Saturday, December 10, 2011

The "B" Katha

In my last blog post 'Third time unlucky', there was this comment which said most big name builders are trustworthy and if a bank approves such property, there is nothing to worry.

Let me provide you with the most obvious evidence to the contrary in this post.

Many new apartment complexes in the outskirts of Bangalore are sold with what's called the "B" Katha. This includes most of the Sobha apartments in the Bellandur belt (which is where I live). Only a couple of apartments in this belt have the "A" Katha.

Now these are apartments where a 3 Bedroom apartment sells for Rs. 1.1 Cr - 1.3 Cr and a 4 BR apartment sells for Rs.1.7 Cr to Rs.2 Cr. Most major banks provide loans for these properties.

I wanted to find out the difference between the two kathas and what it means.

A "katha" literally means an "extract". All it tells is, there's an entry for this land in the BBMP office and the katha is proof of that. The BBMP keeps two sets of registers - the "A" register for legal land (land legally approved by the Government for residential purposes) and the "B" register to keep track of all the "revenue land" (land not intended for residential purposes). It was created as a means to keep track of all buildings constructed on illegal land. Somewhere down the line, BBMP decided to issue an extract of this illegal register so that property taxes can be collected against these properties.

I have read all the comments to the blog posts, I am no fan of big Government myself, not to the extent of DhiMan :), but things like this prove his argument. It's clear that there is illegal construction done on un-approved land. There is no reason the Government should bless this in any which way. If anything, they should be levying heavy fines for providing civic amenities. Instead, they start issuing a "Katha", which confuses the lay-buyer.

The developers, of course, take this as a go-ahead to go berserk on constructing illegal multi crore properties on such illegal lands. What people believe is that the "B Katha" is some proof that this is a valid property. On the contrary, the "B Katha" is a Government issued proof that your property is built on illegal land. Look no further.

The BBMP commissioner Siddaiah recently created a major ruckus by declaring B Katha is a bogus. This kick started a whole range of discussion around the "B Katha" and puts the major builders in a spot. This ruckus led to "betterment charges to give permanent Katha"

"As the Bruhat Bangalore Mahanagara Palike (BBMP) gears up to implement betterment charges, citizens may heave a sigh of relief as ‘B’ khata owners can now get a permanent title deed, ‘A’ khata, by paying the same.

However, senior BBMP officials have placed a rider by stating that ‘A’ khata alone cannot be considered as regularising the property. “Even if they pay the betterment charges and get their ‘B’ khata converted into ‘A’ khata, property owners will still have to get their land regularised under Akrama-Sakrama,” informed a Palike official."

Say what?

You can now take an illegal "B Katha" and get it converted to an "A Katha" - but it's still illegal. i.e, the Government has now taken an obviously clear indicator that this property is illegal (B Katha) and have confused the legal document (A Katha). Earlier, if you owned a "A Katha", that was an indication that it was a clear property. Now, if you own a "A Katha", it "may be" clear.


But then, isn't there an exit through the "Akrama-Sakrama"?

According to


Ah, so it's time bound.

But has even this been implemented? Not quite. It was announced in 2007, but it still hasn't been made legal by the Government yet.

In the meantime, all builders use this legal mess to forge ahead in the construction of illegal property hoping that some day all of this mess would be regularized.

Till that happens, your Rs.1.5 Cr pent-house from the big name developer that has a "B" katha - remains illegal; and you even have a Government issued document to prove it.

Wednesday, December 07, 2011

Third time unlucky.

Originally posted in R2IClubForums.

I am back to entertain you all with more amusing stories of Bangalore Real Estate.

After ReddyGate and CEOGate, one thing was very clear to me. It's very difficult to get the correct legal documents for a resale property. So I decided to narrow my attention to under construction brand new properties. I mean the builder must be eager to sell these, right? The project is progressing well and some blocks have been built and some others are coming up. The project is scheduled to end by Fall 2012, so give or take 6 months, by Summer 2013, the property should be ready. [Yeah, I know the risk of the project never being completed, but at this point I would buy it if the legal papers are clear and live with *that* risk.]

I went with this mid-tier builder who is building their first "villa" project. They have coined this new term called "villament", it's essentially an apartment, but with fewer floors. So instead of a 10 story behemoth, these things are 1x two story apartment built on top of another two story apartment. So there are totally 4 floors split between 2 apartments. I had seen this property way back in August and I couldn't agree on a price. We went back and forth on the price and we settled on a price, just in time as CEOGate was winding down.

The one thing you hear in Bangalore Real Estate - if a project is blessed by "State Bank of India", it's golden. SBI is the top tier bank of the lot and supposedly they have the most anal lawyers in town. If they clear a project, it's absolutely clear. There's nothing to worry.

This project was approved by SBI. Further to that, State Bank of Travancore approved it, so did Corporation Bank, HDFC Bank, Axis Bank, ICICI Bank and the lot. Hell, my bank loan got approved pronto since this was a pre-approved project.

Easy peasy I thought. Finally I can be done with the Real Estate mess in Bangalore. And then it started.

Since this is an apartment type deal, you own a small portion of the undivided share of the land. Since this property was 3 acres and 108 apartments, they divide the undivided land and you have the ownership of it. What this also means is that your lawyer is now going to check the land for all the 3 acres and make sure it's clean. If it is a "villa", typically they verify that one survey number where your property is located. [Typically, big projects are split across multiple survey numbers.]

I tried to find a lawyer who is aware of the intricacies of the project. One of the learnings I had from the past is when a lawyer starts digging up past history, often there are documents that are difficult to "trace". Giving the benefit of doubt to the developers, people quit, they misplace documents and it's a chore to find them. So I thought if I find someone who is aware of the legal issues, things would be easier.

I joined the Yahoo Group of the owners of the "villas" and asked them who used a lawyer to verify the land. Of the 30 odd people in the mailing list, not one had used an external lawyer. They all depended on the fact that the bank they borrowed money from clearing the land. Since the land was cleared by the bank, they assume the land and the project should be clean.

I had little choice but to go with the lawyer I have worked in the past.

This developer gave us a file containing of all the latest sale deeds and "katha" of the 3 different survey numbers. My lawyers went through this and came up with a list of documents that have to be investigated. Each of the survey numbers had 7-8 portions of land parcels and each land portion had multiple buyer and seller. The lawyer said this land is very "fragmented" so he needs to spend a lot of time.

Every land sale deed comes with what's called a "Mother Deed", which lists the history of the land. Typically any developer hands over the mother deeds along with the latest documents to a lawyer check. This developer refused to hand over these documents to my lawyer stating that the originals are mortgaged with SBI (since they pledged the land with SBI and borrowed money against it) and they only have one copy. They refused to make further copies of the documents.

So I beg my lawyer to send a person over to their office. Five such visits and nearly 20 hours of pouring over a few thousand pages of documents, my lawyer goes back in time for all the three survey numbers and investigates all the purchase and sales of the lands.

At the end of it, he lists about three dozen gotchas in the land. A few listed below for a sampling:

- Survey number "C", which forms nearly 50% of the apartment land was acquired by the Government in 1992 for "hitech" purposes. All the land was an agricultural land to start with and it was converted to "industrial" purposes when this happened. In 2007, apparently this document was converted to "residential". The developer had no documentation available for either the conversion to "hitech" land nor has documentation for conversion to "residential". When we asked about it, they said they have applied to the Tahsildar for this and they will get back to us. It's pretty bizarre that there isn't clear paperwork for a majority of the land, as late as 2007.

- There exists a middleman (John Doe) who has been the GPA owner for many pieces of the land in this lot since 1990. He has been the buyer and seller of this land many times over from 1990 to 2007. In 1995, on a single day, many sites were registered. All the sites were sold by John Doe. The GPA number mentioned in the sale deeds is different from the GPA provided to us. The original GPA, of course, is not traceable.

- When a piece of land is sold, the sale deed mentions the site number, and boundaries. The boundaries would say something like "bounded in the east by site x, in the west by site y, in the south by site z and north by 30 feet road". Now, when the sale happened in 1995, for ALL the sites, the boundaries are the SAME. The site numbers differ, but the boundaries remain the same. This is as if the same site was sold many times over on the same day.

The typical answer given by the developer for such cases is that this is a typographical error. While reasonable, the Government provides a solution to fix it. You can apply for a "rectification deed" and correct the errors in the sale deeds. This developer has not done it so far and refuses to do this since it's too late to do the changes.

- None of the original sale deeds for the 1995 sale is available. All that exists are certified copies of the sale deeds. The excuse given here is that the originals were lost. If that is the case, then the process is to file a police complaint, post an ad in the newspaper regarding this and save those as reasons to go with a certified copy. Of course, none of this is available.

Depending upon the lawyer you use, they either check 30 years of land documents or some go as back as 60 years. Here, I was getting stuck with improper documentation within the last 15 years.

The developer is unwilling to fix any of the errors in the sale deeds. I may get to see the RTC for the Government acquisition and release, but even that, we aren't sure.

But I wonder, how is this possible? These are obvious errors that SBI should have caught. So, what gives?

To cross verify, I find a lawyer who works often with SBI to approve these types of documents. He goes over the list of questions and confirms whatever my lawyer has raised are all valid questions and there's nothing out of the ordinary. When I ask him how SBI would approve such a project, all I get back is a smile and an answer that says "anything is possible in India".

I don't understand why the buyers in India don't go for an independent legal opinion when it comes to Real Estate. Shouldn't these things be caught up-front before 90% of the project is sold out? Isn't that the only way you can get a Real Estate developer to fix these wrongs before it's too late?