Are Developers Justified in Charging a Premium for Park Facing Flats?

The unregulated practice of levying a premium for park facing flats is common in the NCR and surrounding areas. Let’s examine the rationale forwarded for this.

In our cities, which are gradually turning into concrete jungles, the importance of greenery cannot be over-emphasized. The nearest that residents can get to greenery of any worth, is by way of a park or a garden in the locality they live. This is the minimum natural landscape that a buyer of such exorbitantly priced apartments would deserve. However, housing projects that offer a park-view as an attraction for their project, extract a premium over others projects in the same locality, not similarly endowed. To add to this, in such projects, from among the available flats, those apartments that are park-facing are charged even more than a flat which is road facing or at a corner.  The practice of charging extra for a view or other privileges is known as Preferential Location Charge (PLC). A recent survey conducted in Gurgaon of various properties that fall in this category revealed that on a base rate of Rs. 5,500.00 per square foot, an additional PLC of Rs. 300-500 per square foot is being levied by builders. Similar situations were found to be prevailing in NOIDA and Faridabad, as well. Incidentally, this is a very ambiguous area of negotiation for a buyer as there is no general clarity of what measure of greenery, size of park/garden, constitutes as applicable for PLC. As the green cover differs from city to city and locality to locality, the buyer is at the mercy of the developer, regarding the interpretation of these criteria.

What is the Extent of Greenery provided?

The Ministry of Environment and Forests, Government of India, has stipulated the norms and standards for environment clearance of large construction projects in its manual on the subject. It speaks on the need for parks and green cover an important leverage for ensuring climate control, offer sanctuary for birds and insects and other essential species in the local environment, to control noise and to act as a boundary to strategic installations like airports, railway lines and roads and highways. The National Building Code lays down that open spaces should be 15 percent of the area of the layout or 0.3 to 0.4 hectares per 1000 persons.

The norms and standards for parks and open spaces have been defined distinctly by the national body, but different state level authorities and bodies have interpreted them differently by clubbing the two categories in one category leading to down-sizing of these areas. For instance, the Punjab Urban Development Authority has mandated that for a residential development of 100 acres, an area of 5.7 acres should be earmarked for use of parks/open spaces. This is confusing and misleading and fraught with ambiguity and poor implementation in reality.

Why Levy a Premium?

Nitin Chaddha, a Gurgaon realtor, affirms that, “The premium that is charged for park-facing apartments, is related to the benefits of living next to green areas,” This rationale finds resonance in other developer’s projects as they include landscaped areas, parks and leisure spots without any consideration to the fact that these available areas are suitable and adequate for a large population that will be residing in their projects. The difference in pricing of park-facing apartments and those that do not open out onto any park is anywhere between 10 to 20 percent, on the price arrived at, during finalizing the deal with the buyer.

Not surprisingly, the re-sale property market also exhibits this trend. In the sought-after markets with established value evaluations, properties located near or at the edges of parks are priced higher than others at locations bereft of this benefit. Experts who have watched changing trends through highs and lows of the property business admit that during the periods of boom, the difference between these two categories of properties has been as much as 50 percent. Further, the ambiguity of the distinct difference in the categories of space is blurring the efficacy of such facilities. Due to increasing demand for such spaces, developers are turning out these spaces as ‘open spaces’ instead of developing them as parks, thereby side-stepping their responsibilities.

What’s the Present Trend?

The demand for distinctly different qualifying factors in acquiring properties, buyers are demanding properties that are located near lakes, ponds, waterfalls and rivers. These may be natural or even man-made. The demand for locations near commercial ventures like golf courses, central theme parks, airports, stadiums, and expressways is also increasing. This trend was witnessed when a golf course was being created at Dwarka, and there was a unusual upswing in buyers interest in the surrounding projects.

How to Proceed?

Let prudence rule your decision of entering into any transaction involving paying a premium for a flat that offers park-facing accommodation. Make sure about certain aspect of the deal i.e. the proximity of your apartment building to the park, the size of the park, the type of vegetation and its maintenance, whether the plot is planned for other uses in future, access to it and other such important facts. It would be useless to pay a premium to buy an apartment on the 20 floor for obvious reasons. Buyer should also discuss the deal thread-bare and negotiate the price to ensure a good deal. It would also be wise to seek an appraisal of it present value and its anticipated value in future.