Developers in Mumbai have sought some leeway in payment of development charges for the redevelopment of old buildings on Maharashtra Housing and Area Development Authority (MHADA) land after the Bombay High Court ruled that they were not exempt from paying such charges.
The Confederation of Real Estate Developers' Associations of India (CREDAI)- Maharashtra Chamber of Housing Industry (MCHI), the apex body of developers, has requested MHADA to not levy development charges until the stage of granting occupation certificate.
In a letter to MHADA, it has also asked authorities to not levy penalty and interest as the payment of development charges was discontinued owing to stay orders from the Bombay HC.
The issue
Seven years ago, the developers had challenged the collection of development charges by planning authorities, including Mumbai municipal corporation and MHADA, for the redevelopment of buildings on land owned by them citing a section of the MRTP Act. According to rough estimates, developers owe more than Rs 800 crore to the authorities.
MHADA, one of the biggest landlords in Mumbai, owns 104 big layouts in the city and had given several land parcels on long leases varying from 50 to 60 years.
What does the MRTP Act say?
Section 124 F of the MRTP Act states that "No development charge shall be levied on institution of use or of change of use, or development of, any land or building vested in or under the control or possession of the Central or State Government or of any local authority."
Citing the statute, more than 100 developers had filed writ petitions in the Bombay HC challenging the levying of development charges by the authorities, in the case of redevelopment of old buildings where land is owned by authorities.
However, the Bombay HC, in its order in October 2022, ruled that developers undertaking redevelopment on state-owned land will not be exempted from paying development charges under the MRTP Act.
Development charges are imposed to provide public amenities and for the improvement of the area. Only planning authorities undertaking such development would be exempt from such charges under the provision, the Bombay HC had said.
The developers have challenged the HC order in the Supreme Court (SC) where the matter is being heard.
Developer's letter to MHADA:
In the backdrop of the developers approaching the SC, the apex body of developers namely CREDAI-MCHI in a letter dated January 16, wrote to MHADA stating, "You will appreciate that the various projects are in the process of completion and therefore the additional costs of demand of development charges will affect the financial outflow in the project."
The letter added, "Hence, it is requested that the development charges may be collected/ recovered only before the grant of the occupation certificate. It shall not be out of place to mention here that no interest/ penalty be levied while recovering the development charges as there is no default on the part of the developer in the payment of development charges."
The developers contended that the payment of development charges was not imposed by authorities as it was under challenge in the Bombay HC. Owing to this, during the payment of development charges, the interest or penalty part should not be charged and the balance should be collected only before granting of OC.
Keval Valambhia, Chief Operating Officer of CREDAI-MCHI, said, "We had a successful meeting with MHADA vice-president Anil Diggikar on January 16, and represented our request for development charges to be collected only on the grant of OC and that no interest should be charged while recovering/collecting development charges. We are pleased to know that the MHADA VP accepted the request of not charging penalty or interest until the SLP is heard in the Supreme Court."
