Amrapali mortgaging homebuyers’ land: Solution lies in mandatory registration of undivided share of land across India

The Supreme Court wondered how the recalcitrant builder Amrapali could have mortgaged the land belonging to homebuyers and obtained loan . One wishes the apex court had ordered all the state governments and Union Territories to mandate registration of undivided share of land (UDS). As it is, such a salutary practice exists only in Karnataka and Tamil Nadu. There are two evils among others plaguing property transactions in the country. First, is the opaque practice of transferring on power of attorney (POA) i.e., transferring the beneficial title without the nominal or legal title being transferred. The Supreme Court had struck down this practice way back in 2011 and cautioned buyers that they would be buying POA properties only at their own peril. Having done this and as a sequel it ought to have addressed the other evil — non-registration of UDS separately in large parts of the country. [caption id=“attachment_1116543” align=“alignleft” width=“380”] Representational Image. AFP[/caption] In Tamil Nadu and Karnataka, homebuyers hotfoot to the sub-registrar’s office twice — first on the occasion of ‘first ownership’ i.e., when the UDS is registered in their favor by the builder and a few years later when the building is completed, the occasion felicitously referred to as ‘second ownership’. They do not mind the trouble in going to the registrar’s office twice over because they feel secure when both are registered — land and building. The UDS conceptually is associated with builder floor apartments and large gated communities. Let us say, a builder constructs six flats on a land on which stood a bungalow till recently. Three of the flats are given to the land owner in return for he giving the land free to the builder who makes money by selling the remaining three flats to buyers. Now, the problem is how to secure the interests of the buyers? In Tamil Nadu and Karnataka, this is straightforward — the buyers insist on the proportionate share of the land being registered in their name. In other parts of the country, it is left to implication, a dangerous one at that — when a flat belongs to the buyer it is implied that he is the owner of the proportionate part of the land as well. It is strange that big governmental housing bodies like the Delhi Development Authority (DDA) think nothing of the UDS when it is of seminal importance. The UDS is a valuable right as the building itself is bound to depreciate over years. Land is perhaps the only asset that appreciates with time. Shouldn’t this valuable assets be evidenced by a separate legal document? One must hasten to add that while the UDS indeed is a valuable independent asset, its owner cannot transfer the land itself unilaterally. Of course, he can transfer it along with the flat. In other words, though registered separately, the two, proportionate land embodied in the UDS and the superstructure, can be transferred only as a package i.e., as a bundled product. Not bad at all because there is no curb or bar on transfer as such. If all the owners of land agree they can again demolish the building after say 50 years and ask a builder to build afresh or sell the land and divide the proceeds among themselves pro rata. The UDS becomes a complicated calculation in a gated community or condominium where there could be 100 to 3000 flats. But the underlying principle is the same. Amrapali and banks were both guilty. Amrapali took the homebuyers both for a ride and granted. Banks were happy to lend because the title deed to the land were handed over to them. Banks ought to have asked the primary question to Amrapali —does the land belong to you? Amrapali would have been stumped. (The writer is a senior columnist and tweets @smurlidharan)