Can builders sell covered parking space in Maharashtra, India?

Author

Ajit R.Powar

Updated on 28.03.2023

Maha RERA issued a Circular dtd.30.07.2021, which restricts the sale of open parking by promoters while permitting the sale of covered parking. Covered parking space cannot be sold by the builder/promoter and The Maharashtra Real Estate Regulatory Authority ( in short ‘Authority) cannot permit the same in the form of clarification.

The Authority has recently published its Order dtd. 28.07.2021 requiring promoters to submit a quarterly progress report on the status of booking of garages and covered parking’s amongst other details enlisted under the Order. Simultaneously the Authority has also issued a Circular No. 36 / 2021 dated 30.07.2021 (in short ‘Circular’) which states that –

“ Promoters are not entitled to sell/allot open parking areas for monetary consideration”

The Circular also refers to the following definitions and reasoning :

 “Garage – under section 2(y) of The Real Estate(Regulation and Development)Act.2016 (in short RERA)

 ‘covered parking space’  – under the Maharashtra Real Estate ( Regulation and Development)                                       ( Registration of real estate projects, Registration of real estate agents, rates of interest, and disclosures on website) Rules 2017 (In short ‘Maha.Rules)

 and ‘common areas’ under section 2(n) sub-clauses (i) to (viii) of RERA,

 and that ‘open parking areas’ is more specifically included in the definition of ‘common areas’ under sub-clause (iii) of sub-section (n) of section 2 of the Act, and forms a part of common areas of the real estate project ”.

Based on the above reasoning the Authority justifies its stand in the Circular that Promoters are not entitled to sell/allot open parking areas for monetary consideration.

I don’t think anyone can find fault with the above view since common areas cannot be sold separately and as ‘open parking areas’ are included in the common areas they cannot be sold. The Authority has further clarified its stand on open parking areas at Sr.nos. i) “open parking areas are provides free of FSI & ii) “promoters are not entitled to sell /allot open parking areas for monetory consideration” under its list of clarifications in the Circular. However, while clarifying the status of open parking the Authority seems to have opened the gates for the sale of covered parking spaces, which is certainly not in line with the provisions of the Real Estate (Regulation and Development) Act, 2016 (in short RERA), which do not under any of its provision prescribe sale of covered parking spaces apart from sale of a garage as defined under the act.

CONFUSION CREATED BY THE CIRCULAR –

The Authority after clarifying that the promoters are not entitled to sell/allot open parking areas for monetary consideration has further made the clarification at serial no.(iv) in the Circular which can be briefly reproduced as –

“ garage/covered parking space when sold/allotted for monetary consideration the details of the same should be mentioned in the agreement for sale”.

So presumably RERA Authority does not object/restrict the sale of covered parking when it uses the words   “garage or covered parking space when sold or allotted for monitory consideration…”  in the Circular. Rather the Authority conveys through the Circular that covered parking can be sold without expressly saying so which is exactly opposite to the law on the point i.e. except for ‘Garage’ no other space can be sold for parking either under the Maharashtra Ownership of Flats Act (MOFA) or RERA or the Maha.Rules.

The only place where we can find some reference to the sale of covered parking space is in the Model Sale Agreement at Annexure  ‘A’ of the Maha. Rules of RERA under Clause 1(a)(iii). The Model Sale Agreement is preceded with an explanatory note ending with  “Any clause in this agreement found contrary or inconsistent with any provisions of the Act, Rules and Regulations would be void-ab-initio”.  Accordingly, the provision referring to the sale of covered parking in the model sale agreement is invalid for being contrary to or inconsistent with substantive provisions of RERA or the provisions of Maha. Rules. Further, any Sale Agreement between the promoter and allottees which incorporates this clause will be void-ab-initio for being contrary or inconsistent with the provisions of the Act & Rules.

In case the Authority relies on clause 1(a)(iii) referring to the sale of covered parking as a Rule permitting the sale of Covered parking in Maharashtra, for issuing the Circular, then it has ignored the detailed Explanatory Note to the Model Agreement under the Maha. Rules. It would be worth pointing out that on a plain reading of the Explanatory Note one can understand it as clarifying that the Model Sale Agreement is a ‘general guide’ for drafting a Sale Agreement ‘which may be modified and adapted in each case depending upon the facts and circumstances of the respective case, but the clauses in the Model Agreement which are in accordance with the statue and mandatory according to the provisions of the Act. have to be retained’. Clause 1(a)(iii) in the Model agreement, cannot be interpreted as permitting the sale of covered parking space as the clause is not in accordance with and contrary to the provisions of RERA or Maha. Rules.

Contradiction in the Circular of Maha RERA dtd. 30.07.21 – If we pause and look at the Circular for a moment, the Authority contradicts its own statement in the Circular by restricting the sale of open parking with the justification that the said space is a part of common areas. If that be the case, then why has the Authority acknowledged the sale of ‘covered parking space’ at sr.no. (iv) of the Circular? The point is the definition of ‘covered parking space’ in Maha. Rules include basement parking space which is located in the common basement which is one of the common areas listed under the definition of ‘common areas’ at section 2(n)(iii) of RERA. Therefore the question is what prevented the Authority from restricting the sale of Basement parking spaces which, also happens to be a covered parking space by definition. As a matter of fact, all of the covered parking spaces are common areas which are discussed below. To put it in plain language there is a direct conflict between the state rules of Maharashtra and the central enactment.

The Circular permits the sale of basement parking, stilt parking, podium parking, and other kinds of “covered parking space” as these spaces are covered under the definition of ‘covered parking space’ under the Maha. Rules. Thus almost the entire parking area except for the #openparking area can be sold as per the Circular. Well, the Allottees are also confused on whether covered parking spaces erected on metal poles with PVC roof sheets fall within open parking spaces or covered parking spaces, as in most cases these spaces are being sold as covered parking spaces.  This is certainly not the outcome that was intended by defining ‘common areas’ while permitting the sale of ‘garage’ only, in RERA and Maha. Rules. Also, the law on the point very much leads us into accepting covered parking areas as ‘common areas’. To understand this let us dig deeper into the question.

Law on parking prior to RERA coming into force –

The question of the saleability of Garage, Stilt, and open parking under MOFA came up before the Hon’ble Supreme Court in Nihalchand Laloochand Pvt.ltd. vs Panchali cooperative housing society Ltd. case, on the basis of which, one can say that only garages can be sold along with the flat as appurtenant or attachment to the flat and in the context of the Circular under discussion the following observations of the Supreme Court are important:

What is contemplated by ‘garage’ in section 2(a-1) of MOFA( definition of a ‘Flat’) is a

‘place having a roof and walls on three sides.’

‘Stilt parking space/open parking space of a building regulated by MOFA is not a

garage.’

‘Stilt parking space / open parking space of a building regulated by MOFA is nothing

but a part of common areas.’

‘The promoter has no right to sell any portion of such a building that is not a Flat

within the meaning of section 2(a-1) of MOFA and the entire land and building has to be

conveyed to the organisation.’

Accordingly, as per the Supreme Courts’ judgment, only a flat within the meaning of section 2(a-1) of MOFA can be sold in a building along with a garage. Apart from a Flat and a garage (to be sold along with the flat to an allottee) nothing else can be sold by the promoter, thereby meaning that the rest of the premises would fall under common areas which would include Parking areas in the basement, podium, stilt, open parking, lobbies, passages, open area to be provided as per rules, gyms etc, which are to be eventually transferred to the housing society. Recently the Hon’ble Madras High Court has held that the Non-FSI area is not saleable ( courtesy the news of the New Indian Express news dated 1st February 2023). Further the DCR (Development Corporation Regulations of the Municipal Corporations ) prevailing in Maharashtra and many of the state’s  the Basements, Podium and Stilt areas when used for parking are free of FSI which goes to establish that these areas cannot be sold as they are common areas belonging to the Housing society / association of flat owners.

The Bombay High court in the same case referred to above had earlier held that “it is a compulsory requirement to provide parking space as per DCR” which means the promoter is not obliging you by providing such parking space. Further parking spaces apart from garages are not included in FSI or are free of FSI as per Development Control Regulations (DCR) applicable at the relevant time. So even prior to RERA coming into force basement, stilt & podium level parking’s were treated as common areas. Further, as observed in the case of stilt and open parking by the Apex court in Nihalchand Laloochand case supra, the same analogy applied to basement and podium level parking, and therefore the promoters were not entitled to sell them prior to the enactment of RERA. Also one has to understand that in Nihalchand Laloochand case supra the point for consideration before the Hon’ble Bombay High Court and the Supreme Court was limited to the sale of stilt parking space and whether it could be sold as a garage along with related issues and if the sale of basement or podium parking spaces were to be under consideration before the Hon’ble Courts the same logic as in the case of stilt parking space would have been applied.

Law on parking after RERA came into force – Can builders sell covered parking after RERA coming into force

RERA became enforceable from 1st May 2017. One of the changes that were introduced in respect of parking by RERA was the introduction of the definition of ‘Garage’ at section 2(y) and RERA also defined ‘common areas’ at section 2(n). The definitions of ‘garage’ and ‘common areas’ in RERA are more or less identical to what the Supreme Court interpreted as ‘garage’ and ‘common areas’ in Nihalchand Laloochand case (supra). Prior to RERA coming into force, only a garage could be sold to allottees along with a flat based on the Supreme Court’s ruling. However, promoters were already selling common areas like covered parking spaces as garages. It was therefore found necessary to define a ‘garage’ and ‘common areas’ in order to safeguard the interest of the allottees and prevent the promoters from selling such parking spaces as garages which were in fact common areas. Accordingly, a ‘garage’ is defined in RERA as –

“garage means a place within a project having a roof and walls on three sides for parking any vehicle, but does not include an unenclosed or uncovered parking space such as open parking areas”.

‘Covered parking space’ as defined in the Maha. Rules mainly cover and include basement parking, stilt parking, podium parking spaces which are being discussed in this article. Covered parking space is defined under the Maha Rules as –

“Covered parking means an enclosed or covered area as approved by the competent authority as per the applicable development control regulations for parking of vehicles of the allottees which may be in the basement and/or stilt and/or podium and/or space provided by mechanised parking arrangements but shall not include a garage and/or open parking”.

Further covered parking spaces are not “separate and self-contained parts of an immovable property in a building or plot of land” used for any of the purposes as stipulated in the definition of ‘Apartment’ in RERA which a promoter is authorised to sell as an ‘apartment’ and neither are they garages and therefore they qualify as ‘common areas’.

‘Common Areas’ – Common areas are listed in the definition of common areas in RERA under section 2(n), which are non-saleable and are to be transferred to the housing society when the conveyance deed is executed. Open parking has been spelt out in the definition of common areas in RERA. However, covered parking spaces (stilt, podium including basement parking areas) are not specifically listed in common areas and therefore there might be a presumption that these parking spaces do not qualify as common areas. But merely because the legislature has not explicitly spelled out any ‘covered parking space’ under the list of ‘common areas’ it need not be construed that the legislature has intentionally excluded covered parking area from the definition of ‘common areas’.

Basement, Stilt & Podium parking spaces are spaces that are community facilities provided in the real estate project refer sub. section 2(n)(vii) and/or portion of the project in common use refer sub. section 2(n)(viii). The definition of common areas in RERA under Section 2(n) is not an exhaustive one spelling out all common areas, and sub-clauses (vii) & (viii) referred above provide the necessary scope, and it is purposely done so by the legislators to bring all covered parking spaces like basement, stilt & podium parking spaces and other areas in common use (which are not explicitly stated in the definition) within the meaning of the definition of common areas. Therefore, these covered parking spaces are not saleable.

The fact that ‘covered parking spaces’ are common areas is also supported by the DCR and UDCPR framed under the Maharashtra Regional Town Planning act, which lay down mandatory rules for promoters to provide covered parking spaces while at the same time specifying these spaces to be ‘free of FSI’ they incentivize the promoters for raising the necessary infrastructure for such parking space. As per the DCR as applicable to different regions of Maharashtra and now as per the Unified Development Control and Promotion Regulations 2020 (UDCPR) for Maharashtra :

>         Parking space shall be provided as per the scale laid down. It is a mandatory requirement.

>         The DCR commonly requires that parking space may be provided underneath the building, in the basements within its stilted portion, or on upper floors.

>         The UDCPR provide that parking spaces include spaces in a basement or on a floor supported by stilts, podium or upper floors, covered or uncovered spaces…

UDCPR – space to be left out for parking shall be in addition to marginal open space left out for lighting and ventilation purpose as given in the regulations.

UDCPR Regulation 6.8.(ii) –  Stilt/ Multi storied floors, podium and basement if used for parking are excluded for FSI calculation(congested areas).

UDCPR Regulation 9.9.1 – area of garages shall be including FSI.

UDCPR Regulation 9.11.1 – Parking spaces in Basement shall be permissible free of FSI

UDCPR Podium – The definition of the podium in the regulations clarify the purpose for which it is meant “ Podium means a floor of a building extending beyond building lines and used for parking, recreation open space, recreation, fire and building services / utilities and incidental purposes, as specified in these regulations”.

It is also pertinent to note as observed above that parking areas are excluded from the computation of FSI or Free of FSI as per DCR & UDCPR except garages. This in ordinary parlance means the promoter by providing such space for parking does not incur a loss of FSI or loss of area from their sale component, as he is incentivized to use FSI in proportion to the space lost in providing the parking space, for developing additional area which he can sell. The very purpose of the incentive is for the promoter to provide necessary infrastructure as required by the regulations which include providing necessary parking space.

MOFA and RERA are beneficial legislations with the benevolent purpose of safeguarding the interest of allottees and regulating the development activities in housing projects so as to protect the consumers/allottees from malpractices of the builders/ promoters /developers. The DCR and DCPR further regulate the development activities in the interest of the consumer/allottee right from the commencement stage of the project till its completion of the project. Therefore all the provisions of MOFA and RERA are required to be read harmoniously with the DCR and DCPR in the interest of the consumer/allottee and when so read it cannot be said that it was the intention of the legislatures/rule-makers to exclude covered parking space from the definition of common areas.

In fact, the Authority in the guise of a Circular has introduced the new rule permitting the sale of ‘covered parking’  bypassing the legislative procedures and adding something new which was never intended by the legislators.

It is unfortunate that the Circular is issued in utter disregard to the provisions of RERA permitting the sale of covered parking space while at the same time reducing the scope of the definition of common areas. RERA and Mah. Rules do not in any way permit the sale of covered parking space and it is worth reiterating that it was never the intention of the legislature to exclude covered parking space from the definition of common areas.

#rera #maharera #basementparkingspace #coveredparking

The Contents of this article are the views of the author on the subject matter. The readers are expected to take expert advice based on the facts and circumstances of their case.