Tag Archives: Builders exploiting homebuyers

Amnesty to builders at what cost & for whose benefit

Posted on by Track2Realty
Track2Realty Exclusive

Bottom Line: Track2Realty debates whether amnesty given to the developers by the banks, development authorities and the courts actually serves the purpose of safeguarding homebuyers’ interests.     

Rules Changed, Favour to builders, Government favours builders, Amnesty to builders, Builders control government, Builders change policies, Indian realty news, India real estate news, Real estate news India, Indian property market,  Best news site for Indian real estate, Track2Realty, Track2Media ResearchContrary to the general perception that the eco system is getting tougher for the builders due to home buyers’ activism, vigilante media and judicial intervention, the facts suggest that the developers have been given too long ropes to cross the bridge over the buyers’ interests. As a matter of fact, there are many instances of amnesty to the developers in the last few years.

When the homebuyers of Amrapali in Delhi-NCR announced massive protest, the Noida administration immediately intervened to deny permission of protest with Section 144 and instead asked the buyers to come to table with the builder

The authorities of Noida, Greater Noida and Yamuna Expressway that allotted the land parcels to developers on deferred payment have time and again heeded to their request to reschedule the payment plan when the builders have defaulted

The authorities of Noida, Greater Noida and Yamuna Expressway cleared an exit policy for developers if they fail to fully or partially complete project after land being allotted

In the wake of non-payment to the banks the builders have on many occasions been allowed to restructure the payment

In some instances even the courts have granted the developers extra time to complete the project with strict warning or some fine

The Supreme Court has given stay on the demolition order of extra towers by High Court with project Emerald Court by Supertech

UP and Gujarat dilute RERA law; UP provided four exemptions to exclude incomplete projects from the category of “ongoing projects”, Gujarat has exempted all projects launched before notification of the rules 

All these instances clearly suggest that once the home buyers have made the payment to the builder, the policy makers and the judiciary take a lenient stand to offer the developers amnesty. The basic philosophy is that any punitive action against the developers will hurt the delivery timelines and hence the buyers’ cause.

The moot point nevertheless is that amnesty to the builders is at what cost and for whose benefit. The home buyers allege such amnesty does not help their cause and rather give the developer an escape route.

Gaurav Gupta, a home buyer in Paras Tierea, Sector 137, Noida is extremely critical of such amnesty to the builders. According to him, instead of penalizing the builders if they are offered amnesty after failing to fulfill their business commitment then the policy makers are setting a bad precedent for the future.

“To the best of my knowledge majority of the builders in Uttar Pradesh and Haryana who were offered amnesty have failed to take advantage of it and correct their wrong doings. This is what compels the buyers to take it to streets. Unfortunately, there is no amnesty for buyers if they default,” says Gupta.

Grey zones with amnesty to builders 

Majority of the builders who are beneficiary of various amnesty schemes have failed to reverse their fiscal mismanagement or delivery delays

Amnesty to builders lends a perception that builders who have compromised with the buyers’ interest can get away without getting penalized

There is no mechanism to verify whether the builder has defaulted by will or due to market dynamics 

The developers naturally have reasons to stand with the peer group. Vineet Relia, Managing Director, SARE Homes maintains that considering that the real estate sector has been facing a slowdown in the wake of weak demand, measures like these are important in sustaining momentum to some extent. Some development authorities like Greater Noida have restructured their payment plans to help allottees, while restructuring of debt by banks is a move to tackle mounting bad loans in the banking system and bring relief to the banks.

“While the recent judgment of NCDRC does place a higher financial burden on developers, but the move will only help improve efficiency and transparency in the sector.  While these measures are welcome, the realty sector is yet to come out of the slump which can only happen when demand picks up,” says Relia.

Parth Mehta, Managing Director – Paradigm Realty feels quasi ownership in real estate makes it so unique that policy adaptations are required to suit the real estate sector. Till the time the project is not delivered the ownership doesn’t get fully transferred. The turnaround time for a project delivery is generally 3 to 4 years and when the business cycle changes it generally hurts the project during the execution, thus buyers as well as builder is affected.

“In my view such amnesty definitely helps to solve buyers and builders problems at large. Amnesty provided to builder helps in getting the possession or regularization of the flat, thus at any given stage even with certain loss of time buyer receives the possession or occupation of the flats. In the final analysis buyers are definitely getting benefited,” says Mehta.

Interestingly, these amnesty schemes are not just Indian reality. In the neighbouring Pakistan too the government is designing an amnesty scheme to address the concerns of the real estate sector, which was reflected in freezing investment and reduced number of property transactions.

The only difference is that in Pakistan the policy makers have favoured a targeted amnesty, which could benefit genuine property buyers and real estate developers rather than those parking their ill-gotten money in plots. Thus, it is a purpose specific amnesty for real estate developers and first time property buyers.

In India, it is an awkward situation in the real estate sector today where amnesty to builders is lending credence to the perception of the developers getting escape route. While exceptions are always there, the general trend has been that of delay in delivering projects which has had a negative impact on the sector. Unless consumers’ confidence is not restored, the sector will not be able to stand back on its feet.

In this context, developers insist that the relaxation to builders is an attempt to help them serve the consumers better by expediting delivery of projects. But whether the amnesty is actually serving its purpose is quite debatable today. 

By: Ravi Sinha

Jail term for homebuyers balances regulator advantage

Posted on by Track2Realty

News Point: If the regulator was mooted out as an ombudsman who could oversee the functioning of the real estate sector and ensure that the buyers are not subject to cheating & existing market malpractices, then the provision to have jail term for the defaulting buyers seem to balance that advantage point.

Jail, Imprisonment, Jail to homebuyers, Regulator in Real Estate, Defaulting homebuyers, India real estate news, Indian property market, Track2Realty, Builders exploiting homebuyersThe fine prints of the regulatory eco system in one of the most disorganized business in this part of the world is yet to roll out, but the said clause has definitely not gone down well in the psyche of the homebuyers at large.

The homebuyers across the country are questioning the need to have a jail term provision for buyers. The common grouse is that there has hardly been cases of homebuyers been catalyst to wrong practices in the sector. There is a general feeling that the introduced provision would act as a deterrent where the homebuyers will have to think many times before taking the builder into legal battle.

Moreover, in case of default of payment also, there is already provision of penalty in favour of the developer. The critics even question that there can be genuine cases of default in payment as a homebuyer might be under duress due to sudden financial setback. They ask whether there can be willful default in such a capital-intensive investment like the real estate.

Scary jail term

As per the new regulatory regime, homebuyers who fail to ‘comply with’ or ‘contravene’ any of the orders of the Real Estate Appellate Tribunal will not only imposed a penalty of up to 10 per cent of the apartment cost but also get a jail term of one year.

The Union Urban Development Minister Venkaiah Naidu informed the Lok Sabha that, “The Bill will not only make the consumer king but also bring in much-needed regulation and transparency for people involved in the sector. It seeks to create a set of rights and obligations for consumers as well as developers.” 

The original version of the Bill that was introduced in Parliament by the previous UPA government in 2013 did not prescribe imprisonment for buyers who fail to comply with the Appellate Tribunal’s order. Under the 2013 Bill, such buyers were ‘liable to a penalty for the period during which such default continues, which may cumulatively extend up to 10 per cent of the plot, apartment or building cost, as the case may be, as determined by the Appellate Tribunal”.

Buyers confused

Rakesh Taneja, a Chandigarh-based homebuyer who has been cheated by a reputed builder in a plot deal is into a legal battle with the said developer for four years now. The builder has got the financial and other resources to keep the case dragging for such a long time. The news of homebuyers getting jail in case of default has come as a shocker to him. He feels being let down by the system and questions whether he would be able to fight with the mighty builder any more.

“Yes, I too have defaulted in payment but only after paying 70 per cent and been witness to the fact that there was no sign of the said plot being developed for possession. Moreover, I got the information with the RTI that the builder has not even deposited his EDC (External Development Charges) and IDC (Internal Development Charges) to the concerned authorities. The DTCP (Department of Town & Country Planning) has also issued notices to the developer. Should I still make payment to be legally safe in my fight in front of the regulator,” questions Taneja.

Surbhi Singh, a consumer rights activist says no homebuyer can afford to be a willful defaulter in a business that costs your life savings. According to her, now the developers too have got a legal tool to arm twist the homebuyers. The monetary penalty itself is more than enough for the homebuyers who in any case has his money locked in if at all one defaults for any given reasons.

“Of course, this provision would ensure that the speculators would be out of the market which is a good thing. But then it will not only affect the sales of houses, which is already very low, but also lead to homebuyers’ resisting to challenge the wrong practices of the developers. This provision overall dilutes the advantage that the homebuyers would have got with the regulator. There should have been other stringent measures to check the arm-twisting speculators into the housing market,” says Surbhi.

Clarity needed

Supreme Court lawyer, Madhurendra Sharma says that in the absence of clarity over the circumstances under which the homebuyers will be sent to jail, there is a whole lot of confusion with the Regulator Bill. According to him, once the dust settles down may be the homebuyers will also understand that the jail term is only a deterrent for the organized blackmailers and not the bonafide homebuyers. Till then, there will be speculations in the market, as the provision of jail term has not been debated before.

“A thorough clarity is needed to make all the concerned parties understand that Appellate Tribunal sending a homebuyer to jail is not the first remedial measure. As a matter of fact, it is the final and extreme measure when all the other possible options are closed and the buyer is still rigid with his stand of non-payment. The non-payment of a few buyers affects the construction timelines and possession for majority of the buyers. But then someone needs to spell it out to the larger audience,” says Sharma.

The jail term provision will continue to be debated in the public space till the time a regulator takes the office and there is clarity over the provision. It is too early to say whether the jail term clause would be deterrent to blackmailers acting as consumer right activists or it will be a tool in the hands of the developers to harass the homebuyers even further.

A lot depends upon the regulatory eco system that evolves with the time and till then there is apprehension galore in the collective consciousness of the homebuyers. Having said that, the Bill itself has given ammunition to critics and there could have been better ways to deal with the defaults on part of the homebuyers.

By: Ravi Sinha