LEGAL CHAT
Know the pre-launch costs
N.C.S. RAGHAVAN
ARVIND RAGHAVAN
Continuing with the discussion on the costs involved in the construction of an apartment complex which finally determine the market value offered to the purchaser, let us look at pre-launch costs including betterment charges, municipal taxes and plan sanctioning costs.
The Bangalore City Corporation (before formation of the Bangalore Mahanagara Palike) was collecting betterment charges from the owners of revenue sites which were under its jurisdiction before the issue of the Khatha in favour of the land owner concerned.
Betterment charges at Rs.100 per square yard i.e., approximately Rs.11per sq.ft. were being collected by the BMP from the owners of the revenue sites.
Once the Bruhat Bangalore Mahanagara Palike was formed, not only revenue sites but also converted land (formerly agricultural in nature) have come within its jurisdiction.
Let us assume that the converted land on which the residential apartment complex is proposed to be constructed is coming under the jurisdiction of the BBMP. In this case, after completion of the formalities like change of land use and conversion, the land owner has to apply for and obtain Khatha from the BBMP in his name.
In such a case, it needs to be examined whether betterment charges have to be paid to the BBMP before the issue of Khatha in the name of the present owner. As several writ petitions in this regard have been filed in the High Court and are yet to be heard, the BBMP is not collecting the betterment charges. This implies that as on date, the BBMP will have to issue the Khatha after collecting the municipal taxes due and without collecting betterment charges.
Once the Khatha certificate is issued, the land owner can apply for a plan sanction. The fees for sanctioning a plan by the BBMP depends on the total extent of the land and the total built-up area proposed to be constructed. The built-up area depends on the total extent of the land, the plan submitted by the owner, the Floor Area Ratio (FAR) permissible depending on the factors like setbacks required, road width etc.
Although the plan sanction fee is collected as a one-time composite fee from the land owner, the several components which constitute it are licence fee, ground rent, development charges for building, development charges for site, security deposit, copying charges, compound wall fees and labour cess.
Apart from plan sanctioning costs, the pre-launch costs such as clearances from the Fire Force Department, Pollution Control Board and the Airport Authority of India (wherever required) will also have to be incurred by the land owner.
(N.C.S. Raghavan is a chartered accountant and Arvind Raghavan, an advocate)
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