Building nests: Housing complexes under construction in Rajarhat

One million new houses every year for the next 25 years. If you thought that’s going overboard, the smile on the face of developers queuing up for a share of the Bengal boom should set all doubts at rest.

At a growth rate of over 6 per cent — one of the fastest in the country — the state is emerging as a favourite destination for professionals who are already swarming in.

But the question is: where will they stay?

The situation now is supply of quality housing lags far behind the demand — a shortage, sources say, of almost five million dwelling units. The need, according to industry statistics, is at least one million additional dwelling units every year for the next quarter of a century.

The private sector is aware of its responsibility to create space, but it also wants the state government to build the atmosphere for the growth of the real estate industry.

“The government has to help the market grow and flourish by creating an environment where builders can cooperate with and also compete against each other and provide value for money deals to buyers,” says Pradip Chopra, who was till recently secretary of the Bengal unit of apex real estate body Credai.

But industry insiders are also worried about the West Bengal Stamp Duty Act and want greater transparency and liberalisation in the provisions of the legislation.

In Bengal, any sale agreement has to be registered with the registrar of assurances on payment of full stamp duty and registration charges.

The stamp duty paid at the time of the sale agreement is later adjusted — or charged less — while executing the deed of conveyance, the final legal document that moves a property from one owner to another.

However, when someone enters into a contract to purchase a property or a piece of land, there may be a number of pending issues and obligations either with the vendor (the seller) or the purchaser or developer. Unless the conditions are met and the obligations are complied with, the contract cannot reach its logical end.

This is where the conundrum lies. If either of the parties feels that there is no clear title to the property in question, the stamp duty paid by the purchaser, as is required by law, is forfeited without recourse to any sort of refund.

On the other hand, if the purchaser does not get such contracts registered, he cannot enforce the agreement on the vendor or the developer of the property. The reason is such a contract, unless registered by paying the requisite stamp duty, cannot become admissible as evidence in a court of law.

“Such a case may arise when the vendor or the developer does not comply with his contractual obligation, such as selling the apartment or the property at the agreed price and specification. It also happens when the price of the property or the apartment goes up. In all such events, the purchaser would have no remedy available to him as his non-registered agreement for sale is non-enforceable and not admissible as evidence in any court of law,” Chopra says.

Real estate players have long felt that the reduction of stamp duty, which the state government announced in the 2006 budget, is an acceptable solution.

In Calcutta and Howrah, the duty is now 6 per cent. For municipal areas, the duty is a uniform 5 per cent and for rural areas 4 per cent, down a percentage point.

Industry sources say the reduction provides both seller and buyer with the legal option to have a clear title on their hands, instead of following legally unenforceable means of simply handing over a power of attorney.

Another option would be to allow the agreement for sale to be entered on a stamp paper of Rs 10. Earlier, such documents were enforceable even when they were not registered with the sub-registrar of assurances.

“This was discontinued when it was realised that apartments were being occupied on the basis of a simple power of attorney. The income-tax authorities were recognising this as a transfer. One has to remember that the stamp duty in Bengal was one of the highest in the country at that point, at about 13 per cent.

“Also the funds being used to collate the transaction was ‘black’ money. To curb this practice and to enforce compliance of the registration of the deed of conveyance, the act was amended. However, it is still enforceable in states such as Tamil Nadu and Karnataka,” says advocate Goutam Saha.

The role played by banks and financial institutions in real estate transactions has undergone a sea change in recent times. Most banks insist on a deed of conveyance executed in their favour by the purchaser at the time of taking possession. This has ensured that the chances of the government losing revenue have diminished.