Tag Archives: construction delay

Justice delayed and denied

Posted on by Track2Realty

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Project delay, construction delay, Homebuyers' grievances, Builders' negligence, Housing delay & default, Consumer activism in India, NRI investment in India, Track2Media Research, Track2RealtyOne-sided builder-buyer contract, late delivery of the possession and poor quality of construction is an accepted reality in the Indian real estate. A prominent developer in Noida Extension is reportedly forcing its buyers to sign the modified apartment buyer contracts with extended possession date and reduced penalty for delay in handing over the apartments. “Otherwise, we are ready and willing to refund the entire booking amount along with 11 per cent interest, without any deductions,” says the forwarding of the letter sent to the buyers.

Builders often force homebuyers to sign standard contracts with clauses that stipulate them to pay 15-18 per cent (per annum) as penalty for late payment. The builders themselves agree to pay only Rs 5-10 per month per sq ft for late delivery, irrespective of the price of the apartments. The fiscal implications of the delay and the opportunity cost los by the buyers go unnoticed in this financial juggler of the developers.

Buyers are asked to sign the contracts when the builders have already received 10-20 per cent of the price of the apartment. The agreement typically says that the “booking is provisional and in case of cancellation, the builder will retain the earnest money i.e. 10 per cent of the basic price and refund the balance with nominal interest.”

By that time, builders artificially hike the apartment price by 5-10 per cent in connivance with brokers to jack up the notional loss to the buyers who (not satisfied with the terms of the agreement) may think of cancelling the booking. Obviously, no buyers dare to question for fear of losing the earnest money and capital gain. These horrifying stories are just the tip of the iceberg. The ground reality of real estate sector in India, from a consumer perspective is harsh. And that is a gross understatement.

When one of our readers, Rakesh Dhall wrote in to us complaining that his builder is asking for a ridiculous price for parking space even after having a deal of super built up area or saleable area, we decided to dig into the issue. What our research revealed that this illegal practice has been struck down by the Supreme Court in a 2010 verdict where it was clearly held that any open spaces usable as parking cannot be sold separately as they are common areas. Ironically, despite the verdict, as Dhall’s experience clearly shows, this practice has not subsided at all, with harrowed consumers across the country forced to pay exorbitantly for what is rightfully theirs.

One of the most commonly reported issues, with innumerable consumer forum verdicts against it—delay in handing over the possession of the houses continues to be the proverbial thorn in real estate consumers’ lives. The wait for the consumer can sometimes be as long as 7-10 years. It is illegal and the consumer forums across country have been relentlessly taking a stance against such delays, the most recent one being a verdict by a Mumbai consumer forum where it penalised builder for delay in handover of flats. But the vicious cycle refuses to break, being repeated by some other builder, in some other place.

A Track2Realty Survey earlier says that eight out of every ten home buyers in India are sulking. And no big guessing game here to understand the wide chasm between the promised and the delivered. Consumers across the country are cribbing about the layout and designs being different from what was promised or shown in the catalogue. What is worst is when this habit of denying the promised extends to denial of basic amenities, leaving a bunch of frustrated consumers in its wake- with houses that leak, doors that creak and windows that rattle.

One of the Mumbai-based developers with financial services in its portfolio launched an affordable housing project in Lower Parel, Mumbai during the downturn of 2008. The buyers were promised finance b the same group through its financial services. But with market picking up by the end of 2011, the developer simply sent a notice to all the buyers to deposit the remaining payment within a period of one week or else their booking would be cancelled.

With the financial division of the company refusing to finance, the developer unanimously got the refund deposited in the accounts of the buyers, since the intention now was to scrap he affordable project for a high end apartment. There are even complaints when a consumer whose builder obliged and refunded the entire amount with interest in the wake of project getting delayed. However, the refund was in the form of a cheque that eventually bounced.

Denying electricity and water supply is a fairly regular practice for the builders. The consumers are forced to pull strings, pay money and resort to all sorts of tactics to ensure they get two basic facilities. The developers mostly get away with it and there are only few cases like the Thane Consumer Forum ha sentenced a builder to two years of imprisonment along with fine for denying a building water and electricity supply.

Is not it a case of a sector where justice is not just delayed but denied? Well, Track2Realty thinks so.