Real Estate Consultant

Guarding the Guards – when Government turns offender!

There is a famous saying in Latin Quis custodiet ipsos custodes? Which translates to “who will guard the guards themselves”, this is from the work of the Roman poet Juvenal from his Satires (Satire VI, lines 347–348).

The Governments are elected with a certain expectation. One of the basic duties of any Government is to guard the citizens against the external and internal aggressors. In the 21st century, the internal aggressors are not the only ones that commit physical crimes but also the ones who commit financial crimes. We can call them “Economic Offenders”.

It will be shocking to find the Government itself turning into an ECONOMIC OFFENDER!

The reference here is being made specifically to the “Executive” arm of the government via the administration and the tax collecting authorities.

This is at least true in “Real Estate” and let me show you how!

Where all the Government makes money in a Real Estate Project
A Developer purchase a piece of land gets the approvals from the “Licensing authority”. The “Licensing Authority” gives the approvals in accordance with the National Building Code, Town Planning Norms etc.

Now for granting the said approvals, the relevant Licensing authorities charge a fee under heads such as “Conversion Charges” etc. The Government makes money. The developers ultimately pass these costs on to the buyers, people like you and me. There is nothing wrong in this.

  • I just wish to point out that the “Government” has received its “First Payment”.
  • The project progresses and the government continues to collect levies under “GST”.
  • At the time of completion the property gets conveyed to the buyer and the Government yet again comes in the picture and collects the “Registration and Stamp Duty” charges.

Property Advisor

Now you must be thinking what is wrong with that! Isn’t the Government supposed to collect “Taxes”? Yes, of course, but as I have heard it before:

With great power comes great responsibility

To understand what I am trying to say, let us go through it again from the start and look to answer some hard-hitting questions.

The government charges taxes for issuing a “Change of Land Usage”.

MY QUESTION: Would it, then, not be imperative for the same government to correct the builders when the projects are build or not build in violation of the licenses issued?

MY QUESTION: If there are third party rights (legal nomenclature of buyers) then in the event of builders failing to fulfill the license conditions should the government NOT return the money it charged for “licenses etc” that eventually got billed to the Buyers?

MY QUESTION: Don’t you think that the Government, by the very fact that they have taken money for issuing licenses etc, has become vicariously liable for builder’s performance?

But the fact on the ground remains that the “Authorities” will maintain a studied silence on the issue. They will treat “Buyers” with disdain and if one ever approaches them then no responses will ever be given.

MY QUESTION: Is the Government being true to the spirit of the money it collected?

The Government’s approach in such situations should be to pay heed to the complaints of the violations of license conditions and ensure that the licensee performs their stated obligations otherwise the Government should itself be liable too.

Now let me come to the collection of “GST” etc.

MY QUESTION: When projects get delayed and the buyers seek refunds due to the same, have the governments ever returned the money to buyers collected in the form of “GST” (or earlier tax regimes)?

MY QUESTION: In the event of failure of the projects how would the Governments even account for the GST collected under these heads?

Consumer forums in their adjudications should ask the Governments to refund these taxes to the buyers.

The Government also charges “Stamp Duty and registration fee” when the projects get completed and conveyed.

MY QUESTION: Have the registering departments ever dug deeper into the fact that lot of times apartment/shop/office sizes were increased inappropriately?

On the contrary, they most gleefully accept enhanced payments on the increased area.

MY QUESTION: Would the government ever return the money it has collected on these shaky grounds from the helpless buyers?

Home Buying Decision

We expect our executives, in this case, Government, to be sincere and helpful and but what we get in return is corrupt, lazy, snail-paced, and callous executive.

India is probably the only country in the world where the judiciary has to intervene in the realm of the executive. Example being the “Public Interest Litigation” which is something almost unique to India.

The solution lies in being vigilant. If need be litigating, and making the right choices in the first place.

In a democracy, we have a right to question and fight against the governments we elect. Therefore do not accept wrongs which look wrong to your common sense understanding, even if it implies taking the governments to the courts.

Hence it is probably in the interest of the buyers to include government authorities in seeking legal redressal when taking legal action against erring builders.

So, rather than falling into the jar of honey and coating yourself with the sweet talks of government, use your common sense and break the honeycomb. Take what is yours and drag them in front of the justice if needed, no matter if it is the government itself. It is in the interest of the buyer to include the government or the authorities in seeking legal redressal when taking legal action against erring builders.

Let us not leave the guards to their own ways but maintain our own checks and balances to guard ourselves against them.

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