‘Can’t use EoI to sell properties’

Gujarat Real Estate Regulatory Authority (GUJRERA) has plans to take suo motu action against developers who are selling their projects to end users and investors via Expression of Interest (EoI). The move is being planned in light of instances where developers are selling residential and commercial projects even before getting the mandatory GUJRERA registration. Most of such projects are in the western part of the city and are being sold on the EoI model through different marketing channels.

Sources said recently the area between SG Highway and SP Ring Road has seen several such realty deals. 

“Areas like Sindhu Bhavan Road (SBR) and Iscon-Ambli Road among others are also selling retail cum office space on paper to their investors.” The sources said these projects however do not have the GUJRERA nod as developers are either yet to apply for registration or have not got the clearance for the same after applying.

Talking to Mirror a developer said many investors prefer to invest at this stage (before GUJRERA registration) as they get special rates (higher discounts) on upcoming properties. “However, if the builder is not trustworthy then it can create issues for investors,” said the source. 

A senior advocate told Mirror that most developers sell space immediately after buying land and the space thus sold makes up almost 70% of the total project cost. “They do it to quickly recover their money,” said the advocate.
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“Most developers buy land on term payment which has to be paid over a short period. So developers immediately start selling their project via realtors (brokers) and to their regular investors, even before getting clearances from respective authorities like AUDA, AMC or GUJRERA,” the advocate said. He said this is done to recover the initial investment so that payments can be made for the land that they bought. “However, it’s still not legal, unless it is GUJRERA registered. Since most of the time the partial payment is in case of commercial or retail properties, there is an issue of lack of accountability too.”

A senior GUJRERA official said no project can be sold to investors or end users unless it’s registered with GUJRERA and has the mandatory clearance. “Even the marketing of such projects under EOI is illegal if it is yet to get the RERA number. However, if such a thing is happening we will take action against them.”

Game of Trust
Realty experts said investing in a project before it gets a nod from respective authorities is an old practice but it needs to be done with caution. Managing Partner of Space Management, Hitesh Shah said there are established developers who have a strong investor base and they prefer to invest in the upcoming schemes of such developers in advance due to the value, commitment and past accountability that they bring to the project. “However, when a developer is a new entrant there is a question of trust and accountability. But most importantly, the role of the broker is crucial; if s/he isn’t trustworthy, you may face opportunity loss and sometimes delay in getting your money back.”

Most developers buy land on term payment which has to be paid over a short period. So they start selling their project via brokers via EoI even before RERA nod 
–A senior advocate