Late delivery, errant builders leave buyers flat-broke in Mumbai

Written By Unknown on Senin, 06 Oktober 2014 | 22.23

In central Mumbai, buyers who booked flats worth Rs 20-50 crore are still waiting for their homes because the project is stuck in litigation for the past three years

In Juhu, people who paid up to Rs 15 crore are stranded after the BMC issued a stop-work notice to the builder for manipulations in the building plan

In Oshiwara, a luxury residential project is stalled because of a dispute between the two partners

Early this year, a group of 124 flat owners in Versova held a dharna against the developer for delaying the project by a couple of years

Despite assurances, promises and agreements, beleaguered flat buyers face an uphill task when builders fail to deliver on time. Property market sources said the delay in handing over possession is rampant. Purchasers who have invested their life savings in a home find it extremely difficult to take on powerful developers. Moreover, seldom do builders pay interest to buyers for the delay.

Many such affected buyers have formed support groups, sent legal notices to errant builders, held dharnas outside their offices and have even approached politicians for help.

"Due to one-sided sale agreements tilted in a developer's favour, buyers have no option but to be patient when the developer delays his project. There have been numerous cases of late possession where delays have stretched beyond two years. However, when an end user who is not financially strong, has to bear the brunt of pre-EMIs as well as rental for his temporary accommodation, it tends to get out of hand,'' said Gulam Zia, ED, Knight Frank India.

In a few cases, more so up north in NCR, buyers have come together and forced the developers to give in to their legitimate demands. "In stark contrast, we don't hear of such consumer unrest in Mumbai. This is essentially due to constantly increasing prices that discourage the end-users from pulling out and investing in another project. So, in Mumbai, those who suffer inordinate delays draw consolation from the fact that the price appreciation makes up for most of the delays. The solution to all these problems can come only out of an equitable sale agreement. A housing regulator is thus emerging as the need of the hour,'' he added.

Lawyer Anil Harish, who is a specialist in the field of real estate, said builders start selling apartments even before work starts. "There could be several reasons for a stalled project. Either the builder has run out of funding or the authorities have issued a stop-work notice for violations. Sometimes, the developer wants to change the building plans or there may be delay in procuring approvals,'' he said.

Harish said the new state housing regulatory authority may offer hope to flat buyers; draft rules stipulate compensation for victims with interest and cases to be decided within three months. "However, the builder should be charged a minimum 15% interest or the compensation should be equivalent to the rent that the buyer may have got from the apartment,'' he added.

Lawyer Rajesh Gehani, who represents flats buyers of an Oshiwara project, said each police station must constitute a special cell for cases pertaining to cheating and breach of trust. "Unfortunately, the delay in dispensing justice works in favour of the law-breakers,'' he said, adding, "It is unfortunate that people have to shell out money (to pursue the case) to recover their own hard-earned money."

A developer said delays could be because of several reasons: "It could be due to a builder's sheer incompetence or as he is under financial stress or entangled in some litigation.''

But there could be circumstances beyond the developer's control too. "He may face sudden shortage of material and labour. There could be government hurdles in procuring approvals and failure of service providers like the local municipal authority,'' he added.

"No respectable builder wants a delay. It's not beneficial, but sometimes out of his control,'' said the developer, cautioning buyers to read the fine print and the developer's track record before investing in the project. He hoped that the new housing regulatory bill will quickly resolve this issue.

Pranay Vakil, chairman at Praron Consultancy, blamed the change in the development control rules in Mumbai in 2012 for many of the stalled projects. "Suddenly, the new law mandated payment of a hefty premium by builders who planned to avail of extra floor space index. This led to disputes between the land owner and the developer as to who would pick up the tab. So, the flat buyer became the fall guy,'' he said. There are buildings ready with occupation certificates and buyers who have paid the full amount. "Yet, possession is not given because the builder now wants more money from the buyer,'' added Vakil.

Market sources said labour and dealing with various contractors and their coordination is also a major issue. "The BMC issues stage-wise commencement certificates. This also causes delay. Inadequate cash flow and lesser sales could also hamper speed of construction,'' they added.

The problems

Builders delay handing over of flats even years after promised completion

Many start selling flats even before work starts and mst don't pay any interest or compensation for delay in delivery

Time violations are rampant, caused by builders' incompetence, shortage of funds, or violations that lead to court cases

Other reasons are shortage of labour and material, or government hurdles in granting clearances

The solutions

State housing regulator must stipulate compensation and quick trial of cases stuck in limbo

Lawyers suggest builder must be charged 15% interest of amount involved, or compensation equal to market rentals

Every police station must constitute special units for breach of trust and cheating cases

Buyers must study fine print before investing in a project

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