Property Buying: How to Handle Delays in Project Completion

In the recent years Indian Real Estate sector has been facing an immense problem with almost 90% of the projects getting delayed. The common myth is that the delay happens at the developers end, but this is not entirely true. The possession of an apartment in India is not entirely in the developer’s hand. There are various other entities and related issues that might be the reason for delay. Some of the common issues are change in fiscal policies, political unrest, reasons of construction by sub-contractor, delay by material suppliers, delayed government approvals, shortfall in skilled /unskilled man power in market, late local approvals etc.

Although there are other factors to be taken into consideration, we cannot ignore the fact that some developers have interest in delaying the projects, since they get the advantage of appreciation in the unsold stock of flats. The price of the flat keeps rising with each passing month and the developers will keep complaining about the increase in construction costs and delayed approvals. Sometimes after collecting 80-90% of the money from the buyer in early 2-3 years the developers diverts the money collected to a more lucrative project, buy land, launch a new project etc.

Though a genuine and credible developer will never do such immoral acts as, they have their reputation on stake with the successful completion of project. Still, a buyer is the one who is most vulnerable in the whole process.

Following are the suggestions and the measures a buyer can take safeguard his interest and avoid getting exploited;

Checks a buyer should make before buying an under construction apartment
A buyer should check the developer’s credibility, past projects, performance and delivery record. He should also ensure that the project is funded by a known bank and has the clause in the agreement of sale/ agreement of purchase regarding the compensation from the builder in the case of delay.

A buyer should also scrutinized the documents like deed of deceleration, apartments deed of declaration, sale deed, encumbrance certificate, latest tax paid receipt, agreement of sale and has all the rights to ask for a copy of the project’s drawings, duly stamped by the municipal authorities.

Remedy available to the Buyer
Checking these documents and credibility of the developer will reduce the chances of the delay in project. If the buyer still has meet with the disappointment with delay, he is left with two options:

Opting out
Taking legal action without opting out.

Opting out is certainly not a wise option, since a buyer must have paid 80-90% of the apartment cost in early 2-3 years and might also be paying rent , EMI’s etc at this stage. If the developer is genuine and he pays back all the money along with the interest rate too, still the buyer will be in loss. Since the money he will get back will be in accordance to the rates prevailing 2-3 years back and in that price he might not be able to find a new flat with the same space and in the present locality due to appreciation. He will either have to compromise on locality of space and still he cannot be sure about the destiny of the new project.

In case buyer takes a legal action against the builder and builder is found guilty of delay in giving the possession the buyer is liable to get monetary compensation and speedy possession of the flat.

Legal options for the buyer
The ‘Agreement for Sale’ though is generally loaded in favor of the developer still creates the basis for complain, since the time of possession is mentioned with the payment schedule. If the agreement also stipulates any penalty for the delay in date of possession, the buyer can go to civil court. The landmark judgment by the Supreme Court in 1983 in the favor of the buyer against the development authority for not delivering the flat on time has brought the housing construction under the Consumer Protection Act, 1986.

The property buyer is considered as a consumer and can file a complaint in the consumer form under the section 2(1)(d) of the act for deficiency in service. Under the consumer act a buyer is entitled to get the money back with the interest or if the consumer does not want to opt out he will be financially compensated along with the allotment of apartment by the developer.

How to file a complaint in consumer forum?
The consumer before going to the consumer court should fist send a notice to the builder regarding the issue and asking for compensation giving the builder sufficient time to address the issue. In case there is no action/response taken from the builder you may knock the door of the consumer court. The main points regarding filing a complaint in consumer court are as follow:

A lawyer is not necessarily required as a property buyer can present his own cases in consumer courts.
After two years the dispute issue will become outdate, so the complaint should be filed within two years of dispute arising.

For a property of value up to 20 lakhs, a written complaint can be filed before the District Consumer Forum. For property of value up to Rupees one crore, the complaint is to be filed before the State Commission and before the National Commission for value above Rupees one crore.