Happy Realty! Government Set To Put Real Estate Regulators In Place; Stringent Regulations Against Cheating Builders.

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Posted on January 17, 2013 by Runjhun

Government Set To Put Real Estate Regulators In Place; Stringent Regulations Against Cheating Builders.

The need for the real estate regulator has been more impending than Manmohan Singh’s tough stance on many many issues. Consumer Tadka has pointed out the need for a real estate regulator numerous times. (See one of our prominent stories on the issue Did You Know About These 6 Things Your Builder Can’t Do But Still Does?).

In a massive relief for the consumers, it seems that this wish would be finally granted. The Government is all set to introduce a fresh legislation–The Real Estate (Regulation and Development) Bill in the budget session. The legislation is expected to massively reform the regulatory regime in the real estate sector.

Apart from putting in a regulator in place, the provisions of the legislation are fairly extensive in terms of a consumer friendly approach. The legislation aims to ensure builders sell residential property on the basis of carpet area instead of ambiguous terms like “super area”.

As per the provisions of the legislation, a real estate regulator in every state will make it mandatory for private developers to register all projects before sale of property and only after getting all necessary clearances, addressing a major concern of buyers about incomplete or fraudulent land acquisition.

According to the bill’s provisions, failure to declare status of clearances will invite up to a maximum three years imprisonment or fine that can amount to 10% of project cost. To make sure developers stick to timelines, the proposed law states that realty players will have to park 70% of funds in a particular bank account so that resources are not diverted and buyers are not left in the lurch.

Realtors will have to disclose project details and contractual obligations to ensure transparent, fair and ethical business practices. There can be a model agreement which is expected to reduce ambiguities in real estate transactions for the convenience of the buyers.

As expected, the private builders are not happy. However, the disagreements are expected to be resolved before the budget session. We just hope that when they are through, the legislation retains its current, consumer friendly form!

We shall keep you posted on the developments.

Realty regulator will keep builders on a tight leash. (Times of India)

3 Reasons Why Young Investors Should Invest In Real Estate!

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Posted on October 25, 2012 by Runjhun

3 Reasons Why Young Investors Should Invest In Real Estate

One of the most frequent advices that can be given to the youth when it comes to investment is starting young. And just because, the advice is so frequent, most of us tend to forget that it is actually the BEST advice anyone can be given.

Why is starting young so important? The answer is hardly rocket science. By the sheer luxury of time that youth has on hand in terms of the period of investment, the risk appetite is multiplied several times which in turn leads to investments that by design are high risk, high returns. At a simpler level, starting young means you have a lot scope for distributing your investments over a long period of time, ultimately leading to a substantial increase in the net amount invested. At a still simpler level, starting young means your money has that more time to grow and hence, higher returns.

While this common wisdom has had many young investors coming into the market, investing largely in equities and debt instruments , real estate continues to be an area out of the purview of the obvious choice of the investors. Going by the volatile nature of the economy these days however, real estate has rapidly emerged as a mode of investment that should ideally be on the top of the investment priority list, especially for the young investors. We give you a lowdown on the reasons why real estate should be preferred by the youth.

The Anti-Inflation Investment—Real estate investments are an almost guaranteed way to get around inflation. Real estate is growing market, more so because of the rapidly shrinking supply of land. You only have to go house hunting in a city like Mumbai to know the extent of land shortage in the country. A shortage supply logically means a growth in market and so long as this shortage persists, the market shall not slow down. The core point here is a careful market research before investing into the real estate. You can hardly expect your money to grow exponentially if you chose to invest your money in a landed property in remote UP. It shall still grow but not as much as it would in a more favorable location like Mumbai or Delhi-NCR. There are other considerations too, which need to be taken into account. For instance, in cities like Pune and Gurgaon, which thrive on floating population, investing in residential properties that can be leased out at a later stage is a good strategy.

These examples are illustrative. The moot point here is that investment in real estate can be an excellent strategy for the young investors to get past inflation. The essential corollary is proper market research and careful consideration before investment. Read up, ask around and ask plenty of questions. If you there is any doubt about importance of market research, read all that can go wrong with your real estate investment 6 Things Your Builder Can’t Do But Still Does.

Affordable Option—Yes, you read it right. Contrary to the popular perception, investing in real estate is actually one of the more affordable options with banks funding up to 80% of the cost. The young investors also get income tax benefits. A slightly more complex benefit is derived from the fact that young investors are expected to pay fixed installments over years which in effect amounts to purchasing an asset at a lower cost, whose value is bound to appreciate while the investor’s own income too keeps rising. For those young investors looking to discipline their investments, servicing regular EMIs is an excellent method. Of course, real estate is a volatile asset but from a reasonable perspective, it is still a safer bet than stock markets, especially when trade pundits across board have been reiterating the fact that the probability of appreciation in case of real estate investments is very high.

Tangible Asset—This is not exactly an objective benefit but may hold significant importance in several cases. Unlike old times when owning house marked a definite landmark in one’s life, young investors can now enjoy the benefits of a tangible asset pretty early on in their lives. If the property is a residential one meant for personal purposes, the obvious benefits are manifold. In several cases, the investors’ end up paying an EMI which is only slightly more or almost equal to the rent they would be paying otherwise, with an added benefit of actually residing in their ‘own’ place.

As we had stated earlier, real estate is a volatile option, even if relatively less so. And hence, the prudent way ahead is to make real estate one of the modes of investment in your portfolio and not the only one. An ideal portfolio has a balanced distribution between various options and irrespective of the benefits or the risk factors, concentration of wealth in any mode is problematic. The ideal way ahead is to start off with SIPs (systematic investment plans) and gradually proceed to real estate, as and when you reasonably acquire enough spare wealth to distribute between various investment options. The key is to be prudent with your money and invest as soon as you possibly can. And while investing in real estate, always remember, an aware investment is the only safe investment and a thorough market research is a must.

Builder Troubles! Consumer Forums Slaps Heavy Compensations In 3 Separate Cases.

Posted on October 22, 2012 by Runjhun

Complaint Against Builders. Consumer Forums Slaps Heavy Compensation

Buying a house is a momentous occasion, a dream come true. And it is indeed extremely disheartening to see so many dreams turn nightmares in seconds, just because the builders in this country have neither scruples nor fear.

Real estate is rapidly emerging as one of the most problematic areas when it comes to consumer issues and with the legislative body continuing to delay the establishment of a nodal regulatory body in this sector, it seems the things are likely to get much worst before they start getting any better, if at all.

Meanwhile, for whatever their efforts are worth, consumer forums continue to be the beacon hope for the harrowed consumers, delivering justice and a sharp rap on the knuckles of the erring builders.

In 3 separate incidents in various parts of the country, consumer forums yet again came down sharply on the erring builders, handing out much needed relief and compensation to the aggrieved consumers.

In the first instance, a District Consumer Redressel Forum has directed a building firm to pay a compensation of Rs 30,000—Rs. 25,000 as charges for causing mental agony to the society and Rs 5,000 as legal expenses due to deficiency in services to a housing society in Navi Mumbai.

The society argued that the building firm failed to complete the lease deed and transfer deed formalities since 1988 which resulted in the stamp duty swelling up to Rs 6.5 lakh, holding Liberty Investment, the building firm liable to pay the charges to the aggrieved Liberty Cooperative Housing Society.

Housing Firm Ordered To Pay Rs. 30,000 To Housing Society (Indian Express)

Separately, a complainant from Panchula had paid the Ansal Properties Rs 4.5 lakh after being issued an allotment letter for a shop booked by her. She was assured that the construction of the shop would begin immediately after the payment of the first instalment, and possession would be handed over before December 2010. But did not receive a timely allotment

The UT District Consumer Disputes Redressal Forum has directed Ansal Properties and Infrastructure Ltd to pay the complainant Indu Dhir Rs 10.71 lakh, along with interest at the rate of 9 per cent per annum and Rs 7,000 as costs of litigation for not allotting a house to her on time.

Builder Directed To Compensate For Untimely Allotment (Indian Express)

In a third, latest incident, a prominent builder and his associate society from Nagpur were at the receiving end of the State Commission’s wrath. According to the complainant flat owners, the builders had promised them a lot of amenities like party lawn, swimming pool, health club, well-equipped gym, lift with generator backup, ample parking space and two ACs for each flat. However, at the time of possession, none of these were provided, thus duping them. The builder not only failed to complete the flat scheme but did not provide the promised amenities even after a lapse of two years after sale deeds were executed in 2007.

The State Consumer Dispute Redressal Forum directed the builder N. Kumar and his associate society to pay nearly Rs. 23 lakh to aggrieved flat owners of Poonam Pride at Khamla Square for adopting unfair trade practices and thus causing physical and mental harassment to the petitioners.

Consumer forum fines N Kumar’s firm Rs23L (Times of India)

Builder Troubles! Mumbai Builder To Pay Flat-Buyers Over 16L For Not Handing Over The Possession

Posted on September 3, 2012 by Runjhun

Complaint Against Builder, To Pay Over 16L For Not Handing Over Possession

Another scheming builder bites the dust just as a score of others innovate newer schemes to fleece the consumers!

According to the complainant, a 450-sq ft apartment was booked in builder Jagat Parikh’s proposed building in Goregaon. In 2008, the consumer made an initial payment of Rs. 9.22 lakh, as agreed upon under the contract signed by them. However, on completion of project, the possession was not handed over to him and the the property was sold to a third party

To top it, the builder did give cheques to the consumer, refunding the money paid by him. But as expected, the cheques bounced. The consumer then approached the consumer forum.

The Mumbai district consumer forum directed this builder to return Rs 9.22 lakh to Goregaon-based consumer, who paid the sum as advance, along with Rs 6.8 lakh compensation.

This matter goes back to 2008. It is matters like these which are a stark reminder of the pressing need for a regulator in the real estate industry. Consumer forums have been filling this gap for too long now and it is high time that the legislature took note of the progressively increasing frequency of harassment cases in the real estate industry apart from other serious concerns and take reasonable steps to put a regulator in place as soon as possible.

Builder Told To Pay Over 16 Lakhs To Flat Buyers(Indian Express)

Harassing Builders Strike Again! Consumer Forum Rules Against Builders In Two Separate Cases

Posted on August 1, 2012 by Runjhun

Defiant Builders, Consumer Forum Strikes Again

Complaints against builders strangely always remind me of the 70′s movies where the villains held the poor heroines/mothers/sisters to ransom in dingy, under construction structures while they waited to be beaten up by the strappy heroes.

I know how it sounds but I really didn’t imply that builders are villains and consumer forums, the strappy heroes. Didn’t primarily for two reasons-one, consumers are way less glamorous and way more harassed than the kidnapped heroines who always had their saviors in sight (unless of course they were wimpy sister kinds whom the directors loved to torture) and two, the strike rate of the consumer forums can never match the strappy heroes.

But of course, consumer forums dostrike and strike hard plenty of times just as they did in these recent cases.

Delhi District Consumer Forum Orders Builder To Refund Booking Amount

Delhi District Consumer Forum, while hearing a complaint against Unitech Ltd., a leading real estate company, held the company liable for arbitrarily increasing the rate of the flats and refusing to refund the advance upon cancellation of booking and ordered it to not only refund the booking amount (over 6L) but also pay a fine of Rs. 15000.

Consumer Forum Orders Buyer To Recompense (Common Floor)

Complaint Against Builders (Falsa Construction) For Incomplete Flats

Mumbai Maharashtra Consumer Forum ordered Falsa Constructions to either finish the project or give another flat to the aggrieved consumer. In an admirable stand, the forum observed that ordering the builders to the refund the money deposited with the builder in 2005 and pay an interest as high as 18 percent will also not enable the aggrieved consumer to buy a flat at current rate and hence, ordered the builders to bear any additional cost in acquiring the flat elsewhere for the consumers.

Finish Building Now Or Give New Flat (Pune Mirror)

An admirable stance by the forum, nailing the ground reality of delayed handover of possession which goes way beyond physical inconvenience. The forum has reiterated a fact we have always stressed a

nd highlighted- that in all such cases, the financial repercussions are borne by the consumer alone.

As more such cases stumble out, the need for a Real Estate Regulator becomes more and more urgent. Only if the authorities were to pay heed!

Did You Know About These 6 Things Your Builder Can’t Do But Still Does?

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Posted on July 27, 2012 by Runjhun

6 Things Your Builder Shouldn't Be Doing But Still Does

Sifting through the numerous real estate related complaints that land on our desks every day is an instructive, enlightening and horrifying experience-all at once.

Instructive and enlightening because these complaints are a living, breathing manual on how to harass consumer; extremely handy should any of us decide to shift into the real estate business.

Horrifying because of the damning realization that this just the tip of the iceberg; a mere trailer of what consumers go through across country when dealing with builders and real estate developers. The ground reality of real estate sector in India, from a consumer perspective is harsh. And that is a gross understatement.

Pending a bill seeking to regulate the real estate sector to infuse some sanity in this opaque, unregulated, unaccountable sector-we decided to dig around some more on the prevailing scenario. The result was this list (which is neither comprehensive nor exclusive, given the rapid rate at which builders innovate when it comes to harassing their consumers) of some of the things that your builders should not be doing but are still doing just because no one has asked them to stop or dragged them to the consumer court!

1. Charging for the parking/open space-When one of our readers, Chetan Dhowan, wrote in to us complaining that his builder is asking for a ridiculous price for every parking space, we decided to dig into the issue. What our research revealed was not surprising in the least-the practice was indeed illegal. What was surprising was the fact that this practice has been struck down by the Supreme Court itself in a 2010 verdict where it was clearly held that any open spaces usable as parking cannot be sold separately as they are common areas. Ironically, despite the verdict, as Chetan’s experience clearly shows, this practice has not subsided at all, with harrowed consumers across the country forced to pay exorbitantly for what is rightfully theirs! For a detailed analysis of this point, see Don’t Pay for the Parking Space, It is Illegal!

2. Delay in Handing Over The Possession- One of the most commonly reported issues, with innumerable consumer forum verdicts against it–delay in handing over the possession of the houses continues to be the proverbial thorn in real estate consumers’ lives. The wait for the consumer can sometimes be as long as 10 Years, and even then it takes a harsh consumer forum verdict to ensure the handover. Is it allowed? Of course not. As we said earlier, consumer forums across country have been relentlessly taking a stance against such delays, the most recent one being a verdict by a Mumbai Consumer forum Consumer Forum Penalises Builder for Delay in Handover of Flats. But the vicious cycle refuses to break, being repeated by some other builder, in some other place.

3. Delay in completion of the project and resulting fiscal setback borne by the consumer- What is worst in case of the delay by builders in completion of a housing project is the inevitable, resulting fiscal setback which is ultimately borne by the consumer. The builder-buyer agreements have penalty clauses but they are not mandatory. The fiscal implications of delay have not gone unnoticed and Maharashtra State Commission in a landmark verdict clearly noted the insufficiency of the 9% interest rate that the builder was liable to pay on the refunded amount and the fact that the consumer in question has invested their lifetimes’ savings when they invested in flat and at the existing rates, it would be impossible for them buy a flat, even with the refunded amount. The result is often exorbitant compensations and interest rates granted by consumer forums in cases that come before them. But has it changed things? That is a cruel rhetoric.

4. The wide chasm between the promised and the delivered- It isn’t very un-common place to find consumers cribbing about the layout and designs being different from what was promised or shown in the catalogue. What is worst is when the this habit of denying the promised extends to denial of basic amenities, leaving a bunch of frustrated consumers in its wake- with houses that leak, doors that creak and windows that rattle. Is it allowed? Do we even need to answer this? And of course you can drag your builder to the consumer court- trust us, it is really worth the effort.

5. Bounced Refund Cheques- This is the kind of innovation we had been talking about. One of the complaints that landed on our desks was from a consumer whose builder obliged and refunded the entire amount with interest when the project was delayed. The catch-the refund was in the form of a cheque that eventually bounced. What made us do a double take on this complaint was the fact that this builder’s act was so wrong at so many levels, not just legally but also professionally. It just made us wonder how easy it was for these builders to get away with harassing consumers. So much for an honest builder!

6. Denial of basic amenities- Denying electricity and water supply is a fairly regular practice for the builders. The consumers are forced to pull strings, pay money and resort to all sorts of tactics to ensure they get two things that are an absolute must and their primary right for survival in modern times. The builders get away with it, mostly- till someone gets a consumer court into picture and then, all hell breaks loose. As was seen in the case where Thane Consumer Forum sentenced a builder to two years of imprisonment along with fine for denying a building water and electricity supply. For details, see Consumer Forum Convicts Builder For Denying Water And Electricity Supply.

As we had mentioned earlier, the horrifying reality of the real-estate sector from a consumer perspective is far too gory to be summarized in a list—any list. And there is some good reason behind the analysts and industry-watchers across country crying hoarse about the need for a Real estate Regulator to be brought into place. A bill is pending and from what we gather, has some promising provisions like hefty penalty in case of default, establishment of a State level regulator and compulsory registration for builders with the Regulator.

Our only question is when? And till then, what?

We really hope that this bill turns into a legislation soon, giving the real-estate consumers at least some hope of redemption. Consumer courts have been filling this gap for too long now and while they are effective, they really cannot replace a system of regulation that ensures that grievances do not arise in the first place.

Till then, and probably even after that, awareness is the key. The entire objective behind this list was to enhance awareness and let the consumers know what is wrong and that consumer forums are indeed of help in several cases. What is essential is knowledge of what is certainly not allowed and this is a weapon which every consumer must possess!