Until the late 1960s and early 1970s, the very notion of a multi-tenanted building did not exist in India. It was only when people started co-owning buildings that questions like who should pay for the common areas arose. The whole concept of a super space was then introduced as a possible solution to the conflict. The Carpet Area means the amount of actual space the customer gets to use. ‘Super Area’ means the total amount of space, larger than the carpet space, which he has to pay for. The extra space is demarcated for use as a common area.

Terming the insistence to transact only in carpet area a ‘dangerous move’, Singaravelu of The Forum said, “As a result, buildings will not only end up being extremely ugly, but also inconvenient. It is important to give builders credit for building common areas and the customers must be willing to pay for them.” Seconding this, Laxman of Chesterton Meghraj said that in theory, charging for super space was justified: “It is fair to charge consumers for the common areas as directly or indirectly they do utilize them. There is no reason why the developer has to bear the expense and the understanding of this is essential.” .

Presenting the customers’ point of view, Chhabra of Megabowl pointed out that dealing with real estate is a harrowing experience for most Indians: “The main problem is that the break up (of carpet and super space) into whatever categories is not always disclosed honestly. This is something that every customer has the right to know.” Broadly arriving at an industry average of rentable space and space efficiency, in commercial areas, the equation is more or less standard with 65 percent space efficiency in structures like shopping malls, which is in sync with the international norms. Offices have a better space efficiency of around 75–80 percent. .

Singaravelu said that all transactions in real estate take place on the basis of two factors: area and rate. Labelling the entire debate as a seven-days versus one-week issue, he added, “The currency of trade in real estate is area. Area into rate is cost. It is the end amount that matters, irrespective of the terms in which you think of it – plinth, carpet or super. As long as the customer is aware of how the rate has been calculated, I don’t see why this entire carpet versus super debate should stretch on any longer!” Chhabra countered: “Of course the end amount is vital to the customer. But every customer comes with his own set of requirements and the question: Why am I paying this amount? For example, if a tenant has a requirement of 15,000 sq. ft. in carpet area, he can end up being charged for 22,000 sq. ft. in one place and 19,000 sq. ft. in another. How does he figure out the math of this?” .

While the entire industry uses a common set of terms, unfortunately, there are no universally accepted definitions for each of the terms. As Laxman put it, “Even as these definitions exist, the problem lies in their interpretation. Each developer has his own system of calculation. While most often than not a fair logic is being applied, it is the lack of standardization that is leading to much confusion”. According to Singaravelu, there are a number of larger issues that have led to the conflict. “Why are we buying buildings that are not completed? This is the real issue. Why are we buying promises?” he questioned. He reasoned that the insistence to buy completed structures would force developers to prove their claims and make them “scrupulously honest.” .

Highlighting another issue, Chhabra said that the role of developers in India is worth looking at: “Their core strength is the management of the environment rather than construction. The contractors are outsiders, the work of the architects and supervisors is outsourced - so the only thing a developer does is get the land, the approval for its development, and then he sells it. As such the developer is running more of a marketing organization than a construction company.” According to Laxman, one of the core difficulties arises from the fact that different buildings have different efficiencies. “Most buildings use different accommodation combinations and this, to a great extent, is why we cannot bring in uniformity in the dealings,” he said. .

The fact that the per sq. ft. area rate is determined more by the locality rather than the building itself is, according to Laxman, a matter of confused calculation: “So if an X amount is charged for inferior building, the developer of a superior building that offers much more, is forced to follow the same rate owing to the fact that they exist in a common locality”. He added that perhaps trends like these force developers to manipulate the area-rate calculation to ensure they receive the fair amount. Introducing an interesting point, Singaravelu spoke of how all the attention is on the horizontal dimensions of a space with no regard to the vertical dimensions. “If the usual floor to ceiling height is 3.5 mtrs. and I offer 6 mtrs., am I supposed to charge the same? If someone takes it for rent and puts up a mezzanine floor, should I charge for it? Some people might charge you a premium for it but it would have to be worked within the area and rate as you either increase the area or rate. Since the rate has to be in sync with the locality’s rates, it leaves the developer with only the area to increase,” he said. Even as these and several other issues continue to confound, the fact remains that it is the customer who usually has to pay for the lack of industry norms. Chhabra, whose Megabowl chain of bowling alleys in different cities across the country has experienced the difficulties that arise out of operating spaces in different regions, said: “First of all you have complications in your own product as not everything works every where. On top of that you have to work the environment differently in different areas. It is pretty difficult to manage this efficiently and profitably. With a multiple operation, people expect you to be cheaper, but this cost efficiency does not exist in the current scenario.” Surprisingly, investors coming from abroad enter the market with a fairly good understanding of the prevalent trends. Laxman, who worked with one such developer earlier, said that while interested parties from abroad find the Indian system different from what they are used to, they are not averse to investing once they understand the broad trend. “Most of them,” he added, arrive with some knowledge or understanding of the Indian scenario and always have an independent support system, like a real estate consultant firm, to help them. .

But irrespective of this understanding, Singaravelu believes that a change in practices needs to be worked out at the earliest. “Our immediate focus should be on standardizing the entire process,” he stressed. Singaravelu is a member of the Foundation for Fair Practices in Property Development in Chennai. He said that while the body had been actively striving to set standards, it cannot enforce them. Who will bell the cat then? Singravelu is inclined to put the ball in the consultants’ court. Addressing Laxman, he said, “As an international consultant, why don’t you create a system and regulate the industry? You could start with building a set of norms which will apply to every member and if anyone wanted to be associated with this organization, they would be bound by the rules.” Laxman replied that unless a government body supports an association, no rules could be enforced. He added, “A bureau of standards will have the authority to state that any development that happens in the country will have to follow this particular norm. So while we can support such a development, as a company we cannot enforce anything on our own”. Chhabra suggested that an architect could be used to certify that a building’s area is indeed the way its developers are promoting it. Such a certification by itself would add credibility. He added that the operative issues in commercial and residential areas were quite different. “While in commercial spaces, the customer’s main concern is how efficient the space will prove to be for him, residential customers are mainly worried about whether they are being taken for a ride”. .

Reiterating the need for uniformity, Singaravelu suggested, “Why don’t we come together as an industry and find a combination using both carpet and super areas and clearly state a uniform ratio?” He added that while this will be the uniform rule, developers could be left to create their own USPs on the basis of the extras they offer with the package. “It could be anything from a great view, to access, to two club houses,” he explained.

BLURB: .

--Some innovations like the concept of ‘seamlessness’ are already being worked on in an attempt to contain the developer-consumer conflict. -- Suresh Singaravelu, CEO of The Forum (Prestige Group) .

--The main problem is that the exact break up of carpet and super area is not disclosed honestly to the customer. — Sanjay Chhabra, MD of Megabowl .

--It is fair to charge consumers for the common areas as they directly or indirectly utilize them. -- Mahesh Laxman, Bangalore head of Chesterton Meghraj Property Consultants