Buying an apartment in Karnataka? Read this

Rev 1. by Murali772 and Sanjayv

There are plenty of articles discussing aspects of buying an apartment in Karnataka, and Bangalore specifically.  This blog posting has a different flavour from most.  We want to focus on some very overlooked aspects which are fundamental as well as important. 

What is an apartment?  An apartment is generally residential and consists of your unit as well as areas known as common areas and limited common areas situated on land which is known as the undivided share of land.  A builder or promoter will formulate a scheme under which the owners have a share in the land which is undivided and cannot be divided in the future. When the property gets occupied, an owner has absolute rights on his apartment and exclusive use of the limited common areas allotted to him, but has to share the common areas and the land with all owners. This close living arrangement naturally leads to a lot of conflicts and confusion later on.  Your share in the land (undivided share) is important because if anything happens to the building (a fire, earthquake?), then the only tangible asset you own is the undivided share of land.  So what is the legal basis of such a scheme?

The two laws that govern this process are the Karnataka Ownership Flats (Regulation of the Promotion of Construction, Sale, Management and Transfer) Act, 1972 (KOFA, otherwise called Act no 16 OF 1973 (click here) which regulates the sale process.  Note that a flat has a slightly broader definition and can be non-residential in nature also.  However, an apartment is a sub set of what comes under the definition of a flat. The other important law is the Karnataka Apartment Ownership Act 1972 (KAOA, otherwise called Act no 17 of 1973 (click here).  The KAOA was passed to make sure that apartments as a property are heritable, transferable and mortgageable. In other words, KAOA allows you to sell, bequeath, gift and get a mortgage (loan) on the apartment.  For this, the property has to be submitted under the KAOA by the builder by following the process prescribed in the law.  This ensures a clear title to the apartment for the owner (as long as there is a clear title on the original land, of course). Unfortunately, majority of the builders in the state do not do this process correctly.  Despite that people buy apartments and banks seem to be giving loans.  However, non adherence to the correct process leads to much confusion and heartache, especially with builders coming back to add additional floors, claiming ownership to common areas illegally and so on.  The KAOA also has the right provisions for associations that govern the society to form and run affairs and resolve disputes. Between KOFA and KAOA, all aspects of apartment ownership from regulating the process of sale to transfer, occupation of property, living and finally destruction of the property is covered.  This is not to say that the laws as they exist are perfect,  but the fundamentals are in place.

Unfortunately, currently, most builders do not follow the KAOA and KOFA as required. When going to but an apartment, it is important to verify basic details such as title to the land, encumbrances against the land, extent of land, basics such as water supply, power, sewage treatment, approach road, approvals etc.  In fact, KOFA clearly lists all the documents and information that must be supplied by the builder to a buyer on demand.  However, it is also equally important to make sure the builder commits to submit the property to the KAOA.  In fact, the KAOA requires that the registered deed of apartment (commonly known as the process of registration) be between the party who has submitted the deed of declaration submitting the property to the KAOA and the first owner of the apartment (the buyer),

The Deed of Declaration in essence describes the entire property along with all the flats, a clear definition of the common areas, the extent and undivided share of land along with a copy of all relevant local authority approvals.  The formula and share of the "undivided share of land and common areas" is also to be mentioned in the deed of declaration.  This ensures that everything is crystal clear and that there is no confusion in the future.  This act also requires the registrar to maintain a record in a separate “book” and “index” which enables clear title to the apartment area as well as percentage of undivided share of land and common areas. It should also be ensured that the sum of the individual undivided shares matches up to the total project area.

It is the process of submitting the property to the KAOA and properly registering the property that gives you a clear and valid title to the property. A "khata" is only an account number issued by the municipality (BBMP in Bangalore) to facilitate payment of municipal taxes. It is not an entitlement to the asset.  People buying apartments are urged to keep this in mind and ensure that proper processes are followed.  In fact, under KOFA, a builder is obliged to give you a list of all other persons who have bought an apartment, which should help in organizing and ensuring that the builder complies with the processes correctly.

For the full discussion on the subject, click here.