Supertech Twin Towers Demolition: Will it send out a tough message to builders and authorities?

What did the Supreme Court say and why?

While ordering the demolition of Supertech’s 40-storey twin towers in Noida, the Supreme Court on August 31, 2021, noted in its ruling that there was collusion between the Noida Authority and the builder in the construction of the additional portions that had not been sanctioned. It pointed out that the guidelines regulating the minimum distance between towers had been violated and that the structure had been built illegally, without taking the consent of flat owners, as required under the Uttar Pradesh Apartment Act.

The apex court observed that the consent of individual flat owners was necessary as the common area was reduced by adding new flats. It noted that the construction of additional towers had “necessarily reduced the undivided interest of the individual flat owners in the common area by adding new flats and increasing the number from 650 to 1,500”.

The court noted that by constructing the two towers without complying with building regulations, fire safety norms had also been violated. The first revised plan dated December 2006 had contained a provision for a garden area adjacent to the first tower.

“In the second revised plan of 26 November 2009, the provision for the garden area was obliterated to make way for the construction of Apex and Ceyane (the two towers slated to be demolished). The common garden area in front of T-1 was eliminated by the construction of T-16 and T-17. This is violative of the UP Apartments Act 2010 since the consent of the flat owners was not sought before modifying the plan promised to the flat owners,” the court said.

“The illegal construction of T-16 and T-17 has been achieved through acts of collusion between the officers of NOIDA and the appellant and its management,” the order said.

What do homebuyers have to say?

The stern action will send a tough message to builders and also to those officials in cahoots with them, who will think twice before indulging in such illegal acts, said Abhay Upadhyay, president, the Forum for People's Collective Efforts (FPCE), which works to protect the rights of homebuyers.

But it is also true that the regulations need a comprehensive overhaul, fixing responsibilities including on those behind the scenes who are known to put pressure to get such illegal structures regularised. The punishment should be clearly defined so that the guilty cannot resort to legal loopholes that are available to people with deep pockets, Upadhyay told Moneycontrol.

The idea of the whole exercise should be to ensure early detection of illegal construction and timely action against the guilty so as to ensure that innocent homebuyers do not get trapped, he said, adding that the Supreme Court order itself is a reform.

“The judgment sent out a message that there is no room for complacency and any illegal structure can be demolished. Approvals by authorities are not necessarily legal and the Supreme Court can go into the legality of the process,” he said.

“A number of far-reaching jurisprudential issues about consumer rights have also been dealt with in the judgment, which will act as a precedent all across the country,” he added.

Sanjeev Sharma, partner, Saraf & Partners, a Noida-based law firm, told Moneycontrol that in both the Maradu demolition case as well as in the Supertech matter, construction was carried out by builders in collusion with local authorities. In both cases, the Supreme Court ordered the demolition of the properties, and in the case of Maradu, the towers had been completed and were even occupied by some of the residents. The Maradu demolition was ordered due to violation of Coastal Regulation Zone requirements, while Supertech was found to be in violation of provisions of the UP Apartment Act. In both cases, the apex court declined to regularise the unauthorised construction.

“This sends a clear and stern message to all builders that courts are not inclined to use their equitable jurisdiction to regularise projects that are constructed in violation of building bylaws.”

Why buildings have been demolished in the past

Buildings have been demolished for several reasons around the world. The reasons range for efficient use of additional floor area ratio, age of a building, redevelopment and engineering concerns. These are all in the case of legally constructed buildings. Other reasons could be non-engineered structures and illegal construction. It took only 10 seconds to demolish the 144-floor-high Meena Plaza in Abu Dhabi. The city's planners had a better and bolder vision for the site, which was to be transformed into an entertainment and shopping destination. In 2019, the Bank of Lisbon building in Johannesburg was demolished after the 108-feet tall building was found to be unsafe following a major fire. The demolition of the Maradu buildings and the twin towers were ordered by the Supreme Court.

What needs to be done?

Despite several buildings getting demolished over the last 25 years in India, especially those that were non-engineered or illegal structures, no lessons have been learnt. The demolition in this case and that of the Maradu buildings has not provided an overarching solution, say experts.

“A permanent solution lies in proper implementation of bylaws and rules. Structural audits submitted to authorities only consider the quality of the material used, the strength of the structure, structural design compliance with respect to IS codes. A legal audit is the need of the hour. This should be undertaken at the time of granting an occupancy certificate and at regular intervals of, say, five years to ensure that the builder has not deviated from sanctioned plans. This audit should be as per the rules of the planning department and it should be initiated by the state authority,” said Abhay Gupta, structural engineer and owner of Skeleton Consultants Private Limited.

What is the Noida Authority doing about it?

Noida Authority sources said it has been using a software since 2018 for approving building maps online. However, the software needs to be updated to take care of revised building plans as well. Revised plans are currently been processed manually, they said.

Should RERA play a more active role going forward?
Homebuyers and real estate experts say that RERA bodies should start playing a more active role post the demolition of both the Maradu and Twin Towers in Noida.

Right now the role of the real estate authority is to assign a registration number to a new real estate project after the builder has the necessary paperwork ready. These approvals are then uploaded on the RERA website.

A chairman of a state real estate regulatory authority told Moneycontrol on condition of anonymity that there should be some kind of power vested on to RERA to issue directives to the local authorities or other stakeholders which are important players.

All companies are mandated to have an internal and an external auditor. “It would be a good idea to have an institutionalised arrangement for either an internal or external audit of the procedures that are being followed within the authorities. For RERA to conduct such an audit may not be feasible. The concerned development authorities should themselves have an external agency carry out an audit of the processes within the system,” he said, adding an external audit could be a useful tool to ensure that such issues are prevented.

Will financial institutions now be wary of lending to the real estate sector?

“This demolition sends out a clear signal of zero tolerance from the judiciary as well as the regulatory authorities for anything that is illegitimate and has not been sanctioned. This incident has sent out a cautionary message to the real estate sector,” said Amit Goenka, CEO of Nisus Finance (NiFCO), which manages a real estate debt fund portfolio.

Most developers Moneycontrol spoke to said that this is a hangover of the pre-RERA days, and say that with the Supreme Court-ordered demolitions, and such violations would become a thing of the past.

But there is no gainsaying that financial institutions have been exercising increased caution in funding real estate projects. A project management company is set up in most cases to monitor the development. There is a cost control mechanism in place and external agencies validate whether construction is taking place as per norms. Fund houses are insisting on a comprehensive all-risk policy (CAR) for the entire value of the works drawn in favour of the financier. In today’s market, barely 30 percent of developers get institutional finance, Goenka explained.

Projects were financed at an average lease rental discounting rate of below 7 percent but that is now close to 8 percent, while construction finance which was at 10 per cent has now increased to 12 percent or more for Grade A developers. There has been an increase of 200-300 basis points in the cost of capital for most real estate players. Regulatory caution is being exercised more for greenfield financing and has become more expensive due to impending regulatory risks, he said.