Rustomjee Urbania Thane: Story of Approvals

As mentioned in the earlier post, the builder asked for interest payment even though it did not have TMC approvals for the 16th floor for about one and half years after i booked the flat. So, digging about what all documentation is required by the builder (at a high level) was a side trail. Here are the findings interspersed with how approvals and various letters played their part in my case.

Two sides of a home loan

To begin with, there are two sides to the home loan story. On one side, the bank checks flat purchasers ability to repay the loan and gives the flat purchaser a "pre-approval letter". The pre-approval letter states the eligibility of flat purchaser for a loan of say few lacs of rupees. The pre-approval letter is valid for 90 days generally.
On the other side, the bank checks the project documents that are responsibility of the builder. The bank can issue a "sanction letter" to the flat purchaser for the project if the project documents are found good. Note that sanction letter is not mandatory requirement from builder point of view. But, it's pretty important from flat purchaser point of view for it verifies the legality of the flat in question. I did not insist on sanction letter for this flat, but luckily did not pay beyond the 20% down payment that i did at the time of booking. I trusted Rustomjee to have all the necessary approvals in place at the time of booking. I did booking on Nov 9, 2009 and paid 20% down payment by Dec 8, 2009. Booking time is kind of crazy as you feel that if i delay, the cost of flat would go up!

When to do Sale Agreement registration and pay Stamp Duty

Builder can then peruse either the pre-approval letter or the sanction letter by the bank and be satisfied that the flat can be sold to the flat purchaser. Now, the builder and the flat purchaser can proceed to make Agreement for Sale and register it with the state government acting as witness to the agreement. Luckily i waited until Rustomjee got the 16th floor approval on Mar 31, 2011 to proceed with registration of Agreement of Sale and payment of stamp duty. I realized that since Citibank was not agreeing to disburse the loan amount, certain project approvals are pending with the authorities. The authority in this case being Thane Municipal Corporation, and 16th floor plan approvals, commencement certificate and IOD were pending with TMC until Mar 31, 2011. Now, i registered the Agreement for Sale and paid stamp duty on May 11, 2011.

What happened between Dec 8, 2009 and May 11, 2011?

Bank needs registered Agreement for Sale original in order to disburse the loan amount to the builder as per the payment schedule mentioned in the Agreement for Sale. Builder sends "demand letters" to the flat purchaser stating how much work has been completed and how much money is due now. For example, for completion of plinth or 1st floor slab casting or top floor slab completion, builder can demand certain amount from the flat purchaser as mentioned in the payment schedule of the Agreement for Sale. Now, that is supposed to be the normal story. This is how it turned out in my case. Rustomjee sent first demand letter on May 4, 2010 stating that plinth and 1st floor slab casting is done with and i have to pay certain amount. That's the first written communication after booking on Dec 8, 2009. I declined stating that i've paid my 20% down payment and asked Rustomjee to go get the money from Citibank! Of course i mediated between Rustomjee and Citibank. Citibank refused to disburse loan for lack of approvals for the 16th floor. The same story repeated for subsequent demand letters. Also, subsequent demand letters from Rustomjee did not dare to declare how much work is complete and just asked for payment from me. Do you believe a builder that asks just money and does not say how much work is complete? Of course not. I did not trust Rustomjee by then. Citibank did not either. The last demand letter in 2010 i got was on Oct 5, 2010. I read it, it did not mention how much work was complete. I could not have helped Rustomjee even if i wanted to! Who has the money? The bank. The bank would not disburse the loan amount until Rustomjee had TMC approvals.

Happy ending: No wait

Then the D-day arrives. Mar 31, 2011.

Rustomjee gets TMC approval for 16th floor (in fact for all of the 27 floors of Athena C wing), gets sanction for development permission / commencement certificate on Mar 31, 2011. The same states conditions on construction that are supposed to be part of Intimation of Disapproval (IOD) and states that it is valid for construction within one year, etc. Hurray! The things seem to be moving now. In fact, moving pretty fast now.
On Apr 2, 2011, i receive a demand letter stating that all the floors of the building are complete and even windows and doors are planted on all floors! There is one more surprise with the demand letter. There is a Architecture Certificate stating the amount of work completed along with this demand letter. And, of course demanding the balance dues. I rejoice. Finally my favorite builder got the TMC approvals and i can pay his dues through my bank. The thought itself was so liberating! You don't want to be in someone else's favors. I mean if you consider constructing a 27 floor building with just 1st floor approval from authorities as a "favor". Nonetheless, we proceed to register the Agreement for Sale as i mentioned earlier on May 11, 2011. But, the story yet does not have happy ending though!!

Pay interest, take possession

After receiving the original registered Agreement for Sale, Rustomjee asked for the price of such "favor". It asked me to pay Rs 13 lacs as interest payment at 24% per annum rate for continuing to construct the building without TMC approvals and me not making any payment for such activity between Dec 9, 2009 and May 11, 2011! Wow, how can i fund such a huge amount that is not part of Agreement for Sale? I protest. I decline. I negotiate. I find mistakes in interest calculation, the calculation presumed the construction was complete on Dec 9, 2009 itself at the time of booking! Interest calculation by slab casting dates, that Rustomjee shares after a lot of insistence, i cannot trust those for who can certify those dates. Interest calculation by demand letter dates? No, the demand letters do not mention the amount of work complete. How to calculate the price of construction that was done without approval from authorities? What if 16th floor was never approved? Why i should pay interest for the loan disbursal that Citibank refused to do? Continuing construction irrespective of TMC approvals was Rustomjee's decision. Rustomjee may have the financial power and will to pay penalty to TMC (TOI June 23, 2011: Rustomjee paid 21 crores penalty to TMC!), but how can a mere flat purchaser with not so much financial power bear the interest payment burden on top of the agreement value?
I tried figuring out on what basis such interest payment is legal, logical, or even ethical! I cannot see one single reason to pay the interest. What do you think?

No to interest payment

I said no to interest payment. Rustomjee issued Intimation of Cancellation notice via email (i am yet to receive the courier email said it sent) on Jun 20, 2011. Now, the matter is sub-judice if i use the legal term correctly! Let's see how it goes. It will be quite a learning for all parties involved i believe.

Documents that save you

BTW, below is the list of documents you should check minimally to verify the legality of your flat (when you book)
- Development agreement = Builder can develop this property or do construction for the owners of the land
- Title certificate = There are no encumbrances for the land in question
- ULC = Land is good for building construction
- Municipal approved set of plans = Should include floor of your flat
- Development permission / commencement certificate = From municipal corp. Should include floor of your flat!
- Intimation of Disapproval (IOD) = Any conditions on development by the municipal corp.

Citibank did check the above documents for the project between Dec 9, 2009 and Mar 31, 2011. And, it found that the last three documents were missing for the project during that period!