Realty law may help to catch errant builders quickly

Mumbai: For many, buying a house is a gruelling experience, a life-long struggle dipping into savings, taking bank loans and paying equated monthly instalments (EMIs). But what if something goes wrong and the project is indefinitely delayed? Or worse, your money is stuck and the builder refuses to repay? This is one of the most sordid, darkest facets of the real estate industry where the flat purchaser is caught in a quagmire. And it’s rampant.

Unfortunately, the system is loaded against the purchaser as resolution can take years.

Lawyer Anil Harish, an authority on property laws, said, “City civil courts can take eight to 10 years to settle such cases and a high court as long as two decades.”

Consumer courts are quicker. But for amounts over Rs 1 crore, the complainant has to travel to Delhi to file a case in the National Consumer Forum.

His client booked a flat in a Khar building with a built-up area of 1,200 sq ft and a carpet area of 900 sq ft. Later, the builder turned around and reduced the carpet area. “He has paid 95% of the Rs 6 crore apartment. The developer refuses to correspond with him until he pays the balance amount,” said Harish.

Property consultant Ashok Narang, whose family firm, L Lachhmandas & Co, has been in the real estate business for five decades, said he has suffered because of a rogue builder. “We booked office premises in Saki Naka in 1995 and received an allotment letter. The building was ready for occupation in 2004 but we never got possession due to infighting among the partners,” said Narang.

The Narangs moved consumer, city civil and criminal courts and received favourable orders. “The builder has challenged the order in the high court now,” he said.

Experts said when the property market was booming, people who invested in apartments did not mind if a project was delayed. “Prices kept increasing, so not many complained,” they said.

 A member of an investor group, fighting a builder in Wakdi, Panvel, who has allegedly abandoned the project, told TOI, “Never invest in an under-construction project. If you have already invested in under-construction projects, collect contact details of other investors so that if they have issues with the builder, they can collectively file a legal case.”
In the Panvel project, the investor said, “The builder stopped communicating with me over the phone, email and in person, or giving any project updates. I don’t know how to recover my hard-earned money from the project.”
Projects are delayed for many reasons,developers said. According to them, a builder may suddenly face a financial crunch due to slow sales. “Many developers raise money from private lenders at astronomical interest rates (as high as 36% pa) and find it difficult to repay,” they said.
Realtors also put the onus for delays on the excruciatingly slow building permission process in bodies like the Brihanmumbai Municipal Corporation (BMC). “Government policies change frequently, resulting in inordinate delays,” they said.
The new Real Estate (Regulation & Development) Act (RERA) brings hope to consumers with more transparency and accountability, Harish said. The new law stipulates strict punishment for errant builders and fines for project delays. “Buyers will have the option to continue with compensation or to exit from a project that is delayed. Developers will have to deposit 70% of the project funds in a separate account, which can only be used for the earmarked project. Diversion of funds to other projects was a major reason for project delays,” says a primer on RERA prepared by global property consultant JLL and law firm Khaitan & Co.

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