Investing In An Unauthorised Colony? Know This

Neeta Sharma, a 50-year-old HR consultant, bought a 200-sq meter land in one of the unauthorised colonies of Delhi and constructed an independent house on it. She received a sale deed, a power of attorney and a copy of Will registered with local authorities. Sharma even has a Voter id, a Permanent Account Number (PAN) card, and an electricity connection registered at the same address along with other important documents of the home.

But, 12 years after the actual purchase, Sharma and her neighbours who had property in the same area have recently received a notice from a third party to show their property papers at the local police station. The third party is reportedly trying to find out its 2000-sq-yard land but don't have the Khasra Number. On asking further, Sharma found out that other residents of the area have property papers with multiple Khasra Numbers. Since there were multiple sellers who sold the property to the existing owners, they didn't know the exact Khasra Number and therefore, mentioned nearby numbers as well. Now, if the third party proved that the actual sellers do not have any right over the land, the will, the sale deed and the POA can be nullified.

This is not the only scenario, many such cases surface in the lives of homebuyers who have invested in unauthorised colonies and did not perform due diligence. But, despite the risk involved, homebuyers still make such investments.

What makes unauthorised colonies more attractive?

Price rise: The demand for properties in unauthorised colonies is always on a high due to several reasons. First, there is a large scope of earning rental income as tenants prefer these colonies for offering similar units as that in the nearby authorised colonies at a much affordable price. Second, people who had black money invested in such colonies to earn monthly rent. Apart from this, realtors often speculate the regularisation of these areas which is one prime reason why property prices keep on a constant rise in such areas. 

Location: Most of the unauthorised colonies are located in proximity to a posh authorised colony hence, indirectly offering the infrastructural benefits to the residents here. For instance, Uttam Nagar lies near Janakpuri, Khirki Extension is close to Saket, Aya Nagar shares the common neighbourhood with Arjan Garh, and Rajiv Colony lies behind Rohini. All of these illegal colonies enjoy Metro connectivity and the development is driven by market demand including roads, parks and shopping zones.

Almost realistic facilities: Though illegal, these colonies have proper water and electricity connection for local residents. Some of these areas have been provided with gas lines as well. People staying here on rent upgrade from a 1BHK to 2BHK and settle here permanently.

On the flipside

Though consistent price rise makes properties in unauthorised colonies an attractive proposition, a buyer should not forget the hindsight of investing in these areas:

• Parking is a very serious problem in these areas as the developer does not follow the building code and constructs on the 100 per cent ground area.
• Internal roads are not developed nor maintained. Therefore, these are more prone to water logging and flooding in monsoon.
• Waste management, garbage disposal, sewage system in unauthorised colonies are always a challenge
• Public amenities such as parks, green space, community halls are missing
• Highly populated but the infrastructure is semi-developed
• The gentry is limited to lower to middle-class group
• Safety is a growing concern here as unlike gated complexes, there are no provisions for security arrangements.
• Banks do not offer loans to buy properties in illegal colonies
• The due diligence gets tough as it is hard to identify who is the real seller and the owner of the property

What does Delhi's state government say?

While Delhi government has promised to regularise the colonies and has opened the registry for the unauthorised area in 2015 but the process stopped mid-way. This was after the urban development ministry interfered asking to submit details of plot size and population in these colonies. In the latest move, the Delhi High Court has set up a committee comprising officials from the Centre and the Delhi government to decide the issue of regularisation of unauthorised colonies.