Builders and developers play vital role in
redevelopment of housing societies. Currently, the redevelopment mania
of residential
properties is booming in full swing and one finds in Mumbai that
compound wall of every third property of a
society is covered with tins as number of small time builders and real estate
companies has joined the battle in an effort to grab a share of this fast
rewarding pastry.
There is also
likelihood of delay in completion of such projects followed by numerous
complaints from the buyers when flats are not delivered in tine as
documented. What do developers do when apartments are not finished on time?
Some pay back their clients as part of a penalty clause.
It is a long
ending tussle between builders and home buyers that never
seems to end delivering projects on time.
There are umpteen cases where builders have taken extra time to finish projects
while leaving home buyers to suffer fiscal setbacks.
Imagine a situation where you have booked a house in an apartment complex while paying hefty EMIs and also the rent for the temporary place that you currently occupy. Any delay in getting into your own house obviously means a financial loss.
To make ease
for the home buyers and to remove rotten from the housing sector, Housing
Department is planning to introduce new norms to control the
realtors. It has made changes in the draft bill and increase
the proposed fine from a maximum of Rs 10 lakh to Rs 1 crore, said Sachin Ahir,
Minister of
state for Housing.
According to
the Ahir “whereas in the draft bill to
control the housing sector Rs. 10L was the maximum fine, on the other
side market experts believes that penalty amount is insufficient for the
developers.” Due to the several complaints from buyers department has taken
it seriously and made the norms to ease it. The new draft states the maximum penalty
for an errant builder is Rs one crore.” This decision has been taken in recent
past in a meeting which has spearheaded by Ahir and attended by the Gautam
Chatterjee, principal secretary housing, and other senior Housing
Department officials.
As per the fresh reports final decision is yet to
be taken to the draft which will be tabled in the state legislature
for setting up of Housing Regulatory
Authority.
However, the
only change today is that builders now have a penalty clause in their agreements
with buyers. But that is not mandatory yet. There have been cases earlier where
people have contested builders in courts but in most cases that is a long
prolonged battle which not many are willing to go through.
There are cases
where people have complained about delayed possession of apartments
but these are not highlighted because there are no effective machineries
available to redress their grievances. However, the
larger and top class developers have their image to protect and to fulfill
their commitment they include a penalty clause
in agreements.
There are
numerous causes for delays such as late government approvals,
getting the completion certificate
after a long wait, raw material delays, cement and steel procurement, manpower
delay to list a few. Getting local approvals is a harrowing task and the new Environmental
Impact Assessment clearance that is now mandatory can even take up to nine months. At any point in
time, there is a 50 to 60 per cent
shortfall in unskilled manpower in the market. Civil contractors executing
projects have so much on their plate that managing different projects is
becoming more and more difficult.
According to
industry watchers, most developers face project delays. About 85-90 per cent projects
are delayed in some way or the other and that a lot of the delays are not in the
developer’s
control. The delays on account of various reasons do affect the
overall budget of a developer, increases the construction and storage cost and
hit the brand image and future of the company. Of course, it has a direct
impact on end-users as well.
A project in
which the buyer has given a minimal advance, the
pressure on the developer is far less compared to heavy advance acceptances.
The buyer’s capital is stuck and
they cannot go anywhere. In such a situation, strict penalty clauses are
imposed. This is one reason why clients rely on top class developers who are
sure of their deliveries.
Adv. R. P. Rathod adds that in
the last few years, developers have taken up 10 times more projects compared to
what they have done in their total lifetime. Have they
thought where the availability of the labor, brick, steel and cement is? How
will they manage all this? However, there are well-known construction companies
who are trying to get more advanced technology for construction
to match their deliveries. However, the cost of adopting such technologies in
India is still very high and not many developers are able to benefit from it.
The solution
lays in the urban development
ministries plans to create a regulator for the real estate sector. The
regulator would promote best practices and consumer interest. Where
there is a delay, the regulator will ensure that penalty is paid by the
developer. The regulator will also be
considered as an ombudsman between the
buyers and developers.
The housing
societies often get confused about choosing the best or right or so
to say, one HONEST builder. There
are many cases where the dreams of members of the housing society
are crashed when the terms of Development Agreement and
time schedule of completion of project is not maintained by such opportune
builders of III tier.
There are types
of voracious builders of III tire
who have abandoned or have delayed the redevelopment projects due to paucity
of inflow or diversion of funds from
the assigned projects in order to
acquire more and more projects beyond their financial means or are
simply not capable to execute the projects due to lack of competency.
Building a home
is a major decision for the lifetime and one would not
want to take chances. It is said that till you do not leave your society, you
are the KING. The day on which you
handover your property to the builder for redevelopment and leave your society,
the builder is the KING.
With regard to
the buying of flats/premises in projects other than redevelopment also, there
is an upward trend for buying the property. The cut down in interest rate and easy registration process
has attracted more property buyers to
invest on their dream home.
Today real estate is one of thriving industries and demand
for residential and commercial property
is increasing day-by-day. There are number of builders and developers in
city who offer or promise special features to attract prospective buyers.
However, there are some builders or developers who delay the completion of
project and the buyers suffer mentally and financially.
There are
property buyers who say his/ her flat’s possession has been delayed by six
months or more. Even those of reputed builders get delayed unexpectedly. The
properties buyers are the now considered consumers and finally have got a voice
and a forum to air their grievances. Using consumer courts, buyers
have been able to get back their money with interest or have been financially
compensated besides allotment of flats by the sloppy builders.
In case of
delay, the builder is liable to refund the amount paid with interest (for the
period of delay) as there has been a breach of contract. A promoter, who
constructs or intends to construct either commercial or residential building,
shall specify in writing, the date by which possession of the flat is to be
handed over.
In case of
delay, as there has been a breach of contract, the builder would attract
penalty under both Consumer
Protection Act and the Maharashtra
Ownership Flats Act. The builders are careless about
compensation because there is no detailed written down Real Estate Regulator
from the Government as yet, for
rigorous punishment to such builders. A consumer doesn’t want to get into a
legal tangle and just wants his flat in hand and the unscrupulous builders take
advantage of this helplessness.
Many property
aspirers buy an under-construction flat for the convenience of slab-wise
payment and lower rates. But is it such a good idea? A Mumbai consumer
says her flat's possession has
already been delayed by six months. Like her,
scores go through the harrowing wait for possession when housing projects-even
those of reputed builders-get delayed unexpectedly. To add to their woes, consumers
complain that builders rarely offer compensation, leave alone
actually doing it out.
Now, consider
the financial implications of delayed possession. A Mumbai consumer who was
promised his flat in June 2007 says, "My
agreement document clearly says that in case I intend to return the flat over
delayed possession, the builder will refund the original
amount with 9% interest from the day one he received the payment."
However, the
flat purchaser calls this an impractical solution. "Prices have more than doubled since we booked the flat, so giving it up
for just 9% interest does not make sense." Besides, he says, the interest rate on borrowed money
has also seen a steep rise. During the unfortunate wait, buyers lose out in
other ways too. One, if they don't own another property, they have to stay put
in a rented place.
Two, if they
have secured a home loan for the flat, its repayment schedule is treated as
pre-EMI (equated monthly installment)
till the buyer gets the property's possession. A
buyer is entitled to tax rebate under sections
24 (b) and 80 (c) of the Income-Tax Act
1961, after securing possession of the property and thus
commencement of EMI. Till then, he gets no tax relief on the pre-EMI.
Property buyer
can present their own cases in consumer courts and do not need to engage a lawyer.
The property buyer must file his complaint
within two years of the dispute arising, after which it becomes outdated. A
written complaint, can be filed before the District Consumer
Forum for property value of up to Rupees twenty lakhs, State Commission
for value up to Rupees one crore and the National Commission for
value above Rupees one crore.
The builder
problems can’t justify the delay. The default on the part of the builder would attract penalty under
both Consumer Protection Act and the
Maharashtra Ownership Flats Act, 1963. Often, the builders have an agreement
clause that assures buyers a daily damage for the delayed possession. The
buyers must ensure that his agreement for purchase of flat includes the clause
compensation from the builder for delay in possession says Adv. R. P. Rathod.
If such compensation clause for
delay in possession of flat is included as penalty clause in the agreement for
purchase of flat entered between the buyer and the builder i.e. monetary
compensation for per day's/per month’s delay, buyer can be sure to
get the compensation concludes
Adv. R. P. Rathod.
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