Wednesday, May 30, 2007

Centre Plans 1% Penalty Per Month for Builder project delay

Times reports

Bangalore: S Kamath, Balasubramanyam and A Pattar are among a group of 18 individuals who have just served a legal notice on a major Bangalore-based property developer for not completing a project near Hebbal which should have been ready by March.
In fact, only the foundation layer has been done. Even if the work takes off now, it will be at least another year before their block is up. Most have already paid Rs 6-9 lakh to the builder, with a good part from bank loans. Sampath, who booked his flat in early 2005, says he is paying a pre-EMI of Rs 4,000 every month. Their mental agony is unbelievable. “We do not even get a proper response from the builder on the project delay,’’ says Balasubramanyam.
The Bangalore property boom is increasingly showing up its downsides. Many projects are delayed — some by as long as nine months to a year or more. Builders and real estate observers attribute the delays partly to the shortage of manpower, material and construction equipment, given the mammoth property development happening across the country.
The Centre is said to be now proposing to mandate payment of a penalty at the rate of 1% of the value of the property for every month of delay. A Balakrishna Hegde, president of Karnataka Ownership Apartments Promoters Association (KOAPA), welcomes the move, though he thinks 1% may be a little too high.

“Delays also occur because builders try to build a bank of captive customers,” says an observer. Customers are sold properties in land under litigation in the belief that the disputes would be resolved soon; in the green belt, in the belief that the new Comprehensive Development Plan (CDP) for Bangalore would lift the restrictions in those areas; and often without getting all permissions. “By this, they prevent buyers from moving to rival builders. Invariably, they go wrong in their calculations about the time it takes to get all clearances,” says the observer. Nilima Malhotra of Cooke Town and Dr Murthy P S, both of whom booked villas off the Outer Ring Road near Marathahalli, have harrowing stories to tell. Murthy believes the builder didn’t get all the permissions when he sold the villa due to which the project was inordinately delayed.
Most major builders incorporate clauses in agreements that lay down penalties for every month of delay. But, as Sushil Mantri, MD, Mantri Developers, says, “Many builders find excuses not to pay up those obligatory amounts.’’ Besides, even when paid, they hardly compensate for the loss of rental income or the mental agony.
Till the time the Centre’s proposal is legislated, and maybe even after that, keep a close eye on what you buy and who you buy from.

SC: Building sanction can be withdrawn

New Delhi: Permission for construction of buildings can be cancelled in public interest even after they are sanctioned, the Supreme Court has held. “Rules framed for the purpose of protecting the heritage and ecology are fully justified as such regulations are framed in public interest which must override the private interest,” a Bench of Justices S B Sinha and Markandeya Katju said.

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