Housing woes: Buyers left in the lurch as builders eye high profits

  • Vandana Ramnani and Abhishek Behl, Hindustan Times, New Delhi/ Gurgaon
  • Updated: Jul 05, 2016 09:57 IST
Housing project plans are changed without notice. Clients are promised one design and given another, green areas are eaten up by concrete structures. Fifteen housing blocks are added to five blocks initially promised. It’s one horror story after another. (Reuters)

When Satyabrat Mitra booked a flat in a Greater Noida’s Earth Towne project in 2010, he thought he was getting himself a great deal. But six years and several missed deadlines later, he and 1,999 other buyers are still waiting to get possession of their flats despite paying 95% of the cost.

Mitra says the developer bought extra land to unilaterally increase the number of towers and floors in each building without permission from the homebuyers, as required under the law.

Homebuyers say the developers launched 13 new projects in the meantime and an RTI revealed the firm owed Rs 24.44 crore to the government. The builder didn’t respond to queries.

He is not the only one. Millions of buyers across India are reeling under mounting loans and missed deadlines with developers getting away with arbitrary expansion of projects, shoddy work and not paying compensation.

The Real Estate (Regulation and Development) Act, 2016 seeks to protect homebuyers and encourage investments in the real estate sector. The bill was passed by the Rajya Sabha on March 10, and by the Lok Sabha on March 15, 2016. It makes it mandatory for developers to post all information on issues such as project plan, layout, government approvals, land title status, sub contractors to the project, schedule for completion with the State Real Estate Regulatory Authority (RERA) and then in effect pass this information on to the consumers.

Last week, the Supreme Court directed Unitech Limited to deposit Rs 5 crore for delaying possession of a batch of Noida flats by three years.

But such penalties are few and far between in a largely unregulated industry. Consumers continue to pay instalments for the flats whose possessions are delayed by years, while shelling out additional money for temporary accommodation.

Housing project plans are changed without notice. Clients are promised one design and given another, green areas are eaten up by concrete structures. Fifteen housing blocks are added to five blocks initially promised. It’s one horror story after another.

Mumbai-based research firm Liases Fores says a third of all housing projects in the national capital region are delayed.

In Faridabad, 6,000 homebuyers have been waiting for flat possession for 10 years and investors in Parsvnath City in Dharuhera have been waiting since 2005. Two other projects by the firm launched in 2006 are still under construction.

“In the last three years, out of 1,500,000 units sold, over 300,000 houses have been significantly delayed,” said Mudassir Zaidi, former national director of Knight Frank India, a real-estate agency. This hurts consumer confidence in housing projects, which is at an all-time low. Even careful buyers are being duped, as shown by the case of retired air force wing commander Manoj Rajendran in Bengaluru.

He bought a house because he trusted the builder, who used to come to the commander’s house for dinner. But despite paying 95% of the cost, possession of the flat is nowhere in sight. He regrets introducing four colleagues to the project. “They trusted me and now their money is locked up,” Rajendran said.

In such cases, builders often manage to wriggle out of agreements that have penalty clauses for project delays because of several financial irregularities and violations. “I was in the JAG (legal wing of the defence) and the builder managed to cheat me. Today after paying so much money, I am not even allowed inside the complex to check the progress of the work,” Rajendran said.

When HT spoke to Rajendran’s builder and RMZ Homes’ director Yash Joshi, he denied the delays, saying “It is all ready. People have already occupied.” Rajendran said people have moved into half-finished houses out of desperation.

Experts say developers do not hesitate to arm-twist buyers because legal recourse is time-consuming and often unavailable. Buyers of Unitech Residences in Sector 48, Gurgaon, approached the Gurgaon district grievance cell after not receiving possession despite paying 90% of the cost. They also complained to Haryana minister Om Prakash Dhankar, who ordered an FIR be filed against the developers.

“We are paying EMIs on loans, monthly rent, and some of us have even sold ancestral properties to buy this property. Despite that there is a breach of trust,” said Manzur Ahmed, a buyer.

The homebuyers’ woes don’t end at just getting possession. Ahmedabad resident Khushboo Malkan refused to take possession of her flat in 2013, two years behind schedule, after finding the house “not in a habitable condition.” Malkan has approached the local consumer court. The builder, Godrej Properties, denied the claims and is contesting them in court.

Inadequate penalties imposed on builders also fuel the problem. In Lucknow, homebuyers say a fine levied by the National Consumer Disputes Redressal Commission (NCDRC) on Parsvnath Developers is nothing compared to the EMIs they’re paying for many years.

But why do projects get delayed? Experts say it is because developers divert a major portion of the funds to subsidiaries for land acquisition and for buying residential units in projects by other well-known developers (as an investment).

Pankaj Kapoor, CEO of Liases Foras, said builders often make promises anticipating the smooth passage of projects and permissions. Developers also use funds to buy new land instead of investing in an existing project, he added. The prices of raw materials and taxes squeeze their profits.

Under a new real-estate law, builders will have to pay stringent compensation for missed deadlines. But developers say they’re not to blame and it is the time consuming permission process that triggers the delays.

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