When a project is declared illegal

There is nothing one can do, except approaching a court

Imagine buying a house by liquidating crucial investments and taking a huge loan. When it’s time for you to move in, the government declares it illegal. This is exactly what happened with buyers in two separate cases in Noida.

In the first one, the developers got all the relevant permission from the Noida Authority. After verifying the papers, even banks tied up with them to offer loans. After four years, as the work in many projects was nearing completion, the National Green Tribunal (NGT) stopped the Noida Authority from giving completion certificates. The reason: they were within a 10-km radius of the Okhla Bird Sanctuary, an eco-sensitive zone. The move affected around 50,000 flat owners. In another case, NGT found the developers were not adhering to guidelines of the ministry of environment and forests (MoEF) and were flouting pollution norms during the construction activity. The NGT order to halt the construction has put the fate of 20 projects (80 towers) in a limbo.

What can you do if caught in a similar situation? According to experts, if the government declares a property illegal, the only option is to approach the court. “In many cases, the authorities issue notices after many years have passed by. The courts take cognizance of this fact and in all previous cases they were lenient to the buyers,” says Ashutosh Limaye, national director (research) at JLL India. He explains that the court’s underlying principle in such rulings have been the buyer is not at fault. Although it is the customer’s responsibility to first check the permissions a developer has with regard to the project, it’s not always possible for them to get a clear picture, due to opaqueness in real estate matters. In most cases, the courts have scoffed at the government for delayed action.

Property lawyer Vinod Sampat says the first thing one should do is file a criminal case against the realty firm and its directors. Such buyers should also approach the consumer court and also create a pressure group. “They should also use social media and go to the developer’s other projects, to make others aware of the problems they are facing due to the builder.”

Time and again, across cities, property buyers have suffered a similar fate either due to the builder’s fault or the government stepping in after many years to declare the project illegal. They buy the houses after trusting that partner banks have verified the documents before tie-up. They keep repaying the loan without taking possession of the flat.

In 2011, for example, about 500,000 residents living in the eastern and western suburbs of Mumbai were asked to shell out extra money for regularisation of their homes on a land classified as private forest land. The forest department had first issued notices to land owners in 1957. In 2001, a public interest litigation was filed by an environmentalist group. Subsequently, residents paid Rs 100 crore as penalty. Similarly, 113,000 buildings were identified as illegal in Ulhasnagar, before a special law was passed to regularise most of these in 2006.

There’s little one can do about the loan. A banking expert said lenders could not take a lenient view, as it would set a precedent. They are also answerable to their boards and shareholders.