Tuesday, September 29, 2009


Every business news channels or newspaper are carrying article after article telling us how real estate companies are trying to raise capital and how RBI is being cautious of lending to them.No,not actually cautious its very nervous in lending to them.Ever wondered why?Even when these so well informed institutions do all due diligence and take all securities and guarantees from the developer.Also they charge them appropriate interest on the amount loaned,and they have benefit of a larger size than the developer to compete at all levels(legally in case of default in payment).Yet with so many formalities,legalities and due diligence on the viability of the project,these institutions are scared.BECAUSE,these developers are not transparent in their dealings,they have the knack of even fooling well informed institutions.From their disclosure of their land bank ,building plan approvals to execution of the project,everything is nothing but a big sham.(I am not taking names here but this is a prevalent practise of many in the industry).
What can we learn from these banks that-
1)That we should try and ascertain all aspects of the project before parking our funds into any project.
2)Should take written and irrevocable underwriting from the developer that all his building plans are approved and that what is being sold will be completed in the same design and standard,on the given time plan and that any delay will cost the developer a pre-prescribed fee or penalty.
3)That the onus of declaration should be on the developer and not the other way round as is the case today,we are made to sign documents on which it is clearly written that the customer has understood everything and agrees with all information.But no information is given in writing on the project,only verbally communicated partial information,deemed to be complete.
4)That we should know when to be assertive with them and not have this attitude that there are so many people involved in this project what will happen to them will also be my destiny.Because of our lenient nature has made these people muster the courage to bite us.
5)To be proactive and a bulldog.when ever you see your developer drifting away from its commitment,ATTACK.
Maybe,if we became as careful and cautious as larger financial institutions only then can we leash in these fraudulent monsters from eroding our hard earned wealth and peace of mind.

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