Monday, February 27, 2012

Entangled and entrapped

What does a customer do when after 5 or 6 years of booking an apartment he/she finds out-
1. possession is delayed beyond agreed date?
2. The project specifications, features and designs as shown in the brochure are totally different on the ground?
3. The super area of the flat has been increased by the builder without giving any justification of calculation of the increased area, as the carpet area is still same or less than what was shown in the brochure?
4. Costs that were never part of sales consideration have been priced in at the time of the possession and the builder is not willing to give any justification of how he arrived on those costs?
5. Not only is the builder charging extra he is not even paying any penalty on delay in possession?

This happens every day in Real estate industry. They would not reply to any phone calls, they would not write back to emails, if they do it would be about everything that you did not ask in your query. When you go to their office they will say sorry actually it is humanly impossible to write back to every customers query as we have 6000 customers or 10000 customers.....but these very people would be able to handle all paper work related to demanding installments from all 6000 customers and even send basically they have human capacity for one way communication, but no capacity for answering our queries, another reason for this is actually they do not have answers...!!
If we take a closer look at the above situations you will see, that the builder even after the date of possession has elapsed advertises in the local or regional newspapers that the possession is going to be offered shortly. Thus giving customers false hopes. The customer when tries to reach the customer care department, he is given a standard reply that within a month or max two months the work would be complete and exaggerates the number of work force employed to execute the project. since this is verbal assurance the customer does not have any proof of the number of times the customer care lied to him. Tired and exasperated when the customer finally distraught by the false claims reaches the head office of the company he is shown in to a manager who volleys a number of excuses as to why the delay is happening....and no....some are really good...sir, the delay is cause there was flood in Thailand and we are importing the bricks from Thailand that is why the work got delayed......sir, you must have heard of the farmers agitation they are almost every day campaigning to stop development work at site.....Sir, as you would know there was earthquake in New Zealand and we were importing faucets and sand from there.....over and above sir, we know we have to pay penalty for delayed possession so we do not want to delay and want this project to finish so that we can fulfill our commitment.....these are some of the excuses you all will find the highest, middle or lower management of the builder would give you.....yes, thinking the final installment would incorporate the amount that the builder would have to pay as penalty for delay in possession and with the assurance that this would be a matter of max 6 more months only , again with verbal assurances the customer comes back home and starts to recalculate his present situation in which he is paying rent and bank EMI...hoping the trauma would end soon as the manager had said.
On expiry of the given assurance for possession, instead of the letter for possession the customer gets a letter that announces for the first time the increase in SUPER area and also the subsequent additional money that the customer has to shell out towards the booked apartment ( as all costs are build in on the super area). When the customer asks for answers on this subject, he is again given standard and stern reply to quickly deposit the said amount or the interest would get compounded on it. with each passing day the customer is left with no choice but to pay this additional demand, knowing that already he has paid everything and now if he cribs he might loose every penny that he has invested in his dream home. the risk of loosing his apartment and the high interest cost weigh heavy on his mind and to avoid any risks to his investment, even though he has not logical answers from the company he pays for the fear of loosing his home.
As the slow ground work continues and the possession keeps being deferred the project evolves to look at what it would be, the parks are turned into parking area, or school sold to third party, even better DG stations etc, the fountain and gazebo simply disappear as it is site for newly launched 4 bhk in the same township. The kids playing area is converted into nursery school compounds or club area. As all the money is already deposited by the customer to the builder, the customers questions on change in design etc are all brushed aside with disdain and the Agreement is shoved at every drop of the hat...the agreement is drafted to take care of this certainty with clauses that clearly say that all plans are tentative and subject to the discretion of the builder and the civic regulatory authority. The fact is in the plans that the builder has sanctioned from the regulatory authority, these are the ones he is following the ones that were shown and formed the part of the brochure were all sales pitch....they were never going to constructed as the builder always had other plans which he submitted for approval.
Finally the Possession is offered and it is now that another set back takes place in the shape of the final settlement before handover of flat is going to happen. The final statement does not show any penalty that the builder owes to the customer for delay in possession, it has all cost heads that were in the agreement or were not included in the agreement but came into effect cause of the will and desire of the builder but no mention or hint of the penalty that was suppose to be given by the builder for delay in possession. In most cases the customer has already learnt from previous experiences of trauma that he had been encountering since becoming a helpless buyer of the apartment, quickly gives whatever amount is asked of him by the builder to get speedy possession. where the customer has still some energy left, he is made to run around from one executive to another, from one department to another, days and days, with no respite in sight, either he understands and pays the amount demanded or finds interest accruing on his last demand.
The only recourse that a customer in Indian real estate industry can hope is through the consumer courts that have been established to take care of interest of customers who pay for services and product. The consumer courts have been very effective in coming to the rescue of the helpless customer. The consumer courts have been established at all levels, District, State and National commission. Already a lot of consumers have found consumer courts helping them in seeking justice and that too at a faster pace then any other courts. The only hope for the entangled and entrapped consumer....the consumer courts!!!!!!!!!

Sunday, February 26, 2012

No EMI Til Possession

Ever wondered why No BUILDER launches a residential project with "NO EMI Till Possession Scheme", The Builder would not do such a thing as his foremost concern is his own interest....which is to get Maximum Profit. The very fact that at the time the project is launched it is not licensed and thus no bank would  finance it. The Builder tries to offer residential project through a channel of brokers who tie up with all types of smaller brokers and quickly try to offload large percent of residential block at very smart commission which often has foreign  trips thrown in with stay and shopping.
After the Project is sold and money collected, then the builder applies for licence and other is only after a year and half of the initial sale had been done the Builder is able to get all necessary approvals from the Govt. Agencies and by that time the builder collects almost 45% to 50 % of the Basic Selling Price from all existing customers. Now the Builder ( after all necessary approvals are taken) tie-ups with financial institutions like banks to finance its project.
These tie-ups that the builder gets in with financial institutions to finance the project, often are the private banks which agree to lend/finance the project at a higher rate than the prime lending rate. This is where the Builder for its remaining residential flats/apartments brings in the so Lucrative No EMI Till Possession Scheme. This is advertised as a no risk scheme to the prospective home- buyers, the logic is that the Buyer does not have to worry on the EMI of the financial Institutions till the possession is offered by the Builder, which puts pressure on the Builder to complete the project on time and handover the possession of the flat to the customer in time so that the burden of EMI shifts from the builders shoulders to the home- buyers. It is propagated as a win-win situation for the customers though this not the actual case.
The reality is that, First, The Basic Selling Price of the flats on such offers are offered at a premium by the builder of approx Rs400 to Rs 800/- more than the initial offer. Therefore the Builder is not paying the EMI from his own pocket he is in fact charging you a higher rate and from it he is paying the bank interest amount on the loan. Second, the Builder in most agreements does not honour the advertised commitment of NO EMI till possession, but has clauses in his agreement which clearly state that his commitment is limited by maximum two years, and in case possession is not offered within two years then the onus of paying EMI to the bank is of the Home-buyer. Therefore, invariably the customer starts to feel the pinch of the EMI after the second year and is at the mercy of the Builder for possession of the flat.
I would like to state that there have been actually zero instances where the project has been delivered by the Builder in time, usually the projects are delayed by more than an year and specially these days most builders are lagging behind their promised possession dates by more than 3 years, which is a very long time. One very interesting aspect in today's market is that most of such delayed projects are running full steam "NO EMI Till Possession Schemes", luring prospective buyers by showing almost ready structures. What the Buyer forgets to take note is that these structures have been ready for last one year and the builder has already taken 95% of the payment due from its existing buyers and has not started finishing work of all the structures. So even if the Builder starts work with money from new sales, he would not be able to complete the finishing work and offer possession within stipulated time of one year or two years that the builder would put in as a clause in its agreement....naturally the agreement copy would only be shared with you on your first paying the booking amount of such a scheme...which would be from your pocket and there after the bank comes into the picture to finance your apartment under this scheme.
The Better option is ( atleast according to me) to be aware...In short...Beware of such schemes and do not fall in their trap...there is always a safer option than the most lucrative option....try those!!!!!

Saturday, February 25, 2012

Projects Era has never owned but being sold

Yes, it happens only in the land of the Ganges. Residential projects sold by property dealers/brokers/consultants in sector-1 t03 and sector-86 dwarka ( express road) for the last one year, have still not been owned by the Builder " Era Landmarks Ltd", as there website still does not show these projects as projects launched by them or approved by the DTCP. Yet, unhindered the sale goes on with property consultants listing these projects on every property portal, their own websites etc.
what is peculiar about these advertisements by these property dealers is that they all talk of the great price at which the project is being offered, and the fact that the price are going to revised soon. Features like acreage of the project, apartment categories/types etc are all being flashed to convince the prospective buyer that the project has been approved and the plans ready, plus the construction would start shortly within a month or so.....all false and fraudulent claims. Why False??? mentioned in our previous column on the same subject on June,2011....That it's mandatory for any Builder in the State of Haryana to get licence of its project approved by the DTCP and only thereafter advertise for its subsequent sale to public at large with clearly mentioning the licence number of the project. So in this case  , ERA LANDMARKS is not advertising directly but through its chain of property dealers etc is propagating the salient features of its residential projects as well as accepting bookings for the same. The builder through this channel is generating huge cash flows which is partly consumed by the builder to pay commissions to these brokers and also to further augment advertising campaigns, leaving the home buyers in lurch as they have committed their hard earned lives saving in a project which in sales brochure is totally different from what the sanctioned plan of the same would be in coming time....perhaps it would be approved after all..or perhaps like DIVINE-COURT, SECTOR-76,FARIDABAD.....which was launched in 2008 and also sold completely, absolutely and fully in the same month of 2008....has still not received the mandatory licence and the period in which Era had committed it would give possession of the independent floors in this project has also elapsed.....similarly in 2006 Era sold the Redwood Residency and it was only in 2007 that Era formally got its licence which since 2009 has not been renewed Era has not paid the EDC it had collected in 2009 from all its customers in this project, so though the company has licence but it is not valid since 2009, and the possession has been delayed more than 3 years.....and as the project is still no where near completion maybe it would be 4 or 5 years delayed...Above all these are just two examples Era Landmarks has a history of Delayed projects...some which have not seen any construction since its launch in 2007, God Help all the home buyers of these projects. Hope Mr. T.C. Gupta is aware of what is going on in his territory and takes the strictest action so that the interest of Indian public is not compromised by the greed of corrupt builders.

Saturday, February 18, 2012

Housing Disputes top consumer courts- Indian express

Article in Indian Express:-
Since its inception in 1997, court has handled 5,290 cases, 2,019 among these were property disputes
Residents are knocking the door of District Consumer Disputes Redressal Forum, Panchkula, mostly for settling housing disputes. After the establishment of the Forum, in 1997 the highest number of complaints received pertained to the various housing disputes.
The Panchkula Consumer Court has received a total of 5,290 complaints, out of which 2,019 were related to housing disputes, mostly against real estate companies or the property dealers who offer residential plots or flats.
“Since establishment of the consumer court in 1997, we have settled 2,012 housing disputes cases. Most of the housing complaints we receive were about violating the terms and conditions of the contract, delay in allotment of flats and failure to construct flats,” said the President of the Forum, Ashok Kumar Jain. “The residents knock the door of the consumer court as they have a faith that they will get justice. Last year we settled 358 cases,” Jain said.
Jain added that people were now coming forward with complaints to the Forum as most of them know that as as per the Act, the consumer forum has to decide complaints within 90 days.
According to the figures maintained by the Consumer Forum, since 1997, they have received 659 complaints against the electricity department, 443 cases against insurance companies, 368 against defective household goods, 244 against telecom companies and 236 against banks.
The way Realtor estate companies conduct business in India ( previous mail shows research done by jones lang lasalle that 63 projects in NCR are delayed by more than 3 to 4 years) there is going to be a lot many cases lodged by aggrieved consumers. Housing is a very critical sector, not only does India's growing population need more houses but its one major decision that the home-buyer makes in his life-time to buy a it costs him all he has ever earned or would earn in the next 20 years ( as most houses are bought on loan from financial majors). If Builders do not deliver the flats/houses etc on time then the customer/home-buyer is naturally losing  a very major portion of his income or savings, therefore when the customer is cheated by the Builder he has no other option but to knock at the doors of the Consumer court for relief.

Redwood Residency Fbd-78

Recent Site picture of Redwood Residency, FBD-78, Shows the towers standing still less than half complete. considering the project was sold in 2006 to public at large its is astonishing the rate at which the construction is going on. This picture clearly shows the humongous parcel of land in between towers that still does not belong to the builder, "Era Landmarks", who fraudulently sold this parcel of land as a park and charged all flat owners overlooking this parcel of land PLC ( Preferred Location Charges) for Park facing flats.
Not only the so called park is nowhere in site, to add to misery of the home-buyers what this third party land in between towers does is it renders this project Dis-integrated. As can be seen from the picture above, all towers stand separated  by the land that does not belong to this project. By concealing all relevant facts Era has been able to sell this residential project to innocent homebuyers. The Home-buyer who has paid the price that was prevalent in this area in 2006 is at the mercy of the builder now, who has clauses after clauses in his agreement that safe guards the builders interests by sacrificing the interest and rights of the customer.

63 residential projects delayed since 2005-06

Now this is incredible, # 63 Residential Projects delayed in NCR ( where, by the way, the central govt of India resides and conducts business). From the Superbranded Realtors to the most fallacious name in the industry has not cared to complete their projects within promised time. and there is no one to stop them from committing whatever fraud these builders wish too.
quoting from economic times-

Most homebuyers would not mind a housing project being delayed by a few months. What is worrying though is that a large number of residential projects in the national capital region, launched in 2005-06, and to be handed over to buyers latest in 2008-09, are still under construction. 

A research done by property consultancy Jones Lang LaSalle shows that as many as 63 large residential projects in the NCR, with over 40,000 apartments, are delayed, many by over four years. 

Of these, nine large projects with a total of 9,000 apartments have been delayed by over six years. These include four projects of Parsvnath Developers, with 2,600 apartments, and one each of DLF(Belaire), Jaypee Group (Jaypee Greens), Ambience Group, BPTP and AEZ. 

"A number of these delays have been due to a lack of initial capital with the developer at the start of the project, hasty and unplanned launches, inefficient project management and issues of land acquisition," says Santhosh Kumar, chief executive officer, operations at Jones Lang LaSalle India. A number of developers have suffered also because they faced cash-flow problems while they were in the middle of a project, delays in procurement of materials. 

In the last few years, real estate developers have suffered because of high cost of debt that has increased they interest payout, banks reducing their exposure to the sector and rising cost of construction. The average cost of debt for the sector has gone up from around 12% to 15-16% today. In the last one year, labour cost has jumped 40-60%, while steel and cement cost has gone up by about 30-40%. 

Developers say funds are hard to come by, costs have gone up and mobilising labour is getting difficult because of the success of the government's rural employment guarantee scheme, MNREGA, which is delaying construction. 

A large number of projects that are delayed are in Gurgaon and Faridabad, while Noida and Ghaziabad present a better picture, says JLL.
end of article.
what happens when the project is delayed beyond reasonable time?
a) the customer who bought hoping to live in the apartment seeing his investment gone sour, tries to sell and move to some other project where he would get possession soon. As the project is slow or not being constructed at all, the prices of such projects go down more than those which are ready or are going to be ready to live in shortly. The customer thus ends up selling his home for a discount. To a new customer who knows he is getting something in distress and also that the time for possession would be another 2 to 3 years as the builder enters into a new contract/agreement with this new customer with enhanced date of possession. Thus, builder does not lose a single paisa on the other hand makes a clean income ( which is not shown any where in records) in the name of transfer charges plus does not have to give any late payment penalty to this new buyer, which is again money saved.


Even as the Builder lobby signs and declares transparency in practice they do not follow what they advertise. I have myself written upteen number of times to Credai and they have never responded to even one mail of mine, and here ( in the under mentioned article ) they say they would take appropriate action against an erring builder and would go to the extent of even terminating his membership....crap...they would do nothing of that sort, In fact this is an attempt to show off a kind of self regulatory exercise to the blinded and muted Govt agencies, so that they do not press for any new regulations....which they don't have balls for anyways.
Do read ...