Land buyer! protect thyself!!

Recently a well-heeled family met me with a request that I examine a piece of land in the eastern parts of Chennai they were about to buy. Its title had been confirmed by a good lawyer. The lawyer had referred the clients to me with a suggestion that I conduct a technical due-diligence of the property, before the deal is inked.

I sent my engineer, got it inspected, measured and photographed. The location was fine; its quoted price was reasonable; it is part of an approved layout; has good potential for appreciation. The property had everything going for it. Or so it seemed!

As part of the technical evaluation of the land, my engineers examined the Google satellite maps and zeroed in on its location. Even as I was appreciating how well located it was, close to a main commercial street which is quite a happening place in the city suburbs, it crossed my mind that it was quite close to a major canal which is winding its way to the sea nearby.

What’s the harm, you would ask? Does not the proximity of a good canal and sea make for a premium location?

Of course, it does-but subject to some riders!

It may not be common knowledge that there are restrictions to the development of land property close to sea coasts and major canals in their proximity. These are called ‘Coastal Regulation Zone’ norms (CRZ). Any piece of property coming within this zone is subject to serious restrictions in so far as the development potential is concerned. Rather I would say there is very limited approved development that is possible in these zones. Of course this is done with a scientific rationale.

For example,should there be a tsunami again in the eastern coast of India, such canals will channelize a substantial part of the wave energy along the canal course to a good distance upstream and help dissipate it! So unless the adjoining lands located on either side of the canal are also clear of developments, there will be serious loss of life and property. Similarly leaving a buffer land on either side of the canal as well as the shore side of the sea, will ensure there is no salinity intrusion into the ground water table.

So naturally there are restrictions on development of land located close to the major canal banks as well as sea shores.

Coming back to the story on hand, after we found the property is located close to the canal bank, we examined the relevant maps of the Chennai metropolitan area. Not surprisingly on either side of the canal we found the marking of a 100m wide strip of land which was designated as part of coastal regulation zone which cannot be developed and used.

When we scaled the map and related it to the Google map we realized that the land selected by the clients is lying well within the said coastal zone.

The case looked interesting. We examined how the layout got approved by the government with this limitation, a serious one at that. When we probed further, we found the so called ‘approved layout plan’ issued by the Government had so many factual errors and several pieces of misleading information. When we approached the government body which had supposedly developed the layout and asked for the official layout plan, they were least helpful.

Through some other checks we found the so called ‘layout plan’ is a bogus one! There was an original approval, but subsequently several additions have been made by unscrupulous operators who went on adding Government lands which were part of the reserved land that are part of CRZ to the original approved layout and literally ‘expanded’ it and ultimately touched the shores of the canal breaching the CRZ restrictions.

So they plotted the extra lands which were freely available and started ‘marketing’ them. The property which was sought to be sold to the clients was apparently one such.

A successful fraud is always a mixture of facts and fiction. In this particular case the facts and fiction are so well intertwined that we are still not able to trace the origin,scope and scale of the fraud. Absence of proper documents is a major impediment in this process. Had the concerned Government department uploaded the correct layout plan pertaining to this neighborhood, our task would have been easier.

After I explained to the clients about the intricacies of the case, they reluctantly dropped the proposal. It saved them Rs.100 lacs ($160,000/-), a sum which was fixed as the consideration!!

So, friends, please be careful about investments in real estate. It always helps to conduct a technical evaluation of the target property, before you venture!!

Do write to us in case you have some interesting information or feedback!

BVe Consulting Engineers

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Some recent developments in the realty sector

 An online news-letter on property matters & development trends

It is stated by many ‘insightful’ reports there is a large unsold inventory of residential apartments across metro cities; for example in Mumbai it is about at 2,10,000 units. It is also estimated it would take 36 months to sell off this stock based on the sale velocity witnessed in the last two years. In Bangalore (do we say Bengaluru?) it is about 105000 units. NCR is grappling with 1,67,000 units. Chennai is said to have some 40000 of such unsold stock. The stock here refers to un-sold ready to occupy, un-sold under construction and un-sold units in projects launched two years back.

With so much of unsold stock we find some developers dropping prices of apartments in the case of small and medium apartments. Luxury apartments and top end villas have not had much of price correction.

Obviously the potential buyers find the prices of mid-segment apartments quite unaffordable! Given that the land is the main cost component in the value matrix of most of the urban apartment projects, we need to take a hard look at it! In Chennai kind of markets, the value of land constitutes as much as 50-75% of the quoted rate of the apartment, especially the city properties.

Curiously despite the fall in demand for apartments, continuing slow-down in the economy and demand the land prices stubbornly continue to remain high! There are some strong reasons why this is so; it is

common knowledge that a substantial amount of money invested in major apartment projects is that of select politicians, their side kicks, extended families,crony capitalists, corrupt Govt. officials and others who had parked their ill-gotten wealth in real estate. In some cases the lands are acquired much below their market price using the political/muscle power or with advance insider information. Therefore this money by definition does not demand any immediate return. So the investors have staying power and hold on to their prices. Consequently prices of land/apartments continue to remain high!

But how is that the prices remain high even in the case of smaller properties in urban areas?; after all most of these are owned by honest and law-abiding citizens.

The reasons for this phenomenon in this case are different! We will examine this in the forthcoming issue!

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An interesting tidbit of info!

 An online news-letter on property matters & development trends

The price of gold had increased by about 2000% since the year 1981; during the same period, land properties in metro cities and suburbs had appreciated by 20000% to 40000% ; take for example the price of 10g standard gold; it was about INR 1670/-in 1981 ; it ruled at about INR 30000/- in the year 2013; this works out to CAGR* of about 9%;

*compounded annual growth rate

Bank fixed deposit certificates, during this period, gave a CAGR of about 9%;

During the same period the inflation grew up by a CAGR of about 7%;

During this period a plot of one Ground (2400 sq.ft.) in South Chennai went up from about INR 1 lac to INR 400-450 lacs; this gives a CAGR of about 20%;

The BSE sensex, during this period, grew from about 175 to 19000, giving a CAGR of 15%;

So if we take the real CAGR (nominal CAGR less the inflation), it works out as follows:

Gold – 2%

FD’s – 2%

Stocks – 8% (this will be higher if we consider the dividend payouts)

Land – 13%

Of-course all stocks don’t give this return nor would all properties! Only those who had selected their stock and land pickings carefully would have reaped a good return in the above lines!

But generally various comparative studies acknowledge the fact the stock market gives the best rate of return over long periods, among all asset classes. Obviously one needs good knowledge and perseverance to stay invested in stock market. It can cut both ways.

Same way beyond one’s dwelling, if one were to hold landed assets, that requires lot of ability to ensure quality tenants, ability to get the possession of the same as and when required and avoid encroachments.

So the higher returns from these classes of assets come with a ‘price’ and they demand ‘active efforts’ as noted above.

Ordinary mortals like the author are happy not investing in stocks or real estate assets and thus not having to worry on the returns and the issues that go with these!

Do write to us in case you have some interesting information or feedback!

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Curb the transaction costs! Kick-start the economy!!

Curb the transaction costs! Kick-start the economy!!

Everyone talks of investments not happening and demand not picking up in Indian economy. This is in the backdrop of heightened expectations of the new Union Government taking over the reins of power in May’14.

The construction sector is particularly badly hit. Shrinking pipe line of new orders for contractors; huge backlog of sale of new apartments; construction permits and clearances continuing to get delayed; red tapism ruling the roost in various sectors; shortage of skilled labour; high interest rates; poor credit facilities; problems related to environmental clearances ; no fresh investments; power shortage; the problems seem to continue as they were in the previous UPA regime.

I for one believe the transaction costs of doing a business is one area where there could be visible improvements with minimal changes and efforts. Take for example, the task of buying such varied goodies like pizzas to pancakes , mobile phones to movie tickets or computers to credit cards, from home. We all know it has become quite simple, hassle free and just a phone call away.

Why can’t we have the equivalent of it in getting a construction permits; or obtaining completion certificates for occupation ? Why should it be so onerous that a developer shudders to think of investing money in a new green field project?; the task of getting various clearances and approvals is so riddled with procedural bottlenecks and regulatory minefields, that a developer’s productive energies are mostly consumed in dealing with this rot in the system. He is left with that much lesser time to think of technological improvements, quality, better customer service, cost reduction, innovation and the like.

In my own case I have found it takes anywhere between 3-5 months to get through this process of getting water, sewer and power connections in Chennai, even if your building is perfectly complying with all norms. This is after relentless follow up and countless no. of visits to various offices of Metro water HQ, Area office, Unit office, Corporation’s zonal office, unit office and division office, EE office dealing with road cut permits, TANGEDCO’s AE’s office, AEE’s office and EE’s office. One just can’t estimate the transaction costs of dealing with such levels of stupid bureaucracy and wanton dealys. It is as if these officials are doing a big favour to the citizens by agreeing to provide these utility connections, which should actually be given as a matter of right!

Look at this! About 200 completed apartment projects in Chennai are not in a position to be commissioned due to the huge backlog of issuance of ‘completion certificates’ by Chennai Metropolitan Development Authority (CMDA). It is quite likely the average delay due to the pile up of such a certificate is about 75-100 days. During this period the apartment owners are not able to occupy the flats and are forced to live in rented houses. The builder is not able to apply for power, water and sewer connections. He continues to use DG power which is about three times costlier as compared to grid power, not to speak of loss of foreign exchange in buying fuel. He spends unnecessary overheads and administrative time on maintaining the flats till the time of handing over. Sometimes he is forced to compensate the buyers of apartments for the delay.

All these will wipe off about 10% of his legitimate profits which are very limited in any case. So this leaves him with that much lesser capital for the next investment. We are not talking of the other aspects of Government created delays in plan approvals, property registration, delay in power, water & sewer connections and the ubiquitous costs of corruption involved in every stage. If we take all these together the cost imposed on the developer (which is either passed on to the buyer or borne by the developer as reduction in profits) will be about 25% of the fair profit estimated by the developer.

Let us say in a 100 apartment project with one lac sq.ft. developed space, the developer estimates a profit at Rs.300/- per sq.ft.; if 25% of it is knocked off as the increased transaction costs as explained above, the additional cost paid by the flat buyers is Rs.75/- per sq.ft.; in other words, Rs.75,000/- for a 1000 sq.ft. unit. This is a huge amount for a home buyer. If the developer does not pass on this cost to the buyer he is poorer by Rs.75 lacs which will have to be funded by bank credit or additional equity. Had this money been deployed in some other project, it would have created corresponding economic activity and incremental addition to GDP.

We can thus see the increase in transaction cost for both the buyers as well as the developers on account of the mindless delay, blighted procedures and slothfulness on the part of the Government agencies in a small area of one particular economic activity. Multiply it by million times you can see the crippling effect of unnecessary transaction costs on the economy overall.

Is it not time to think of cutting down the transaction time and costs so as to make our national economy more robust?

The accent should be on providing service to the customer; if a power connection is given on time, the department earns revenue from it and the inflows add to the government’s kitty. So is the case with water and drainage. Why this delay which hurts the customer as well as the service provider?

What we need are,

a) clarity of rules and procedures, which should be simple enough

b) minimal documentation and avoidance of duplication

c) online processes for each application

d) time limits for each approvals and service connection and

e) self-certification for most of the approvals

Imagine how much time and energy will be saved if the above were to be truly implemented. It is entirely doable and will divert substantial resources from useless tasks like follow up, chasing government officials and filing endless types of forms to productive usages which will add significantly to the nation’s wealth creation!

Do write to us in case you have some interesting information or feedback!

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Leasing office space is no joke!

Aruna, a twenty something, petite and gregarious girl reaches her office every day by 9am sharp. A systems analyst working in a newly minted, glittering office tower that rises 15 stories up in a busy stretch dotted with IT buildings-symbolic of the new urban India growth story-she gets picked up from Chennai’s western suburbs and reaches the premises in air-conditioned cushioned comfort that the employer run Volvo multi-axle city coach provides mercifully.

Even as she enters the office she jostles for space to walk across the main entry door which surprisingly looks dwarf against the mammoth reception foyer beneath. As hundreds of employees emptied by the countless buses and cars, rush past the door to reach the lift lobby within a window of 20-25 minutes, there is a near stampede. It is an everyday spectacle! Aruna squeezes past,not failing to smile at acquaintances that look equally harried!

As she approaches the lift bank,the usual exasperation returns to her face seeing the huge crowd that is already waiting to hurry into any of the half a dozen20-passenger capacity elevators that seem to be in eternal motion. For a moment she thinks about taking the stairs but drops the idea as the stairs are too steep and narrow for comfort. Try as she might, it takes a good ten minutes before she manages to squeeze herself into one of the noiseless&sleek machines. As she enters her office in the sixth floor, it is invariably 9.25! Late!! The swipe card attendance system never lies!!

She soon squeezes herself into her 4’ x 4’ workstation and throws herself into the daily chores that await her. As more and more youngsters troop in, the office brims with people even as the glazed cabins abutting the walls get occupied by the senior executives. Meeting rooms get engaged as the morning grind of project discussions start. Even as the daily rhythm of the office gets fully set, she starts feeling choked and soon enough it is followed by mild sweating. Aruna cranes her neck and looks around, as she does every day, and exchanges troubled glances with the neighboring staff, who too start feeling the lack of ventilation!At around half past 11, when the office activity peaks all over the building,the air-conditioning system seemingly starts sputtering &gasping, a routine they have come to experience.

Soon it becomes too hot what with so many computers and assorted machines throwing out streams of heat adding to the body heat from the 340 odd staff who have checked in for work today. Someone switches on the pedestal fans bought for this purpose hoping some circulation will help. It does help, but in a limited way. The disturbance created by the lack of adequate ventilation soon tells on the work as batches of staffwalk towards the coffee vending machine, collect their brew and disperse into the adjoining passage hoping to get some fresh air. Someone looks for some window type openings in the glazed façade on south side to let in some fresh air but without success as no operable windows within reach have been provided. It’s all steel, aluminum panels and glass fixed and pasted, all the way!

Aruna decidesto freshen up! As she reachesthe rest room, she realizes it is crowded as always. With only six restrooms for about two hundred women in the floor, the situation is almost chaotic there. All of a sudden the power fails and the whole place is engulfed in semi darkness as the scope for natural lighting is very limited.It seems an eternity before the roar of the generating sets could be heard signaling the standby power mode ‘coming on’.

If you are an employee in a large and modern office complex, it is quite possible some of you would have experienced a few, if not most, of the problems listed above.

Why at all do they happen in the first place?

To put matters in simpler perspective, all these stem from the fact that the space leased by the employer is not engineered to handle the population it would ultimately hold nor have the relevant standards been followed in the development and choice of critical equipment.

Right from the regular stampede at the main entry, the long wait for the elevator, steep and narrow stairs, absence of operable windows at lower heights, sub-optimal air-conditioning, power generators not kicking in quickly, poor natural lighting to the inadequacy of rest rooms, all these are attributable to the failure in following modern standards and poor engineering in office design and construction.

Apart from these known weaknesses, there could be many more unseen and non-apparent defects waiting to create havoc!

No doubt all these result in loss of productivity; issues like poor ventilation will be a health hazard too; there could be life threatening issues if windows cannot be opened in case of a major fire which will result in smoke accumulation and people choking to death. Similarly steep & narrow staircases result in people not being encouraged to use them, even if willing; this may even be a death trap in case of an emergency evacuation.

Could the above weaknesses in the office space have been foreseen and avoided?

YES-if the management had carried out a proper& systematic technical due-diligence study of the premises through a competent engineering firm before they signed off the lease deal. It could have cost some money and taken about couple of weeks but would have saved the company the serious blushes apart from the everyday invisible productivity losses, not to speak of the looming safety hazards. 

Such a due-diligence covering all aspects of the construction would have brought out these serious handicaps and the company could have chosen a better premises, had they been meticulous enough!

Do write to us in case you have some interesting information or feedback!

BVe Consulting Engineers

Engineering Project Consultancy & Property Advisory Services,

Residential-Commercial-Industrial-Infrastructure Designs

Due-diligence studies -Asset valuation services

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www.bveconsultingengineers.in

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Fraudsters are innovative thinkers!

To give the devil its due, I have come to accept a fraudster is an out of the box thinker! In most cases the fraud is a crude deceit but in some cases it is indeed quite sophisticated and one can see flashes of rare brilliance of convoluted variety ! Some of these worthies out think the system and its current operational dynamics! Unwittingly a fraudster exposes the chinks of the system, albeit for his personal benefit!!

I will briefly narrate a fraud that took place in a private bank about a decade back!

Let’s say the name of the protagonist in this case is Alex (name changed of course). He went to a private bank, which primarily operates in South India and requested credit facilities for a small business that he was running. He was already its customer for a few years at that point of time. The loan was sought against the receivables in his business and the secondary security was the land property in his native village deep inside Thiruvallur district bordering Chennai city.

When the bank officials visited the village along with their engineer to assess the property, he took them to the site and then led them to the sub-registrar’s office where he asked in their presence about the Government guideline value for the survey no. of the property sought to be offered as collateral security. The sub-registrar referred the concerned register and informed him and the officials that it is Rs.10,000/- per cent. It was far too high a rate for a remote village property but nevertheless the bankers noted the figure and the team left the office.

It is generally believed (but not always true) that the Government rates for land are invariably lower than market rates at any point of time. This is the one of the causes for black money generation in real estate deals, for the property is always registered exactly at the Government value and the rest of the consideration is transacted in cash. Any way let’s leave the black money part aside as it is not relevant to the issue on hand in this case.

Back at the office Alex explained to the bankers and their engineer that the property is worth at-least Rs.15,000/- per cent as the market rate is higher than the guideline value by 50% and more. This was accepted and the engineer certified the value at Rs.14,000/- per cent, with some conservatism thrown in. For an extent of 5 acres or thereabouts, i.e. 500 cents, the value was pegged at Rs.70 lacs. The bank took comfort from the fact that their lending will be only about 60% of the above value at Rs. 40 lacs.

Soon after the paper work was completed the amount was disbursed in two tranches.

After the holiday period of 12 months the repayment was to start. Nothing happened and the customer was nowhere in sight. Calls to him went unanswered. After a few months when the account was about to turn an NPA, the bank official went in search of the borrower and finally located him in his business place. The business was wound up by then. There was no activity of any sort and it was a rented premises. The borrower narrated his woes saying that he went into grave losses as the orders were drying up due to China factor, that collections were not materializing and he had to close down the operations and dispose off the plant & machinery. Oh! yes! He remembered his dues to the bank but was helpless, he pleaded. No doubt, the bank could take over his secondary security and dispose it off and collect its dues. He did not want die as a debtor, he proclaimed proudly for good measure. Whatever help the bank needed in this process, he would willingly extend, he added gracefully!

The bank’s higher ups were informed and the legal process for sale of security was set in motion. When the property was put on block the bank to its utter shock realized that its true worth was about one tenth of its assessed value i.e. Rs.7-8 lacs was the value range the market was willing to offer vis-à-vis Rs.70 lacs determined during pre-sanction due-diligence.

How did things go so horribly wrong?

It was to later emerge that Alex played the system so beautifully and the realization of the contours of the web of deceit he cast so elegantly would leave the bank officials completely flummoxed. His modus-operandi went like this:

About six months prior to his application for loan, he ‘sold off’ a small portion of 2 cents of his land in the same survey no. at an astronomical price that was 10 times the Government rate that prevailed earlier. If the then Government rate was, say, Rs.1,000/- per cent (i.e. Rs.1 lac per acre), the 2 cent land was sold for Rs.20,000/- as against the government value of Rs.2000/-; stamp duty was paid for the said Rs. 20000/-. He enacted two such transactions in a gap of two months. Both these transactions were within his family (the term ‘related party transaction’ was not in vogue then) and so his net investment was only the stamp duty and registration charges he paid as no consideration was actually paid or received.

Consequent to these transactions, as per the procedures/rules laid down, the Government guideline rate for this survey no. was revised based on the last transactional value; on the strength of Alex’s 2-cent micro transactions, this was officially pegged at Rs.10,000/- per cent, which was later confirmed to the bank officials as noted in the earlier part of this story.

Thus having engineered an artificially high Government rate for the land, he pulled off this fraud by taking a huge loan against this property convincing all concerned that the Government rate being what it was, the true market value ought to be higher. This was not challenged by anybody as it was kind of an accepted wisdom in these parts of the country. Having got a sum which was at least seven to eight times his land’s real worth there was no way he was going to repay the borrowed money!

That Government’s guideline rate can be so easily manipulated to unleash such a fraud was a revelation to the bank and its engineer!

When the author who was not aware of this story was asked to give an opinion about the property some two years after the loan went bad, he inspected the site and assessed it at about Rs.2000/- per cent; i.e. Rs.10 lacs overall. Finally after few more months the bank managed to sell it off for Rs.12 lacs or thereabouts and in this process the bank took a hit of Rs. 28 lacs plus interest.

A proper technical due-diligence of property would have helped the bank avoid this pitfall!

Alex is said to have reinvested the proceeds that he palmed off from the bank and he is now comfortably off, it is believed!

Do write to us in case you have some interesting information or feedback!

BVe Consulting Engineers

Engineering Project Consultancy & Property Advisory Services,

Residential-Commercial-Industrial-Infrastructure Designs

Due-diligence studies -Asset valuation services

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Why living in Chennai’s suburbs is such a nightmare?

The title should not give you a mistaken impression that living in Chennai city proper is as though a wondrous experience! This is intended to convey the relatively more difficult civic life one endures in the suburbs than the city. The difference if at all is in only the degree of severity of the issues involved!

Let us take for example the traffic in suburbs. It might be quite obvious to anyone the interior roads in most of such suburbs are quite narrow (mostly 20ft wide and rarely 30ft wide). This is irrespective of the length of the streets. One of the basic parameters of town planning is that higher the length of the street, broader it should be. Here we have situations where even a kilometer long street is just about 20ft to 25ft wide. With unimaginatively built storm water drains jetting above the ground, encroachments and parked vehicles taking significant space, you end up with one or one and a half lane for traffic. Count on your lucky stars if you have to navigate deep inside such streets as this may be kind of a one way ticket. If you are fortunate enough you don’t encounter some other vehicle in the opposite direction or you have some margin space somewhere to squeeze your vehicle in and let the other one pass. Or else you end up reversing so long you end up back in the main street, that too only if there are no vehicles behind you!

Then let’s take the case of piped water supply and proper sewerage. Are these such luxuries that suburb-walahs should not expect it as a matter of right?; Why is that these poor souls must fend for themselves with brackish water from tube wells that seem to be reaching so deep into the bowels of mother earth that soon our unit of measurement will turn from the present hundreds of feet into thousands of feet, when it comes to talking about the depth of these wells. Are these people not entitled to piped treated water in their door steps?; Is a proper public sewer system that would give them deliverance from the septic tanks and cesspools of waste water which are breeding grounds of tortuous mosquitoes and many a disease, too advanced a civic amenity?

How about power supply through underground cables than the dangerous overhead variety?; Most of the readers in the suburbs will have seen overhead non-insulated power cables so close to balconies that a child can just lean and touch it and pay for it dearly with life. Or what about the dysfunctional street lights , 90 degree turns in narrow streets, street dogs, clogged storm water drains, rotting garbage, crowded and mis-sized apartment blocks in narrow streets, private buildings in the middle of roads, absence of government schools, hospitals, potholed roads that get marooned with the slightest of rains, complete absence of sidewalks and parking space and the battles one has to wage ...Continue Reading

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Collapse of the building preceded by the collapse of the system !!

The Chennai multistoried tower’s recent collapse killing 60 odd poor construction workers, in my view, is an incident that was waiting to happen. May be this is Chennai’s first, in terms of the magnitude, but unless effective steps are put in place in double quick time, this won’t be the last. Even before the debris in this site was removed it was followed by another collapse near Redhills where a huge compound wall fell killing eleven poor people including children . Read on and you will know why such incidents are going to be repeating themselves in the forthcoming days, though I hate to say this !

As for collapse of the multi storied building, several views are flying thick and fast and various theories are floating around. One says the developer got additional sanction for extra floors even as the work was in progress and he went on to add five more storeys without bothering so much about the need to strengthen or re-do the foundations and RCC columns which will be loaded almost twice the load earlier designed for.

Another theory says being proximate to lake bed and given the unsuitable type of foundation system (rather than deep piles to take it upto the rocky layer deep below), the soil gave way and resulted in this catastrophe.

Another view is that the quality of designs and construction was below par and did not meet the codal provisions.

Many are blaming the CMDA for sanctioning extra floors through some exemptions which would not have happened without the ability of the developer to play the system. While one doesn’t know if the CMDA’s system of approvals has been compromised, it need not necessarily mean it led to the collapse, for this body sanctions the construction based on its compliance with land usage norms and its conformity to the development control regulations and nothing more. Checking the engineering designs and soil conditions or suggesting changes in design are beyond its jurisdiction , expertise and mandate. In fact CMDA’s approval for such developments expressly state that the structural design and construction are in the realm of the developer and CMDA is in no way responsible for the same !

May be if the building construction was already on when the additional floors were sanctioned, the CMDA could have got an undertaking from the structural designer that structure already executed is capable of taking the load from 11 storeys rather than 6 storeys as per the original approval. I do not know if this was done or not. If insisted upon this would have ruled out one possibility for the failure. In any case it was not CMDA’s task to examine the structural stability of the building.

It is said the structural designer who gave the designs was not associated with the project right after approvals and someone else has been looking after the structural aspects. It is also said lot of changes have been effected at site in terms size and positioning of the structural elements like columns and beams.

Be these as they may be, I have some small but nevertheless relevant questions:

a)   How is that an ex-bank employee turned developer feels confident (over confident, rather) enough to construct such a tower all by himself without the help of senior architects and structural designers ?;  even after the original designer opted out of the system,it appears the developer went on with a make shift arrangement for this most important component of such huge buildings. Amazing confidence indeed , but at what cost ?

b)   How is that a person who is said to be a draughtsman acted as the structural engineer in-charge during the construction ?

c)   How is that the well heeled buyers go for such developers whose background is hardly impressive when it comes to developing such high-rises ?;

d)   How is that none of the buyers took an engineer from his/her side to understand how the construction was being carried out and if indeed such inspections took place, how come no one could fathom such deep flaws ?. After all if I am buying a property and am not technically qualified, I would take such a help from some known engineer and try to understand if my investment is safe.

e)   How is that none of the bank engineers who must have visited the site in connection with the property loans, suspect anything wrong at all ?

The collapse of the system :

Till a decade back there was always a lurking fear in the minds of designers, contractors , builders and soil analysts with regard to  structural and soil aspects. If the design assumptions and the site conditions do not tally, the issue used to be referred to the concerned expert who would visit the site and take a call suitably which might involve complete re-design as well.

Designers used to decide how a design ought to be in so far as important aspects like type of foundation, size and layout of columns, extent of reinforcement and such technical aspects are concerned. Over the years with rapid computerization and commodification of designs, no designer has a ‘feel’ of the structure or the site; .Hawk eyed architects and design engineers used to visit the site frequently and spot even minor transgressions and had the authority to correct them.  The resultant product would be a robust development where there will be no room for such nasty surprises.

These days there is  proliferation of designers and the latter bend over backwards to please the new crop of bossy and purely profit driven developers; designers try to display their ability to give ‘ competitive & economic’ designs rather than safe designs with adequate margin for  errors in execution, so that they remain in the reckoning of the private builders; given these and the falling returns from this profession and the rapid pace of construction which permits no periodical meetings or changes to suit site realities as they emerge, the architects & designers have largely lost their space and authority in the project sites. Site engineers used to exercise vigil to ensure there was no compromise in the quality of works –especially in the case of RCC elements !

During the past decade or so, many developers and project promoters, have developed a tendency to outguess the structural engineers in terms of how a beam/column/foundation should be sized , what type of reinforcement is to be used , what should be the depth of the foundation and the like. They may have a degree in finance or marketing or HR or may not even any educational qualification to speak of and would not be able to tell the column from a beam, but nevertheless they venture with their ‘suggestions’ and ‘judgments’ as to what constitutes a good structural design; if not challenged , they even go overboard with their ‘gnan’  on electrical engineering, HVAC, fire protection and the like.

Some meek structural designers try to satisfy the whims of these characters and design inadequately sized columns and foundations with minimal reinforcement with a prayer in their lips.

Where such poor designs is further compounded by poor soil conditions and defective work practices leading to weaker structural elements, then it becomes a disaster waiting to happen !

Simultaneously execution standards have gone haywire with the steep fall in the standards of engineering education!! We have site engineers who do not know how many millimeters constitute one meter or vice versa ! This is no exaggeration as I have come across several engineers with such astounding levels of ignorance. Obviously one does not expect them to ensure quality work at site.

Therefore the above failure is symptomatic of a deeper malady and setting it right  is going to be a long and tortuous process, if at all we start working on this !

The simple truth is that there are no simple and quick fix solutions !!

Do write to us in case you have some interesting information or feedback!

BVe Consulting Engineers

Engineering Project Consultancy & Property Advisory Services,

Residential-Commercial-Industrial-Infrastructure Designs

Due-diligence studies -Asset valuation services

Chennai -600 083

bv.consultingengrs@gmail.com

www.bveconsultingengineers.in

www.bveconsultingengineers.com

Harass ! Hound ! Halt ! The saga of construction permits in India !

Aditya Builders (name changed), a small time construction company, routinely executes construction contracts for medium sized builders and small factories in and around a southern metro. The proprietor, Adityaram, a trained engineer with more than two decades of experience as a construction engineer, has set his sights high. He is credited to go about his work passionately and was widely appreciated by his clients who have been with him for several years now. However being a very competitive business that construction is, the capital formation in his books was modest.

At some point of time, a small piece of land in a suburban area was offered to him for sale by a known person. Here was an opportunity to go higher up in the value chain of construction business, he thought and finally decided to take the plunge. Being capital starved he had to borrow almost 70% of the property value from banks and private lenders.

Adityaram planned to develop the property as a small apartment building and was enthusiastic as it was a major step of forward integration for him.

He did not know what really lay ahead for him!

He applied for transfer of patta in his name as it was a technical necessity. The process of issue of patta has been computerized and what should happen as a routine measure, would take about two months, he was told. The Revenue Dept. staff are busy on flood relief duties, they reasoned. Of-course things can speed up but some ‘expenses’ will be there, he learnt . Aditya was adamant he wouldn’t pay.

Two months passed by and after repeated visits and endless waits in the dirty corridors of the Tashildar office, he got his patta that too without any speed money! ; A small victory, he told himself.

Next was the issue of getting approvals for construction. He submitted his plans online through a licensed surveyor; ideally the plans should get cleared within 72 hours, but there was a software glitch, he was told. After some fifteen days, the online clearance was received. Armed with this and other property documents he sent in his application with relevant attachments and prescribed fee.

After a long wait Aditya approached the concerned officer to know the status of the application. He realized even though his papers were in order and his drawings have been pre-approved, there were still ‘demands’ to be met. The Executive Engineer he met ‘briefed’ him about the ‘going rates’ for such approvals. What happens if someone doesn’t pay, Aditya ventured to ask. Well, things get delayed; officers don’t take much interest! After all they have lots of other work and your work gets de-prioritized, the EE said in a thoughtful and compassionate tone, as if he was taking pains to help Aditya. See, you have invested money and a delay of even one month can set you back by way of lost interest on locked up capital; besides material prices are going up rapidly and as a  builder you would be better off not minding the small payouts! After all take this  as just a small additional layer of cost which gets offset by the savings in time! The EE was now talking corporate finance!!.

It was the time to make up his mind! Aditya rose and said in a firm tone he wouldn’t pay up. Nor would he countenance unnecessary delays! He added he will take up the matter with higher ups if necessary. The EE was no longer interested in him and buried himself in other files, as if saying Aditya could go out.

In the next few days Aditya thought dispassionately and shot out couple of letters under RTI Act. The replies, mercifully, were received in fifteen days. Studying them he learnt that the officials are obliged to clear the files for new construction projects of the category which Aditya applied for, within a maximum of 14 days and if they were rejecting a proposal they need to communicate to the proposer the detailed reasons.Given the on-line pre-approval of plans which Aditya had already completed, the officials had to perforce come out with very good reasons to reject his proposal, Aditya reasoned.

Next he shot out a detailed letter to the approving authority asking for reasons for the delay in his case and why the laid down guidelines are not being adhered to. He would approach the court for compensation for the delays caused by the officers concerned and they would be asked to compensate him in their personal capacity besides claiming damages from the civic body, his letter added for good measure.

A week passed and then he got a call from the civic body and was told his approvals are ready.

He reckoned an additional three months time had passed beyond the ‘normal time’ period for such approvals.

At long last he commenced the work at site and the construction gathered steam. One fine morning Aditya was asked to meet the local councilor. Aditya, sensing trouble yet again, just ignored it. There were repeated calls and he went on stonewalling them. Several warnings, some subtle and some not so subtle, came his way, but he stood his ground. How councilors can manage their wards if people who run their business there do not contribute, he was asked to clarify!. The present councilor doesn’t take no for an answer, was another friendly advice from one of his sidekicks!; Later he would realize had he met the councilor the demand would have been approximately INR one lac per apartment.

When he had planned the first level roof casting work, he had to store lot of materials on part of the road as the site was quite small and the materials had to be necessarily kept on the road. Aditya was taking due care to avoid traffic blocks due to material stack. Just as the labour team arrived to start the work, there was a group of officials from the local body who said he was blocking traffic and the work could not proceed. They had brought some policemen to the site who too commanded Aditya to stop.

A livid Aditya decided to take the bull by its horns ! He asked the officials if they had stopped similar works elsewhere and there are atleast a dozen such construction works going on within a kilometer range, he pointed out. Why is this selectivism, he demanded to know. He asked them to give the order in writing and said he is prepared to pay the applicable fine for such temporary disruption to traffic. He warned them he would approach the court and ensure that he was being targeted and singled out. After some time the team from local body lost its steam and went away saying he would be penalized for the traffic disruption. The police team booked a case and went away. After an hour of stoppage, the work resumed.

There were similar issues at the time of giving power, water and sewer connections and he had to endure substantial pressure, strain and delays at every stage.

Finally when the work got finished, he estimated he had saved nearly INR 10 lacs by his spirited approach. This was nearly 10% of the cost of the construction and added to his bottom line. He also worked out the additional interest cost on account of loss of time was nearly 30% more than the notional savings! .

But he could not resist feeling a moral victory of sorts!.

If this is the pressure a developer has to face in a small project (which happens in almost all the projects) the readers can imagine the kind of demands a major project proponent will countenance!! And the costs of such blackmail and rank illegality are being borne by the developers and users of the project ultimately!

Multiply it million times, you get the effect it has on the overall economy by way of loss of productivity, escalation of costs, wastage of resources, undue and unjust enrichment and loss of revenue for the exchequer!

Let us start resisting illegal demands of this sort in our own small ways and soon it will form a crescendo!

Do write to us in case you have some interesting information or feedback!

BVe Consulting Engineers

Engineering Project Consultancy & Property Advisory Services,

Residential-Commercial-Industrial-Infrastructure Designs

Due-diligence studies -Asset valuation services

Chennai -600 083

bv.consultingengrs@gmail.com

www.bveconsultingengineers.in

www.bveconsultingengineers.com