Does your apartment deed favour you?
On Tuesday, the Competition Commission of India (CCI) imposed a penalty on India's biggest real estate firm DLF Ltd for treating homebuyers unfairly. While the order is good news for buyers who booked flats in the concerned projects, the case points out to the bigger problem of lopsided builder-buyer agreements that favour builders.india Updated: Aug 26, 2011 21:20 IST
On Tuesday, the Competition Commission of India (CCI) imposed a penalty on India's biggest real estate firm DLF Ltd for treating homebuyers unfairly. Key complaints included increasing the number of floors, changing the size of the apartments and delay in projects by the builder.
While the order is good news for buyers who booked flats in the concerned projects, the case points out to the bigger problem of lopsided builder-buyer agreements that favour builders.
In a scenario where most builders draft agreements on similar lines, as a homebuyer you need to sift through the pages of terms and conditions and know what you are signing off in favour of the builder. Here are three clauses that can mean trouble for you in the future.
Most agreements mention that the area of the apartment can increase or decrease, depending on market conditions and architectural changes, and the price will be subject to change accordingly.
This clause can create problems for you in the absence of any uniform practice. Take the example of Vijender Sharma, a Delhi-based management consultant, who bought a three-bedroom house in BPTP Ltd's Park Elite Floors project in Faridabad in May 2009. He was surprised when he got a letter from his builder demanding an additional Rs 3.0 lakh. He is among 3,100 homebuyers who have got similar demand of Rs 3-5 lakh. What's problematic is the fact that carpet area, the actual living space you get, has not changed. The super built-up area, including common spaces such as parks and lifts has increased.
In an email response to our queries, the builder said: "Due to lack of detailed design development drawings at the time of launch, tentative areas are communicated to buyers and final area is measured at the time of completion."
BPTP is not alone in doing so, there are several others as well.
"The concept of built-up area in the sector and what the builder chooses to include or exclude is still not clear because there isn't any uniformity," said Ajit Krishnan, sector leader, infrastructure and real estate, Ernst and Young.
What you can do: You can approach the consumer court if you don't agree with the change. "While you go to the court, you should continue paying the installments 'under protest'," said Sunder Khatri, a Delhi-based lawyer. "This means, while making payments, you should send the firm a letter and an email mentioning that the payment is done under protest."
Delivery timeline clause
The agreement will rarely mention the exact month in which project completion is expected. It is usually a timeline that varies from builder to builder. If the apartment delivery is calculated from the "start of construction", it may be difficult to find out the exact date or month when the construction actually starts.
Ideally, the builder-buyer agreement should be signed at the time of booking. However, in practice, developers usually do not sign the agreement until the buyer pays 10-20% of the total amount. The booking amount is taken on the basis of the "application form". Only after receiving this amount will the developer sign the builder-buyer agreement.
On top of this, recent agreements also contain a new clause, saying that market uncertainties can delay the project by another six months
What you can do: Ask for the exact date of completion at the time of signing the builder-buyer agreement and ensure that is mentioned in the agreement.
Holding or fit-out period
It is the period during which the builder offers you to take possession of your property. For a commercial property this is called the fit-out-period and is of three-six months. For a residential project, it is known as holding period and lasts 15-45 days. There is no regulation on how long this period should last.
However, what is often hidden from you are the holding charges and penalty you may have to pay if you are unable to pay the remaining amount and claim possession within the specified period. Failure to take possession for several months may result in cancellation of your booking.
What you can do: To avoid paying penalty, you can negotiate with the builder to lower the rate of penalty in the agreement. Also, arrange the remaining amount when the project is nearing completion.
In collaboration with Mint.