Delhi’s land pooling policy: What’s in it for buyers?

There was euphoric exultation on the evening of September 7 over news that the Delhi Development Authority (DDA) has approved land pooling policy under Delhi’s Master Plan 2021. The question here is whether this optimism is justified? What does the policy have in store for buyers of residential units? In the short term actually nothing.

Having said that, let’s examine the systemic disruptions in India over the past two years – Benami Transactions (Prohibition) Amendment Act; demonetisation in November 2016; Real Estate (Regulations & development) Act, 2016 (RERA); inclusion of the real estate sector in the Goods & Service Tax; and Real Estate Investment Trust (REITs) and Infrastructure Investment Trusts (InvITs), which have suddenly exposed the soft underbelly of the $180 billion industry.

While the above policy disruptions may seem like radical changes, these have the potential for a more transparent and predictable business ecosystem in the future. And that’s exactly what buyers need to take note of while investing their hard-earned money in real estate assets.

Now, back to the question of land pooling and home buyers. Let it be categorically known that there is no immediate hurry to transfer your hard earned money into some quasi developer’s account.

In the run-up to approval of the land pooling policy, it was not mere coincidence that the Delhi Development Authority released some press releases warning unsuspecting buyers not to buy/book/fall for offers of apartments in unapproved projects under the land pooling policy. One may have also seen some tweets from BJP MPs and some MLAs exhorting people not to fall prey to unscrupulous offers, or complain about such grievances to authorities.

What this essentially means is that the DDA is serious about land pooling this time around. It also wants the policy approvals to stand up to judicial scrutiny and not be castigated for not taking suo moto cognizance of the issue of multiple societies offering ‘DDA approved flats and plots under land pooling’ in Delhi.

Merely owning a few acres of land does not qualify the landowner to develop and sell apartments. If one carefully reads the final notifications, the land pooling policy of Delhi introduces the concept of developer entity (DE). Here is an excerpt from the Raj Bhawan release of September 7:

“For smooth planning and development of infrastructure, integrated sector-based planning approach shall be followed. A sector will comprise 250-300 hectares of land. Once the minimum 70 percent contiguous land of developable area within a sector, free of encumbrances, is assembled, such sectors shall be eligible for development under the policy, where any individual, DE or consortium with minimum two hectares of land can take up development.”

For the ease of calculation let us assume that a particular sector is 500 acres. Effectively, DDA would initiate development planning of that particular sector after 350 acres of documented contiguity is proven. This points to the fact that a 2-5 acre property owner, who has sold apartments already under some scheme to buyers, is a marginal player in the decision making process of that sector. Assuming 500 consumers bought apartments in a marginal decision makers’ unapproved project, they have negligible say. To top it, DDA has already cautioned them earlier.

Don’t forget, DDA is also the real estate regulator in Delhi. Hence, there is not much protection for an individual buyer as RERA has no provision for buyer gullibility. Most buyers who assumed that they bought an apartment better be aware that they are a member of a multi-state cooperative housing society, not strictly classified as a buyer under RERA.

Price cannot be the only consideration while buying real estate. The ability to deliver needs be the foremost. Many projects that have been announced cannot even be delivered at the price points they have been sold at. Its common sense, why would anyone build if there’s no profit to be made.

Various notifications and judicial orders explicitly prohibit any marketing and sales of real estate projects without a valid licence to build and prior registration with RERA authorities. Many a projects advertised by quasi developers in Delhi have neither, and DDA has already cautioned prospective buyers.

Prospective buyers are the only custodians of the safety of their money. So, exercise caution, do not be lured by some imaginary price benefits. Wait for the licenses to be issued by the authorities. Else, you may neither see your money, nor your dream house for another 5-7 years.