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This article is in continuation to my previous article which covered NGT order’s impact on Real Estate industry in Bangalore. In this post I am trying to analyse the developments that happened post this order and the adverse impact this order will have on city development, landowners, builders & property buyers.

NGT order at a glance

As per Bangalore Development Authority (BDA) CDP 2015 a setback of 30 meters is required from the boundary of lake i.e. no construction is permitted within this 30 meters buffer zone. For primary drains the buffer zone was 50 meters measured from the centre of the drain.

NGT order changed the buffer zone of lake from 50 meters to 75 meters. For primary drains it made the buffer zone of 50 meters from the boundary of drains rather than centre of the drain. The order overruled BDA rules and thus jeopardised interest of several stakeholders. Fortunately the order is prospective in nature & affects only those projects that do not have approvals or commencement certificates.

Reactions to the NGT order

When this order came out people including city developers thought this was specific to a particular project of Mantri Developers. So there was no industry specific reaction to this order. However within a week of this NGT order the Government of Karnataka passed a circular stating that they are going to abide by this NGT order which sent shock waves across the industry. The circular clearly indicated that BDA / BBMP will not give approvals to any project abutting lake & drains that do not conform with new requirements of buffer zone as per the NGT order. Suddenly the industry realized the seriousness of impact of this order & subsequent circular by the govt. As per estimate over 150 projects are adversely impacted by this NGT order in Bangalore amounting to around Rs. 30,000 Cr of inventory!

Who gets impacted by this order & How?

A. Builders

Obviously the worst affected are the builders. Imagine you abide by the local building laws, buy land, pay for initial expenses & submit the plans for sanction. But BDA refuses to give you approvals citing NGT order. A number of builders bought land abutting lakes to get the “prime” factor. Builders are not at fault as they abided by 30 meters setback norms. Who is going to compensate the builders for the losses? Many builders borrowed expensive money from NBFCs and Private Equity Funds to buy the land. What about the fate of those financial institutions who may not be able to recover their investments? More litigations?

B. Property buyers

I pity buyers who bought properties in projects affected by NGT order. Though ongoing approved projects are safe, people who bought in Pre-Launch would be affected by this order. They have the right to cancel their bookings but refunds might be delayed as the builders can say they are not at fault or are contesting the matter in the court. Such orders create confusion in the minds of property buyers. How will a property buyer know whether the project won’t get adversely impacted from some other order in future? I have already started observing the growing preference among buyers for ready to move in projects. Investors will also stay away from the market putting more stress on the sector.

C. Landowners

Imagine you were a proud owner of a lake facing property worth several crores. Suddenly NGT order makes this value ZERO as no project can come up on this land. What if somebody had invested his life savings & bought a plot in a layout approved by BDA which now falls within 75 meters buffer zone? Suddenly he or she can’t build his or her dream house on it. Who will compensate such landowners? What about the fundamental rights of these landowners? Ideally the government should buy the land from landowners to create the buffer zone. It would be win-win for them.

D. City Development

Million dollar question is who is going to protect the buffer zone in future? What about subsequent illegal slum development on this buffer zone? If you travel across Bangalore you will see rampant encroachments by slum dwellers on several lakes. You can’t even clear these illegal settlements by going to courts.

Other big issue is the ongoing and planned work on Sewage Treatment Plants on several lakes. What happens to them? Govt has already cancelled allotment of lands given to private agencies for building STP which now falls within the new buffer zone. While the NGT order was passed to “protect” the lakes the ambiguity over the fate of these STPs will delay the work and pollution & destruction of lakes will continue unabated.

Current Status

Supreme Court has rejected the representation made by Bangalore chapter of CREDAI to quash this NGT order and asked affected builders to approach the court individually. It will hear their cases on individual basis and pass judgement accordingly. Bangalore now has a “NGT aggrieved Builders Group” which is meeting regularly to strategize their fight in supreme court. (I am not kidding!!)

Possible to resolve it?

Ideally the state government should have taken a stand as the building laws are state matter. Only the state cabinet is empowered to make laws. NGT is a quasi judicial body which doesn’t have the power to “make laws”. Unfortunately the state government toed the line of NGT, thus jeopardising interests of thousands of customers & hundreds of builders who were following the local building laws. This is a classic case of judicial overreach which is a matter of serious concern these days.

Going forward all depends on how the State Government of Karnataka make its next moves. Whether it assist the affected parties by staying behind the curtains or let it suffer will decide the future. So long, pray!

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