Why The Occupancy Certificate Is Essential For Home Buyers

Updated on December 28, 20185 mins read
Occupancy Certificate

Buying a home is a complicated and time consuming process. There are many documents which are required and obtaining them all is tedious to say the least. However, with a little bit of research, this process can be streamlined and common pitfalls can be avoided. One such pitfall is a document called the Occupancy Certificate (OC). Most first-time home owners don’t know about the OC and while some do know about it, they don’t realize its importance. If you are considering buying a home for the first time, a few minutes spent understanding the OC would be time well spent. Occupancy Certificate

What is the Occupancy Certificate?

The Occupancy Certificate is issued by the local planning authority to certify that the building is fit to be occupied. The OC is issued only after verification of adherence to Building Regulations, Safety Regulations, provision for utilities etc. The OC can only be obtained by the builder after the Completion Certificate is issued by the Planning Authority.

What is the Completion Certificate?

The Completion Certificate is proof that the building construction has been completed as per the plan approved by the local planning authority and in accordance with all the construction laws. The CC must be obtained by the builder upon completion of construction.

How important is the OC?

The OC is a mandatory document that must be obtained before you can occupy your home. Legally, you are not allowed to occupy your home without the OC. The OC is required for applying for services like:

  •         Water Connection
  •         Sanitation Connection
  •         Electric Connection
  •         Applying for a home loan
  •         Switching your home loan

Common issues with the Occupational Certificate (OC)

  1.       Buying property under-construction:

When you buy a property which is under construction, the OC is yet to be issued to the builder and it is not possible for you to get it. Once the building is completed, you should demand the OC from the builder. If the builder refuses to give you the OC, then you MUST NOT TAKE POSSESSION. In this situation you are protected under Maharashtra Ownership Flat Act (MOFA) and the builder is required to give you the OC by law. You can file an official complaint against the builder if needed. If you take possession without the OC, then you are no longer protected by MOFA and the builder has no incentive to obtain the OC. Also, since the final payment to the builder is done before taking possession, this is an additional push for the builder to meet your terms.

  1.       Builder gives Completion Certificate instead of OC:

Since the builder needs to first apply for the Completion Certificate and then for the Occupancy Certificate, it is a time consuming process. To quickly sell completed houses, some builders might try to give you the CC and tell you that it is the same as the OC. This is seriously misleading and will create years of headache for you. Always ask for the Occupancy Certificate in addition to the Completion Certificate and be wary being misled by dishonest builders.

  1.       Documents in local language:

Since the Occupancy Certificate is issued by the local planning authority, it might be written in the local language. If you are not fluent in the language, it is recommended that you get your documents verified by an advocate’s office. In Marathi for example, the Occupancy Certificate is called Bhogvata Pramanpatra (भोगवटा प्रमाणपत्र).

  1.      Old OC Application Receipt:

Sanjay, a SwitchMe customer, found himself stuck in a difficult situation last year. He had finalized an apartment in Thane and he asked the builder for the OC. The builder told him that he had applied to the Thane Municipal Corporation for the OC and gave Sanjay a copy of the application receipt. Convinced, Sanjay paid the token amount to the builder. When he approached ICICI bank for a home loan, he was informed that he could not get the loan because the OC application receipt was 3.5 years old. Since the OC is generally granted within a 1 year, the bank suspected that something was out of place. Sanjay approached many other banks but they all rejected his application saying that the OC application should not be more than 1-1.5 years old. Out of options, he finally took a home loan from DHFL at a much higher rate of interest. In cases like these, a DHFL home loan might be the only option. Looking for a home loan? 

  1.       OC issued by Gram Panchayat:

Sneha, a 27 year old techie, has a different story altogether. With her parents residing in Delhi, she decided to invest in a spacious 2 BHK in Nala Sopara so that they could relocate to Mumbai. Since Nala Sopara was previously under Gram Panchayat, the builder provided Sneha with an OC issued by the Gram Panchayat. Just like Sanjay, Sneha’s home loan application was also rejected even though she possessed all the documents. Sneha didn’t know that the OC must be obtained only from the local Planning / Municipal Authority. The Gram Panchayat OC is not recognized by loan lenders and you should always check the OC before finalizing the property. In the end, Sneha forfeited the booking amount and bought a different home with a legitimate OC. In spite of all these issues, there are a large number of homes which are occupied in the absence of an OC and there is no telling when disaster might strike. In the iconic Campa Cola Compound case, the builder sold prime apartments in Worli without providing the OC to the buyers. The buildings had been approved for only 6 floors, but the builder constructed two high-rise buildings of 20 and 17 floors. This deviation from the sanctioned plan was the reason that the OC was not issued. The matter was taken to court by Brihanmumbai Municipal Corporation and after living for years without water, electricity or sanitation connections, 140 families are facing eviction.

Special Cases

  1. Builder not alive: If the builder dies without procuring the OC, then the society can apply for the OC instead of the builder. A penalty needs to be paid after which the OC can be obtained. This can only be done by the society and not by an individual house owner.
  2. Building older than 20-25 years: If the building was completed more than 20-25 years ago, it is possible to get a home loan without the OC.

Once you take possession of a house without the OC, there is nothing that you can do as an individual to remedy this problem. So our heartfelt advice to you is that before you buy any property, carefully conduct a study of the documents being provided and only then make your decision. Often the builder will try to rush you to make a decision quickly with the threat of selling to another buyer. Ignore everything and proceed systematically. A few days of caution might save you decades of regret.

Aditya Mishra

Aditya Mishra

Aditya has a Post Graduate Diploma in Finance and strategy from IIM Bangalore. He comes with rich experience in the field of strategic investments, venture capital and technology. During his nearly 7 year stint at TCS, Aditya gained deep experience in start ups and exploring new technologies and business models. As director innovation partner Network, Aditya identified start ups with innovative technologies and incubated them to maturity. Aditya's deep understanding of upcoming ubiqutous computing trends helped TCS make strategic investment decisions in this area. As head of sales West India, Aditya spear headed new collaborations for TCS in the banking and financial services space. With a zest for start ups and new innovations, Aditya co-founded Headstart Netwrok Foundation in the year 2007. This is a non profit organisation that promotes entrepreneurship. Aditya founded SwitchME in the year 2012. SwitchME was a pioneer in the field of specialised home loan advisory, conveniently based on an online platform. Today SwitchME has helped over 1000 customers with new home loans and balance transfers right at their doorsteps.

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  1. Pravin
    Jul 10 2016 at 2:05 pm

    What legal action against builder if he refuse to provide occupancy certificate

    • Sumita Nath
      Sumita Nath
      Oct 05 2016 at 3:24 pm

      You need to issue a notice to the builder to apply and handover Completion Certificate / Occupancy Certificate, within one month from the date of issue of your notice. If the builder does not respond, file a complaint in the consumer forum against builder to direct him to obtain OC