benami property buyers. The lure of buying unregistered property will be capped to an extent.
Adjustment of Cash component: Property market has been infamous for adjusting cash component. The builders generally reduce the per sq feet rate for adjusting cash component. Suppose, market rate of the property is Rs 10000 per sq feet and you buy a 2000 sq feet property worth Rs 2 Crore. If you wish to get 50 lakh cash adjusted in the property, the builder will sell the same property to you @ 7500 per sq feet and charge you just Rs. 1.5 Crore. The builder-buyer agreement for the same property will be made @Rs 7500 per sq feet for Rs 1.5 Crore (because you have already paid Rs. 50 lakhs in cash). Adjustment of cash component will be thing of the past because there cannot be different sale rate for different buyers of the same property. Involvement of Authority at initial stage will infuse fair pricing and equitable treatment for all the buyers. Yes, it would reduce influx of cash component in realty sector.
The economic policy decision of Yogi ji would go a long way in reforming realty sector. He has played a masterstroke where Baller (Builder) is happy, Batsman (Buyer) is happy, Fielder (Authority) is Happy and even Referee (The Government) is happy.
