The occupancy certificate signifies that the building has been constructed with essential civic amenities in place and adheres to the approved plan. Additionally, it is a crucial requirement for any subsequent transfer of ownership.

In a recent order, the Bombay High Court (HC) quashed the occupancy certificate (OC) obtained by a Mumbai-based developer for a couple of apartments in a high-rise, as other flats in the building did not have an OC. The court ruled that, “It is illogical to expect that there can be an OC for one single floor in the middle of a building, but not for any of the other floors. An OC applies to the building and not to individual tenements in it.”

The reason why an OC is so important is because it is the final approval given to builders before home buyers can move into their newly-constructed flats, legally. Across the country, this certification is essential for developers to register housing units in the names of home-owners. However, it is frequently observed that possession is granted and registration completed without obtaining an OC.

Below, we examine the case in a little more detail, and also understand the significance of not only the OC, but also other certifications essential for housing units.

The case

The court's decision was based on a contempt petition filed by Najma Aslam Merchant against Darvesh Properties, for the alleged violation of the High Court's prior order. Merchant had sought the court's intervention in 2022 to expedite the redevelopment of Quettawala Residency  and secure the OC for her two flats on the seventh floor.

Based on discussions following the filing of the writ petition, the parties reached an agreement, subject to the terms outlined by the HC on March 16, 2023. As part of the settlement, the developer was to provide two cheques, each dated March 10, 2023, totalling Rs 59,78,525, representing the transit rent payable.

To put it simply, the builder was to redevelop an existing property, and the tenants were made to move to another location, the rent for which was to be paid by the builder. Once the original property was ready for possession, the tenants were to move back in.

Transit rent is paid by the developer or the relevant development authority to the owners or occupants of the housing units who vacate their premises for redevelopment.

Per the original plan, the developer had committed to obtaining the OC by June 20, 2023. If that didn’t happen, the agreement said that the builder would pay a certain amount every month until obtaining the OC. The court noted that while the builder had paid the transit rent as agreed, he had not obtained the OC for the entire building, but only for the two flats that were due to the petitioner.

The court rejected the developer's argument, emphasising that there is no concept of flat-wise OC. “Partial OCs are granted to parts of large projects which are built in phases to enable grant of possession till the completion of the project. The High Court has held that the concept of flat-wise OCs does not exist. An OC is granted for a portion of the building or the full structure, i.e., it covers the building up to a certain floor,” said Manmeet Kaur, Partner, Karanjawala & Co.

The importance of an OC

The occupancy certificate, as its name implies, is a certificate confirming that the property is suitable for habitation. “An occupancy certificate is a crucial document attesting to the building's compliance with local regulations and approved designs during construction,” said Kaur.

According to the rules, the holder of a development permission, usually the developer, should apply for the OC from the relevant authority. “The OC indicates that the building is equipped with necessary civic facilities. It is also essential for any further transfer of ownership. Lack of an OC may end up delaying or preventing the sale of the property.” added Kaur

OC vs CC

There is a difference between an OC and a completion certificate (CC), and homebuyers often mix-up the two. “The CC is issued by a licensed surveyor / engineer / structural engineer / architect attesting to the fact that the construction adheres to the sanctioned plan. Whereas the OC certifies the building is compliant with the sanctioned construction plan and fit for occupancy,” added Kaur.

Despite the importance of these certificates, many developers either delay obtaining them, or fail to do so. This is because there are significant costs associated with obtaining these, which the developers want to avoid. In cities like Noida and Gurugram, numerous homebuyers eagerly await possession of their homes or utility connections from government agencies, as there is no OC. Also, many individuals are yet to register or occupy their apartments due to the absence of an OC.

Experts note that a substantial percentage of real estate projects, especially in the Mumbai Metropolitan Region (MMR) and the National Capital Region (NCR), lack completion certificates. In the  NCR and MMR, the majority of buildings developed and sold on a floor or apartment basis typicaly lack a CC.

According to experts, about 80 percent of buildings  in Mumbai and Delhi lack a CC, and a significant number  do not possess an OC.

Besides CCs and OCs, builders need to secure various other certifications before commencing construction or delivering the property to buyers. “These include NOCs (no objection certificates) from authorities like the Pollution Control board, railways, defence authorities, etc., for buildings that require special clearances ,” said Kaur.

Homebuyers are advised to diligently verify these certifications prior to making a purchase, as they play a vital role in ensuring the safety and security of the property.