India's Supreme Court ruled yesterday that developers cannot sell parking spaces as independent real-estate units. The court ruled that parking areas are 'common areas and facilities'. This upholds an earlier Bombay High Court ruling. [Update: you can see the full ruling here.]
First, let's understand the ruling.
First, let's understand the ruling.
According to PTI news agency (via YahooNews):
A Bench of Justices R M Lodha and A K Patnaik in a judgement rejected the argument of a real estate development company that they are entitled to sell garages/stilt parking areas as separate flats to owners who intend to use it as parking facilities.
"The promoter has no right to sell any portion of such building which is not flat within the meaning of Section 2(a-1) and the entire land and building has to be conveyed to the organisation. The only right remains with the promoter is to sell unsold flats.
"It is, thus, clear that the promoter has no right to sell stilt parking spaces as these are neither flat nor appurtenant or attachment to a flat, Justice Lodha writing the judgement said. The apex court passed the judgement while dismissing the appeal of the promoter Nahalchand Laloochand Pvt Ltd challenging the Bombay High Court''s ruling that under the MOFA (Maharashtra Ownership Flats Act) a builder cannot sell parking slots in the stilt area as independent flats or garage.
|Housing in Ahmedabad with parking at ground level between the stilts.|
I fear that this ruling may be misunderstood to mean that unbundling of parking has been forbidden completely or that charging for off-street parking has been outlawed.
Do you know what I mean by unbundling? Here are some basics on parking unbundling from this nice primer from Boston:
The cost of parking for residential and commercial units is often passed on to the occupants indirectly through the rent or purchase price ("bundled") rather than directly through a separate charge. For example, a three bedroom unit might come with two parking spaces included in the purchase price or rent. This means that tenants or owners are not able to purchase only as much parking as they need, and are not given the opportunity to save money by using fewer parking spaces. The alternative is to unbundle parking - rent or sell parking spaces separately, rather than automatically including them with building space. This is not only more equitable, but can also reduce the total amount of parking required for the building.So, does yesterday's Supreme Court ruling outlaw parking unbundling altogether in India?
I don't think it does. It just outlaws one specific kind of unbundling. (Unless, there is much more to the ruling than the newspapers have so far reported)
The news reports suggest that India's Supreme Court has ruled out only the option of buying and selling parking separately as real-estate. It has not ruled out other options.
For example, managing parking as 'common areas' is compatible with having a system of parking permits for tenants. These can be priced of course. Managing parking as 'common area' is also compatible with deciding to charge visitors for parking, which would be most relevant for commercial complexes.
The Supreme Court ruling means that the developers of residential apartments or commercial buildings must hand the parking areas over to the management organisation (such as the 'housing society').
However, the news reports on the ruling do NOT suggest that the Court has forbidden unbundling altogether.
Building management committees (but NOT the developers) can still unbundle parking and charge for it if they choose to. I think such committees will find that charging/unbundling is a useful way to manage conflict over their on-site parking.
Any thoughts on this from India? Have I interpreted this ruling and its implications correctly?