35% bank guarantee now mandatory for Punjab realtors

To fix accountability and check potential fraud with investors, the Punjab Housing and Urban Development Department has made it mandatory for promoters to furnish a bank guarantee equal to 35 per cent of the cost of the internal development of a project, while doing away with the option of mortgaging property.

Earlier, a promoter, while paying the cost of the internal development of a project, was allowed to mortgage plots at 90 per cent of the collector rate of the property concerned outside the municipal limits and at 75 per cent per cent of the collector rate of the property concerned inside the municipal limits.

“In many cases, the realtors were mortgaging chunks of land that were not in their name,” said a senior government functionary.

The fresh amendments to the provisions of the Punjab Apartment and Property Regulation Act have become effective from November 3.

Similarly, the promoter was also allowed to mortgage plots against the balance external development charges (EDCs) to be paid in lump sum or in instalments. Now, a bank guarantee of the balance EDCs will have to furnished, as the option of mortgaging plots has been done away with.

Apart from having the ownership of at least 25 per cent of the project land, the government, in another move to fix accountability of the developers, has made it mandatory for them to submit the letter of consent for the remaining land registered with the sub-registrar.

In the recent past, the housing department came across cases where a fake letter of consent of landowners was submitted by developers while getting the CLU. However, the department is yet to provide the format for the registered agreement that has to be submitted by the developer.

Citing the case of Ludhiana (outside the MC limits), an official said a developer carving out a colony on 10 acres of land would have to furnish a bank guarantee of Rs 616.55 lakh.

Similarly, in the case of Patiala (outside the MC limits), the developer would have to furnish a bank guarantee of Rs 444.45 lakh, and in Kharar (outside the MC limits), the developer would have to furnish a bank guarantee of Rs 887.62 lakh.

Sources in the department said the clause of the bank guarantee instead of plots was regressive for small developers but would suit big developers.