Project Delays: Precautions and Rights of Investors

The trend of residential projects getting indefinitely delayed due to various reasons are on the rise in recent times. Incidentally, about 25-30% of committed projects in India have not been delivered to investors on time, with residential projects in the NCR region topping this list. This causes considerable hardships to investors who have invested partly or wholly in ongoing or prospective residential projects. Besides, there are also instances where developers knowingly take investors for a ride. To safeguard their interests and to prevent their future plans from going awry, it would be helpful for investors to take necessary steps to ensure that they don’t have to worry later.

Real Estate Regulation Bill

Purchase of real estate is generally bound by a one-sided, unregistered agreement called the Builder-Buyer agreement. This agreement is handed over to the investor only on payment of about 20-30% of the total property cost. Moreover, in case of soft-launch or pre-launch of projects, investors are not even handed over the receipts of payments. A draft real estate regulation bill has been suggested with a proposed sector regulator to put forward the obligations required to be fulfilled for project delivery. However, until the Bill becomes functional and the regulations are imposed, buyers of real estate projects would have to rely on their rights that are mentioned in the booking agreement.

Investors compromised

Instances of delayed projects normally occur in an unorganised market. Generally speaking, reputed developers try to deliver, more or less, on time and as per the specifications mentioned prior to the purchase. But a few small developers default by delaying their projects beyond the promised completion date. There have been cases where projects have been delayed by more than a year due to various reasons. This is mostly caused due to paucity of funds. There are also instances wherein developer compromises on the quality of products used in construction, thereby duping investors. There are also cases in which municipal authorities may not approve of projects since the project drawings presented by developers may not be detailed enough. In the worst cases, fraudulent developers disappear altogether after pocketing the initial payments of investors.

Precautions

There are certain aspects that investors need to be aware about and steps that they need to take before investing in real estate, so that their interests are safeguarded.

·  Scrutinise the project details and the background information and track record of the developer.

·  Check if earlier projects by the developer were free of any issues and that they were delivered on time.

·  Ensure that the project has bank approvals and sufficient funds are available to cover the construction costs.

·  Make a visit to the project site to get first-hand information regarding the quality of construction and any other aspect that ensures the quality of the project is top class.

·  If there are already home owners residing in any unit of the project, information can be sought from them regarding the various aspects of the project as well as about the support and services provided by the developer.

·  Legal advice can be sought from a legal expert or attorney to know if the area of the property is approved by the municipal authority and is litigation-free.

·  A real estate consultancy firm can be hired to provide expert opinion about the developer and the project.

·  Copies of approvals of the project as well as the map of the project stamped by the municipal authority can be sought even during the soft-launch stage.

·  Detailed construction schedule can be sought with the investor being able to negotiate for penalty clause in case the project is delayed.

Relevance of Bill

It is in this context that the relevance of a real estate regulation Bill becomes important. It ensures buyers who have already invested or those who are looking at future investments the prompt completion and delivery of projects. Until the Bill comes into effect, buyers would have to rely on their rights which are documented in the booking agreement.

Rights of investors

There are various other rights that investors are privileged to in case of delayed projects. They can approach consumer courts seeking refunds for projects that have been delayed beyond the stipulated time mentioned in the Builder-Buyer agreement. They can also file a case with the Consumer Disputes Redressal Commission, either at the national, state or district level.

With large land parcels available in many areas in Hyderabad, particularly in the outskirts of the city, the demand for plotted land in the city has seen an upsurge. The fact that prices are considerably low in recent times has also prompted many investors to buy land with the hope that prices will appreciate in the future. Many developers are also buying large land parcels with the intention of constructing residential projects later on when prices appreciate.