Coping With Conversion Pangs

The tradition of offering a property on lease instead of selling it is a hangover from the Raj. In Delhi, where most of the land is owned and sold by the Delhi Development Authority (DDA), the perpetual 99-year old leasehold system has been widespread.

So, if you were an original allottee to a DDA flat or plot, you were not technically the owner of the holding. Sale of the property would mean sharing a portion of the profits with the lessor (DDA in this case) apart from undergoing some administrative hassles.

In 1992, the ministry of urban affairs and employment provided an incentive to opt for more transparent property deals. The scheme allowed people to convert their leasehold residential property to freehold and become absolute owners by making a one-time payment to DDA. Initially, the scheme was mandatory for built-up plots or flats upto 150 sq m in area. But now, this conversion is entirely at your discretion.

 

So far, the high conversion rates have resulted in few takers for the scheme. Says Jagdish Chander, director (residential land), DDA, By April, 1997, of the 46,193 people who applied, 37,000 have been granted conversion. The response is not extremely enthusiastic as people still hope that the rates will drop. The possibility of it happening now after five years seems quite remote.

Shashi Kumar, an original allottee of a self financing scheme (SFS) flat in Vasant Kunj feels, Paying such high conversion charges followed by registration and stamp duty charges does not seem worthwhile for I dont intend selling the only shelter I have. Kumar, however, agrees that it is definitely in the interest of a secondary buyer to get the property converted to avoid legal hassles.

Complete ownership does come for a price. Apart from the charges, there are a number of dos and donts, tiresome procedures and a long list of documents to provide. A look at some of these could help you reach the decision you have been putting off for five years.

What does it cover? The scheme does not cover property leased for a fixed term without any premium charged on its price. However, it includes all flats constructed and allotted by DDA (Janta, lower income group; middle income group; higher income group and SFS flats) or those constructed by co-operative housing societies on land leased by DDA.

The mandatory condition is that the property should be built-up and used specifically for residential purposes. Vacant plots upto 500 sq m leased by DDA can be converted if you obtain Form D, that is the completion certificate for the built-up area.

If you have not registered the lease deed to avoid paying the charges then forget about this entire exercise. If the delay was due to administrative reasons you simply pay the stamp duty charges and the premium on the property before applying for conversion.

What happens to mixed purpose properties? Check with the Master Plan of Delhi -2001 (MPD-2001) whether your use of residential premises for non-residential purposes is permissible.

If you are a professional using upto a maximum of 25 per cent or 50 sq m (whichever is less) of your property for professional activities, you are allowed complete conversion at no additional charge. This is also applicable for use of upto 25 per cent or 30 sq m (whichever is less) on the ground floor for specified household industrial units.

For using area within these limits for other purposes you will have to pay an additional charge three times the conversion charge for that property. But you disqualify if you utilise area beyond 500 sq ft or 25 per cent of the built-up area for purposes outside the MPD list. DDA officials conduct a check and if a person violates the rules criminal proceedings are charged under the DDA Act.

Mortgaged or disputed properties: If your property is mortgaged once or more than once, you will be granted conversion after all the mortgagees hand over a No Objection Certificate.

And if you are in the thick of a legal battle for the property title or in a dispute with your power of attorney (POA) holder, you have a long wait. The application is considered once the dispute is settled.

What does it cost? Certain formulas have been established depending on the size of the

plot and the current land rate per sq m. DDA flats and co-operative housing flats upto 125 sq m plinth area have flat conversion rates based on the zone in which they fall. Co-operative houses with more than 125 sq m plinth area are charged according to set formulas (here the conversion rate for the plot area is 1.2 times the plinth area).

Additional conversion charges are also calculated on the basis of model formulas taking into account the area that has been used for non-residential purpose and a surcharge of 33.3 per cent of the conversion charge is also levied if your attorney applies for conversion for a third party.

Procedure: You start the process by obtaining the specific challan form for your type of property from certain bank branches identified by DDA. The completed form has to be deposited in the bank together with the required documents (see box: The paper trail) and the conversion charges (including additional charges and surcharge, if any). You can pay by cheque, pay order or a bank draft. You will also have to pay all arrears for the ground rent due plus the interest.

However, you can choose to pay a lumpsum or you can choose to pay in equated annual instalments (maximum five instalments). Of course, you pay 12 per cent a year extra as interest on the instalment (see box: The payout). Under this scheme you will also have to continue paying the ground rent till the last instalment is paid. Remember to take back an acknowledgement with a copy of the challan.

You have 30 days to finish any incomplete formalities before the application gets rejected. A conveyance deed is then sent by registered post within 90 days. After getting the deed stamped by the collector of stamps, get it deposited at the specified counter of DDA within 45 days. On receipt of the signed deed, you have to finally get it registered with the office of the sub-registrar by paying an additional amount as stamp duty as well as registration charges.

Redressal: The 90-day waiting period is over and you still havent received the conveyance deed. Contact the nodal officer for the scheme or the director concerned in land, housing or the slum department of DDA on the public hearing days (Monday to Thursday) from 2.30 to 5.30 pm.

Future allotments: You may not think much of a conversion till you are in the buyers position or till your lease nears its lapse. However, new allottees can certainly rejoice. As Chander indicates, Allotments of flats in future has to be on freehold basis. Plots upto 500 sq m will initially be allotted on a leasehold basis but will be permitted conversion once they fulfil the statutory conditions of completed construction and obtain form D from DDA.

The paper trail:

(Documents DDA needs)

Attested undertaking and affidavit on non-judicial stamp paper of Rs 2

Attested indemnity bond on non-judicial stamp paper of Rs 10

Attested copy of power of attorney(s) plus a copy of sale agreement

Attested copy of completion certificate for co-operative flats

Attested proof of physical possession of the residential area

Four attested passport size photographs and four attested specimen signatures

Details of payment of ground rent Attested copy of lease deed/ sub-lease deed/ conveyance deed/ allotment letter/ demand letter

Attested copy of no-objection-certificate from the mortgagees

Copy of municipal licence and power connection letter (for household industr activity only)

The payout: (For conversion charges of Rs 10,000)

Tenure Equated annual

(years) instalment (Rs)

2 5283

3 3718

4 2940

5 2477