A Construction Agreement is a contract between the builder and the buyer. It describes the rights, duties and obligations of both parties in their dealings with each other. The contents of the Agreement may vary based on the nature of the project, but generally, the Construction Agreement should contain the following:

• Names and addresses of both the parties
• Location and address where the construction work is to be done
• Description of the construction/renovation work to be done with timeline
• Materials that will be used during the construction
• Duration of the project
• Details and method of payment
• Methods to handle any change in work order
• Penalty in case the builder defaults in any of the clauses mentioned in the construction agreement.

A Deed of Sale is a document that actually transfers the rights associated with a property from one party to another. All the terms and conditions mentioned in the Agreement for Sale would be fulfilled and observed in a Deed of Sale. The Deed of Sale is the document prepared at the time of full payment made by the buyer and when the actual transfer of the property takes place.

The Commencement Certificate is a mandatory document issued by the municipal authority (BBMP or BDA) to permit the builder to begin construction work once all the licenses, permissions and consents have been obtained. After completion of the foundation work prior to the erection of the walls, the builder gives notice to the authority to inspect the site to verify whether the foundation work has been done in accordance with the approved plans. Based on this, the authority carries out an inspection of the site and if the foundation work including the construction of column footings is in accordance with the approved plans, issues a commencement certificate to the builder. Only after a Commencement Certificate is issued, a builder can legally proceed to construct the building. It is important to note that an Occupancy Certificate will not be issued to the builder upon completion, if the builder has not procured a commencement certificate prior to construction.

A Completion Certificate is a mandatory document issued by the local municipal authority to attest that the newly constructed building has been constructed and completed according to all the safety norms and regulations of the Buildings Act. The certificate contains all the required details, such as identification of the land, the location, if the building has met all the standards of safety and regulation, the distance from the road, distance from surrounding buildings, height and other criteria set by the municipal authorities, along with the building plan. It is mandatory for the builder to give a copy of the Completion Certificate to a person purchasing the house. Sometimes a provisional or temporary completion is usually awarded to a builder if they want to hand over an apartment to residents but still have pending work to complete, such as finishing construction of amenities like the club house, gym, etc. The provisional certificate expires after six months and should be followed by the builder applying for the final Completion Certificate. This certificate is needed for an apartment or building to receive basic facilities such as electricity and water. In fact, the water rate is converted from non-domestic to domestic only after receiving a completion certificate.

The Occupancy Certificate (OC) is a document issued by a statutory authority such as BBMP and BDA that gives the builder permission to “occupy” the property. It is required for commercial buildings and for residential buildings that have more than five units. The builder, on completion of the building, needs to apply to the concerned authorities for an OC. If the building has been built as per the sanctioned plan, and fulfils the other legal requirements, the authority is supposed to issue the OC within 30 days. The OC certifies that the building has been completed according to the sanctioned plans and is fit for use. OC is issued for an entire building, or a part thereof, and is not given to individual flats. It is illegal for the builder to hand over the flats to the buyers without receiving the OC.

The main difference between Completion Certificate and Occupancy Certificate is that a Completion Certificate is issued after the completion of the building in accordance with building standards and as per the plan that has been approved by the concerned authorities. The Occupancy Certificate is issued only after the builder is granted the Completion Certificate indicating that the building is fit for occupation which means that the building not only complies with the building bye laws and standards, but has also received No Objection Certificates (NOC) from the Fire Department, Electricity Board, Water Supply and Sanitation., etc.

Many apartment complexes form societies and take over the control and maintenance from the builder/developer. This is normally done after a couple of years of completion of the project. Following, is the checklist to ensure that the handing over from the builder to the society is free of hassles and that the operations move seamlessly. List of documents that should be handed over by the Builder to the Society:

• Copy of the approved Building Plan and Master Plan.
• Handover of original registration documents, parental documents, drawings, CMDA/BBMP or concerned authority approvals etc. to the association.
• No Objection Certificate (NOC) from the Pollution Board, Electricity, Water and Fire department.
• Completion Certificate.
• Occupancy Certificate.
• All as-built building drawings detailing electrical wiring, including earthing pit.
• Drawings of water supply system including details of water pipes.
• Drawings of STP system (in cases where there are more than twenty apartment units) certified by Architect and the Pollution Control Board.
• Transfer of utility connection (electricity, water connection from builder to apartment owners association or individual owners).
• Annual Maintenance Contracts (AMC) for elevators, pumps, back-up generators, transformers, lighting in common areas, etc.
• Invoices and warranties for pumps, lifts, transformer, generator, gym equipment, air conditioners in common areas like clubhouse, gyms, etc.
• Maintenance schedule of all assets.
• Handover of office room, departmental stores, clubhouse, gym, swimming pool etc. to the Association.
• Payment records of taxes paid towards property, construction and maintenance.
• Payment records to infrastructure agencies like water supply, electricity, etc.
• Records of all building maintenance expenses.
• Contracts with existing maintenance staff and security staff.
• Sale Deed copy and proof of ownership of all owners.
• Share Certificate Copies of all owners, if applicable.
• Khata Certificate for all owners.
• Car parking allocation plan.
• Undertaking from the builder regarding indemnity and limitation of liabilities of the Society for all transactions prior to the handover date.

Stamp duty and registration charges are mandatory costs, which every buyer has to pay while planning to buy his apartment or property. Currently in Bangalore, one has to pay 5 per cent of the registered value of the property as stamp duty. In addition, there is a 10 per cent cess and 2 per cent surcharge on stamp duty. Therefore, buyers have to pay 5.6 per cent stamp duty in urban areas and 5.65 per cent in rural areas as the surcharge in such areas is 3 per cent. The Registration Charge is 1 per cent of the total or registered property value.

In Bangalore, different classification of buildings apply different factor while calculation the Stamp Duty and Registration Charges.

Sl No	Type of Property	Standards /Factors used
1	Multi-Storeyed Apartments	Super Built up Area is used for calculating the Stamp Duty.
2	Plots	The Square footage is multiplied by the guidance value of the Area
3	Independent Houses	The total constructed area is considered while calculating the total property value

The guidance value is the minimum value at which a property can be registered. This value differs from area to area within Bangalore.  These charges are primarily dependent on the existing market rate of the property, the expansion of the city limits and the property market performance.

Let us take the instance of a property, which measures 2,400 sq. ft. in an area in Bangalore where the guidance value is Rs. 5,000 per sq. ft. Hence, The Saleable Value of this property = 2400 x 5000 = Rs. 120,00,000 Registration charges = 1 per cent of 120,00,000 = R.s 1,20,000 Stamp duty in Urban areas = 5.6 per cent of 120,00,000 = Rs. 6,72,000

Stamp Duty and Registration Charges in Bangalore are paid through the Karnataka State Department of Stamp Duty and Registration. Stamp duty can be paid through the following means:

• Purchase of impressed stamps from treasury or authorized stamp vendors, OR
• Purchase of adhesive stamps, OR
• Payment to the government through payment of DD/ pay order issued by any nationalized bank/scheduled bank or challan, OR
• Instrument (document) can be written on plain paper and the stamp duty can be paid through DD/ pay order issued by any nationalized bank/ scheduled bank or challan within two months of the date of execution of the instrument, and certified by the jurisdictional District or Sub Registrar.

These two taxes are applicable only for an under-construction property. Service tax, is payable on services provided by the service provider. The service provider collects the tax from the consumer and deposits the same to the government. As of June 1, 2015, the service tax is 14 per cent of the 25 per cent of the total agreement value for properties below Rs 1 crore or 2000 sq. ft. area in size. For properties exceeding or equal to Rs 1 crore or more than 2000 sq. ft. area, the service tax is 14 per cent of 30 per cent of the total agreement value. According to the latest Karnataka Value Added Tax (Amendments) Act of 2012, VAT is charged at around 5.5 per cent of the construction-related services

Bangalore’s Local Planning Area is conceptually into three main ‘rings’ for the consideration of zoning and regulations. The inner core of the city falls under the purview of the Bruhat Bengaluru Mahanagara Palike (BBMP). Land in the second ring falls under the purview of the Bangalore Development Authority (BDA), and land belonging to the outer ring is the concern of the Bangalore Metropolitan Region Development Authority (BMRDA).

For layouts, BDA is the plan-sanctioning authority for all areas under the purview of the BBMP as well as the BDA. The BBMP itself has no powers to sanction layout plans but can sanction the construction of apartments, individual houses and commercial buildings. BBMP administers and collects property tax for properties falling under the jurisdiction of the BBMP.

The BMRDA, through its five Local Planning Authorities (LPA) namely, Nelamangala, Kanakapura, Magadi, Anekal and Hoskote along with Ramanagara-Channapatna Urban Development Authority (RCUDA), Bangalore International Airport Area Planning Authority (BIAAPA) and Bangalore Mysore Infrastructure Corridor Area Planning Authority (BMICAPA), are the plan-sanctioning authorities for all properties falling in the outer ring.

BIAAPA deals with the ‘island’ containing the airport along with parts of Bangalore North, Devanahalli and Doddaballapur. The BIAAPA is a plan-sanctioning authority concerning land use only around the airport. The organization primarily focusses on the operation of the airport and the flight paths of aircrafts before sanctioning any land development plans in that area.

BMICAPA is the plan sanctioning authority for areas that are in the Bangalore Mysore Infrastructure Corridor. This corridor includes parts of Kengeri, Uttarahalli and Yeshwanthpura.

All lands falling beyond the jurisdiction of the BMRDA are considered as rural areas, and such areas come under the purview of the Directorate of Town and Country Planning (DTCP).

Panchayat-sanctioned layout or apartment plans are not valid for properties developed within the jurisdictions of the BBMP, BDA, BMRDA, BIAAPA, or BMICAPA; these plans are valid only if the land in question lies outside BMRDA limits, and then such properties come under the town and country planning authority, i.e. DTCP.

 

A Khata is a mandatory legal document or certificate issued by Bruhat Bengaluru Mahanagara Palike (BBMP) to property owners in Bangalore. This document is essential when licensing the property for trade or for applying for a loan from any Bank or financial institution. However, having a khata does not confer ownership of the property on the individual in whose name the khata is registered. The Khata contains all the details of the property like the name of the owner, the size of the building, location of the property and all other details that are required while filing your property tax. It is an identification for property owners who are liable to pay property tax to the concerned authority.

From property owner’s viewpoint, the main purpose of the Khata document is that it contains an assessment of the amount of property taxes the owner must pay BBMP. From BBMP’s perspective, the purpose of the Khata is to record the amount of property taxes that may be received for the property. It also identifies the party who is primarily responsible for paying the property taxes.

The Khata Certificate is a document that identifies the owner of a particular property

The Khata Extract contains the amount of property taxes that must be paid on the property. This Extract also contains the following details of the property:

• The size of the property
• The Location of the Property
• Built up area of the Property

These documents are mandatory when the property owner wishes to register or sell the property. In addition, these documents are also required for the following instances:

• While applying to BESCOM for an electricity connection.
• While applying to BWSSB for Water Connection.
• Applying for a loan from a Bank, or while using the property as a collateral for the loan.
• Applying for any sort of license from the Government.

A Khata and B Khata denote the two types of khatas that exist under BBMP. The concept of khata came into effect in 2007 after BBMP was formed to simplify the collection of property taxes in Bangalore.

BBMP started maintaining two registers to maintain the property taxes. The first register was called A Khata, which contained the list of the fully legal properties in Bangalore. A second register called B Khata was maintained to contain the list of illegal or semi-legal properties in Bangalore.

A Khata

Property that conforms to all building byelaws and government regulations are issued a Khata A certificate. The possession of A Khata document enables property owners to apply for building licenses, trade licenses, building plan approvals, and avail bank loans on the property. An A Khata certificate is also required if the owner wants to get involved in any kind of financial transaction involving the property.

B Khata

A ‘B Khata document is issued in the following cases:

• When the property lies in a layout that is not authorized by BDA or BBMP.
• When the property lies in a layout on Revenue Land that has not gone through Deputy Commissioner (DC) conversion to allow non-agricultural use.
• When the property has not obtained the appropriate plan approval.
• When the property does not have an Occupancy Certificate.

In all these cases, BBMP has issued Khata B as a way to bring these properties into Government’s records and charge property taxes. Having a B Khata document does not allow property owner to apply for licenses from the government or avail loan from banks or financial institutions. However, having a B Khata on a property will not prevent the property from being sold or bought by people.

An Encumbrance Certificate is documentary evidence that the property in question is free from any monetary and legal liabilities. It is an assurance that the property is clear from and legal dues or liabilities and has a marketable title. Encumbrance is a reference to any liabilities in the form of a mortgage or a loan against the property that has not been cleared. The Encumbrance Certificate is provided from the sub-registrar’s office where the particular property is registered. All the details of any transaction on the property is listed in the certificate. It is important to obtain this certificate, if one is planning to buy any property, secure a home loan, or mortgage the property.