The role of small promoters in Kolkata’s housing transformation


Smaller buildings and stand-alone houses are a prominent category in the urban scape of Kolkata, where real estate has emerged as the one of the primary modes driving the urbanization process. While large residential complexes within and outside the municipal limit have dominated popular imagination due to the speculation involved in acquisition of larger lands for real estate, there has been less attention on single stand-alone buildings that are being converted to vertical housing in last decade or more. This trend has been driven by a combination of factors that include municipal interventions, the increasing desire of middle classes for vertical housing, and an active market for redevelopment of small plots.
By  |  March 23, 2021

Introduction

Smaller buildings and stand-alone houses are a prominent category in the urban scape of Kolkata, where real estate has emerged as the one of the primary modes driving the urbanization process. While large residential complexes within and outside the municipal limit have dominated popular imagination due to the speculation involved in acquisition of larger lands for real estate, there has been less attention on single stand-alone buildings that are being converted to vertical housing in last decade or more. This trend has been driven by a combination of factors that include municipal interventions, the increasing desire of middle classes for vertical housing, and an active market for redevelopment of small plots. Two narratives that follow will illustrate the trend.

The first story is of Nila (name changed), a widow who resides on the eastern fringes of the city, where she inherited her mother-in-law’s house through her husband. At present, she has entered into a written agreement on a 50:50 sharing basis with a promoter to redevelop this single-storied one-room house, which is located on a 1 Katha (equivalent to 66.89 sq.m.) plot of land abutting the road. This means that of the four apartments – one per floor – that will go up on this piece of land, she and the promoter will own two each. Currently, she lives in a temporary accommodation whose rent is being borne by the promoter. The agreement also states the timeline within which the flat will be completed and handed over. Nila is not aware of what price the promoter will fetch from selling his share of flats or whether he would rent them out, but is content with the deal because she is promised a two-room flat after many years of living in a smaller house with an asbestos roof. She got acquainted with the promoter through neighbours, who are also similarly in the process of redeveloping their houses into vertical structures. A local acquaintance of the promoter in the area played an important role in finalising the deal.

The second story is of Das (name changed), who during his last years of employment entered a similar deal with a promoter for redeveloping his ancestral house, located in a plush south Kolkata neighbourhood. Das was introduced to the promoter through people he knew at work. Of the four flats developed, Das received one flat as well as exclusive rights to a part of the roof, which has another single room apartment. During the construction period, Das received temporary accommodation. The right to the remaining three flats went to the promoter, who sold them. When Das and his wife passed away, the flat and the room on the roof were inherited by his two children, who live outside West Bengal. Getting into a deal with a promoter worked well for this family since it was becoming difficult to maintain a single standalone house, financially as well as from the perspective of physical upkeep. In the redeveloped apartment block, maintenance is a joint activity of all the flat owners. Das’ children also found this to be a safer arrangement for their ageing parents when they were alive.

Small scale promoting, a common mode of redevelopment
The anecdotes narrated above are not exceptional stories at all. Rather, they are part of a popular trend of redeveloping single-family houses to multi-storeyed apartments in Kolkata over the last two decades. In a city like Kolkata, where open virgin land is not available, small scale promoting assumes a key role in the development of housing real estate. Despite widely used terms like promoterer dokhole [in the grasp of promoter], promoterer shyen drishti [hawk-eyed promoter], which portrays them as land sharks looking to target and taking over private property, promoters have emerged as crucial actors in real-estate development in the city.

As per the West Bengal Apartment Ownership Act 1972 and the West Bengal Building (Regulation of Promotion of Construction and Transfer by Promoters) Act 1993, a promoter is someone engaged in “construction or enabling construction of building for the purpose of transfer of the same through sale, gift or otherwise to any person, or company or cooperative society or association of persons”. In the West Bengal Housing Industry Regulation Act 2017 (WBHIRA), the definition of promoter is more extensive and includes a person who:

develops a land into project whether or not constructing structures for the purpose of selling, any development authority or public body in respect of allotees of building building/apartments constructed by such authority and/or plots owned by such authority/body for the purpose of selling, apex state level co-operative housing finance society who constructs for its members for allotment or any other person engaged in development, contracting, colonizing, estate developer, contractor for the purpose of allotment and any other who holds power of attorney from the owner of the land on which construction of building is being done for sale and simply any person who constructs building for sale to general public.

Kolkata’s real estate landscape functions through both large as well as small scale promoters. Vertical residential structures were not a very common feature in the city of Kolkata till the 1980s, when the main trend was to own a parcel of land and build a house on it. The inner-city area, particularly the middle-class neighbourhoods in the northern and southern parts of the core, are dotted with older single stand-alone houses and is considered a prime locality for real estate where density and land value is much higher. Many of the older buildings date back to the pre-independence period.

Single family homes on small plots also came up in the added areas of the city, i.e. those areas which were incorporated within the municipal limit of Kolkata Municipal Corporation (KMC) in the 1980s. These single buildings are either single or double storeyed and the ground floor is often rented out either to individual household or to shop. In these areas, both small and bigger plots are available for redevelopment, as this area started developing late relative to the inner-city neighbourhoods.

How planning regulation supports promoting
Though the Kolkata Metropolitan Development Authority (KMDA) prepares the city’s Land use and Development Control Plan (LUDCP), residential and commercial buildings come under the domain of the Kolkata Municipal Corporation (KMC) Act, 1980 and its implementation through KMC Building Rules 2009. These provide ample flexibility with respect to erecting, re-building and altering the existing structure, having mixed-use building or altering the existing building plan. Some of the important provisions in the KMC Act 1980 that enables changes in building structure, flexibility in changing plan, and re-assessment of new buildings are summarised in the table below:

Provisions Section of the KMC Act
What is re-erection/what includes re-erection 390
Re-erection, alteration of building 393, 393A
Grounds for provision of sanction and refusal of the same 396
Revision of assessment of new re-erected/altered building Nature of Occupancy changes 180

Source: Kolkata Municipal Corporation Act 1980.

KMC also has provisions for detailed charge rates for change in use of building from one category to another. Further, there have been several changes in the implementation of the Act through frequent changes in the KMC Building Rules 2009. For instance, in 2019, KMC relaxed building rules for the added areas by doing away with mandatory submission of Record of Rights (ROR)/ mutation deed from the Block Land and Land Record Office  for getting sanction for houses on plots below 210 sq.m. In another initiative, KMC relaxed the mandatory requirement of building sanction plan for plots up to 3 Katha or 200 sq. m in all wards. Newspaper reports mention the withdrawal of mandatory submissions of building plans for small houses, though the circular could not be traced. Though this was supposedly done in order to curb harassment of the small plot owners, it could also be interpreted as a move to hasten real estate development on small plots. Besides, KMC also has a detailed fee structure for changes of use, deviation in height of building etc., making change the norm rather than the exception. The situation is similar in the twin city of Howrah were the same KMC Building Rules 2009 are applicable.

Over the course of time, the state government has simultaneously amended tenancy provisions in order to unlock land. This has further pushed for conversion of single houses to multi-storeyed buildings. Many of the older houses were built on plot varying between 3-4 Katha (200-334.5 sq.m) or on 2-2.5 Katha (133.8-167.2 sq.m) in size. Demolition of each old building paves the way for one or more multi-storeyed units, depending on the size of the plot. From the city’s perspective, redevelopment also paves the way for re-assessment, enhancing property tax.

Aspiration for flats and the opportunity for small promoters
There are several factors that explain why small promoting is so relevant for the city. The first is related to inheritance. It is common for a property to have multiple inheritors. This prompts redevelopment because the inheriting families have different demands for housing and a common desire to have their own private space. Secondly, the property owner may opt for redeveloping their property into flats for reasons related to maintenance and security. Joint maintenance and increased security in living with other families within a single premises make life easier than living in stand-alone housing. Thirdly, the property owners of older houses in the city are unable to repair and renovate their homes, which are located in prime realty areas, owing to financial constraints, which has prompted them to opt for redevelopment. Further, tight tenancy rules make it difficult for property owners to vacate tenants staying in the same building for decades. In this case, there is scope for the promoter to negotiate for fair compensation with both tenant and landlord and able to vacate the premise and redevelop.

The promoter eases the process of redevelopment in a number of ways. He manages hassles of obtaining building permit for altered construction plan and re-erection. In case of multiple claimants to a single home, there is the option for negotiation of proportional distribution between promoter and the claimants. As a promoter once mentioned, “Vertical rise (in a city) is inevitable”. With high density of households within the city, there is also growing demand to access the prime areas for housing. With nuclear family systems replacing joint families, replacing single houses with flats is more the norm than the exception.

A property above 500 sq. m (7.47 katha) has to be registered under WBHIRA. In the core areas of the city, accessing such a large plot or consolidating smaller plots into one is difficult to achieve. Though large plots are lucrative since high end residential complex with different amenities can be built within single area, there are risks as well, like not able to sell all the units. Instead, redeveloping smaller plots/properties is convenient.

According to another promoter, the rise in the trend of promoting individual small houses for flats also reflects the aspiration among the younger generation for monetising their property assets. Though security for aged parents and the ease of joint maintenance are the common reasons provided by owners, it is also true that the motivation for redevelopment is linked to the ability to liquidate ancestral property to access finance to buy flats in more modern residential complexes, even if they are located in the periphery, or in lieu of cash to afford a better lifestyle. These aspirations also play an important role in driving the demand for vertical living in the city.

A plot in transition in Kolkata, 2019

The share of promoter and the house-owner also varies considerably. In most cases of joint promoting, the maximum cost of the land is borne by the land owner and maximum cost of construction is borne by the promoter. A joint project is understood to be a process, where development of land is shared between the land/property owner and promoter through a duly registered agreement. Here the promoter shares the responsibility of developing the land/property including mainly the construction.

Accordingly, the share of profit varies on the basis of land price and location. If an older house is located on prime land, the proportional share between the owner and the promoter tends towards 1:1. The share of promoter increases with decreasing value of the land on which the house is located. There are cases were the owners sell the land/property to the promoter and gets reimbursed partially in cash and the promoter also provides them accommodation elsewhere. Under such circumstances, as the promoter becomes the sole property owner. As one promoter states, monetising the property is equally crucial for clients and there is an increasing demand to do so in recent years.

Risks for property owners
Besides changing and tweaking rules in favour of real estate development on small plots, one of the crucial aspects in the success of these projects is the credibility of promoters, which is obtained not through big banners or brand names but through reputation and networks. However, it is important for the promoter to be registered. Many of the single standalone buildings are on plot sized not exceeding 500 sq.m. and therefore unregistered promoters are also in this business, which poses potential risks for house owners. Though recently there are stricter municipal norms regarding curbing of fraudulent activities of the promoters, informal references remain crucial to ensuring credibility.

There is also risk of fraud through the promoter-political nexus. The trustworthiness of the promoter within the neighbourhood is essential. This is achieved when there has been a successful redevelopment in the same locality, or the name is referred through a common acquaintance. A clearly articulated agreement between the owner and promoter is crucial in the process. In fact, property owners are often advised to involve an experienced arbitrator (either a lawyer or an experienced consultant) in negotiating with the promoters in order not suffer losses.

Local political influence is also critical. On one hand the nexus between the local political parties is threatening for those single house owners who are unwilling to shift to vertical structures and thereby resist promoting their property. There may be constant pressure on them through the local clubs and parties to do the same. Even if there are multiple heirs, it is essential to have the consent of all the stakeholders. On the other hand, in case of joint promoting, the promoter handles political issues as well as accessory problems like donations to local club, or taking building material from the local syndicate.

The other critical challenge in promoting individual stand-alone houses is lack of understanding among many owners about the heritage value of their houses. This is particularly relevant in case of older houses in core areas. The KMC Act 1980 has clearly laid rules that prevent building sanctions to graded declared heritage structures. However, in cases where the owner or the heir is apparently unable to care take of the maintenance of the building, the Heritage Commission under the state government steps in to do so. But in many instances the house owners are either not aware of the heritage value of the house or the heritage list itself needs to be upgraded. If a building with heritage value is not enlisted, it is treated as an ordinary building, making it easier for the promoter to push for redevelopment.

Conclusion
The idea of nijer bari [own house] has changed over time from owning a small house in the city to owning a flat. It varies across different sections, from owning a flat in the same neighbourhood to owning a flat in a high-end residential complex, even if it means moving away to the periphery of the city. The small promoters operate in a space which is at the crossroads between nostalgia for conserving the stand-alone houses of the older generation and aspirations about owning a flat in the city; between preserving links with the older neighbourhood on one the hand, and accessing prime localities in the city on the other.

Though the small promoters are ‘small’ in scale, they are widespread. They are sweeping the city silently and steadily, spurred by changing middle class aspirations, and increasing municipal intervention in favour of real estate development and property re-evaluation.

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About the Author(s):

Sarani Khatua

Dr Sarani Khatua is a researcher who she completed her Postdoctoral Fellowship from Centre for Urban Economic Studies, University of Calcutta.

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