Searching the blog and other things

Someone asked me on how to search the blog effectively to find out articles related to duping of buyers by the builders. I've tried to tag all such articles with various tags like fraud etc. Look at the bottom of this posting and you will see those tags. Click on those tags and you will find the relevant articles.
On another note, due to some personal commitments I am unable to follow the market and post articles on a regular basis. I would urge some other folks to take up this mantle for the benefit for all concerned parties. I had given some folks posting rights in the past and I can give some more folks who would like to take up the cudgels from me. We have a good audience and the bull bear story will continue for a long time before everyone is exhausted.

As I see the market in Mumbai, speaking to friends everyone tells me the money has dried up. Some businessmen friends have drops of upto 40-50% in their sales. Rents have dropped. I was shocked to see some rentals going for 32k, which were quoting 50-60k last year.

We are in a deep protracted downturn, specially Mumbai. As I have said repeatedly, be it Mumbai, Pune, Chennai, Bangalore, affordability for Indians or NRI's is upto 4,000 per sq/ft. Anything above is for the politicians and black money operators. Anyone who pays more then that is going to suffer for a long time.

Lastly I spoke to a loan banker who said that most builders have reduced rates but still some are holding on. He does not see any hope for anything more then 7k. He is bit more bullish them I am :)

the areas I was referring to in this and previous posts is in Santa Cruz and Vile Parle.

Builders scandal highlighted by CNN-IBN

Buyers rights and consumer activism

It seems that apt buyers have woken up to the internet and are organizing and ganging up against builders in ways never seen before. In the old days, media was controlled by few select companies or the government. Consumers had to resort to telephones, type-writers and sit-in dharnas to have their voice heard. In this new age of instant connectivity, builders are facing the music by irate buyers who are getting increasingly impatient for their purchases. Most of these buyers on delayed projects are paying a high rate of pre-EMI in addition to the EMI they will end up paying once the loan tenure begins. They also have to account for the loss in rent they have to incur for their present accommodation. They are bleeding slowly and it is high time builders be held accountable for their losses. For too long have buyers been herded around like sheep.

Livemint.com reports. Kudos to the Wall Street Journal for voicing the problems of the masses. Most Indian newspapers write soft marketing articles how it is a great time to buy. Its time for the Times group of companies to take some journalism lessons from the WSJ. If only Vineet Jain can get some time from posting Holi pictures on his Indiantimes website.


After using a portion of his retirement money to buy an apartment in Gur gaon, on the outskirts of New Delhi, S.K. Bangia pursued the developer for almost a year to get the purchase agreement. He eventually got a letter cancelling the allotment of the flat, Bangia says.

The 62-year-old former bank manager booked the apartment in a Raheja Developers Pvt. Ltd project in December 2007, the month that he retired, in his and his son’s name. His son wanted to borrow a home loan to finance part of the cost.

“They did not give (me) a buyer’s agreement and an approved sanctioned plan of the project, without which no bank gives a loan,” says Bangia, who sent a legal notice to the company in November, demanding the sanctioned plan and buyer’s agreement. A sanctioned plan is a project layout approved by the local urban development authority.

Homebuyers are taking recourse to consumer forums and the courts and online activist groups to resolve grievances against real estate developers. As slowing economic growth and a property market downturn cause cash-strapped realtors to abort or delay projects, property buyers are increasingly being forced to turn consumer activists.

Bangia, who approached a consumer court last month, claims he was targeted because he was trying to involve other buyers in his fight. He wants double the 9% interest Raheja Developers paid him on the money it eventually refunded him. Raheja, which charges 18% interest for delayed payments, says it’s following the rules.

“As per the terms of agreement to sell, it is mentioned that the company will give 9% interest,” said a Raheja Developers official who didn’t want to be named. “I am not familiar with this particular case...” One reason for the increasing incidence of disputes is a decline in real estate valuations, which is prompting buyers who had booked property at high prices in the past to seek refunds and switch to cheaper developments, said Anuj Puri, chairman of Jones Lang LaSalle Meghraj.

“It is (also) true that many projects of developers have got delayed for genuine reasons—may be because of lack of finance or whatever—and at the same time the tolerance level of buyers has gone down,” he said.

DLF customers gang up, pressurise developer to commit refund

Latest developments in the DLF's chennai project from ET.

DLF customers gang up, pressurise developer to commit refund
29 Mar 2009, 0633 hrs IST, ET Bureau

CHENNAI: Customer pressure seemed to have got the better of India’s realty giant DLF. Nearly 300 such buyers, who have backed out of the company’s prestigious ‘Garden City’ project in Chennai, refused to leave its premises till they got a written assurance that their money would be paid back in full.
Consequently, DLF has assured them that the formal refund letter addressed individually to the exiters would be given by April first. In its communication dated March 28, 2009, DLF Southern Homes, the special purpose vehicle executing the project on Old Mahabalipuram Road, said "the process of full refund will commence from 1st April, 2009, and will be completed before 30 September, 2009. The priority of disbursement shall be based on the order of first exit letters received and will be intimated by 10th April 2009."
For over a year and more, problems for the country’s largest listed developer have only been mounting. It has been facing the ire of customers, who made bookings in the 3,493 apartment Garden City project on 53 acres, which marked the Gurgaon-based realty biggie’s maiden entry in the city.
Apparently, the total number of exiters from the project was pegged at 580 out of its existing base of 1,800 customers. DLF Southern Homes was to have given a letter outlining the timeline of refund for all the exiters. But that did not happen, provoking angry reactions from the exiters, who refused to leave DLF premises until they got one.
The buyers, who advanced payments, have organised themselves into a Google Group, constantly monitoring the builder’s progress. Last month, as part of the attempts to appease its customers, wanting to exit from the project, DLF had brought down the prices from Rs 2500 to Rs 2600 per sq ft against Rs 2800 to Rs 3200 per sq ft for its existing customers. For new customers, the basic price was fixed at Rs 2750 per sq ft.
But this too seems to have not made any headway. For, on Saturday evening, nearly 300 buyers converged at the DLF office, seeking a written assurance from the developer to refund their money paid as advance for the project.
Earlier this month, the realty major had expressed its commitment to complete the project on schedule. This was in the wake of reports about consumers shooting exit letters.
If delayed approvals triggered anxiety and panic among existing customers, DLF Southern Homes MD K K Raman allayed the fears stating that "the construction activity is in full swing and we are well on schedule. We are committed to hand over the homes by April to June 2011, as originally committed."
"We do not foresee any problem in adhering to the timelines as we are adequately capitalised," DLF ED J Subrahmanian further said.

Prices down 50% in Gurgaon

Livemint has an article on the crash of housing in the Delhi-NCR region. Not all builders are created equal and Unitech/DLF and Pasvanath seem to have taken the cake in the bad press they have seen over the past six months. This scenario will be repeated in every city where over money seem to have vanished for houses priced for over 50L. The sweet spot for now is between 25-45L. I think the rapid increases in salaries, combined with the low interest rates pumped up housing rates beyond affordability. People with soaring stock market portfolios leveraged loans for large houses. With everything unwinding, the highly priced properties are unwinding as well.
LiveMint reports
New Delhi / Bangalore: When he bought the four-bedroom apartment in Unitech Grande on the outskirts of New Delhi 22 months ago, the hefty price tag of Rs2.75 crore didn’t deter him. The economy was humming, the markets surging and nothing, it seemed, could go wrong.

Billed as India’s first ultra-luxury residential project, Unitech Grande promised a Greg Norman-designed golf course and luxury trappings, including a dozen theme gardens, an integrated sports complex and world-class health care, shopping and entertainment facilities.
The price of the apartment, promised for delivery in September 2010, has now dropped by about half to Rs3,500 per sq. ft, said the 37-year-old buyer, who didn’t want to be identified by his name or profession.
“I can’t even sell the property because of the erosion in value. I will lose money if I sell now,” he says, adding that he is fretful the project will be delayed because “not even a hole has been dug in the ground” at the site in Noida since he purchased the apartment.
His predicament illustrates the plight of homebuyers who bought apartments and houses at the peak of the property cycle after prices had surged 30% year-on-year during 2005-07. Those properties are worth half the price they paid after the economy and, with it, the real estate market, went into a tailspin last year.

Builders default and some offer Rent to buy + Swiss Banks

Pune apartments developer offers sale plan to tenants

Livemint reports
The campaign, branded ‘Rent Today and Own Tomorrow’, invites potential buyers to rent apartments of their choice on 11-month contracts, with the option of buying the apartment anytime during this time
Sudha Menon

Pune: A Pune-based developer may have a solution—at least temporary—for the hundreds of realty firms faced with dwindling demand for homes: Rent out apartments and hard-sell a purchase option to the tenants.
Mont Vert Homes has kicked off a ‘Rent Today and Own Tomorrow’ campaign, inviting potential buyers to rent apartments of their choice on 11-month contracts, with the option of buying the flat anytime in the interim.
“Paying rent hurts and is often considered a waste of money, so what we are telling our customer is that once he decides to buy the apartment, we adjust the rent paid towards the down payment for the house. That way, he has not lost the rent amount,” said Manish Kaneria, director of Mont Vert Homes.


Buyers under pressure as builders begin to default
Some small developers are yet to start on their projects; buyers are asking these firms to return booking amount
Shabana Hussain

New Delhi: It is more than two years since Kamal Sachdeva and brother Harish booked villas in Faridabad, an industrial area south of New Delhi that is fast becoming a housing destination, with Pal Infrastructure and Developers Pvt. Ltd.
Sachadeva made a down payment of Rs3.5 lakh and was promised possession of a 1,200 sq. ft house built on a 1,350 sq. ft plot by the end of 2007. He says not only has he not yet received possession of the property, construction has not started since he made his booking in February 2007.
Some four months ago, Sachdeva, a finance professional with a New Delhi automobile company, asked Pal about the progress at the project. Pal informed him, he says, that it did not have the land for the project proposed to come up at Sector 78 of Faridabad.
“I want my investment back but the company says it will only give me a six-month post-dated cheque at an 8% rate of interest. Earlier, they had said they will give a 12% rate of interest,” says he. “I don’t want post-dated cheques because I have heard the company’s cheques are bouncing.

Swiss Banks reports on DNAIndia.com

Kudos to the author for raising the important issue. As everyone knows,Indian politicians are the ones to lose the most, if their names are made public. Who will bell the cat ??

Under pressure from federal authorities, Swiss bank UBS is closing the hidden offshore accounts of its well-heeled American clients, potentially allowing their secrets to spill into the open.

In a step that would have once been unthinkable in the rarefied world of Swiss banking, UBS will shut about 19,000 accounts that prosecutors suspect have gone undeclared to the Internal Revenue Service. UBS will transfer the assets to other banks or other divisions within UBS, or will mail checks directly to the account holders, creating paper trails for federal prosecutors who are examining whether UBS clients used such accounts to evade taxes.

The clients now face stark choices: They can cash their checks, and thereby alert the authorities to any potential wrongdoing, or not cash them, effectively losing their money. Or they can transfer the money to new banks, a procedure which, in the case of foreign banks, requires depositors of more than $10,000 to report the new account to the Treasury Department.

UBS, the largest banking institution from Switzerland, has also committed to provide names of the top 250 persons who have kept money in offshore accounts, out of 19,000, to US authorities. UBS has also committed to pay a fine of $780 million to settle claims that it has defrauded US Internal Revenue Service.

The original charges are that the UBS offshore accounts have helped Americans hide $18 billion in 19,000 accounts. But now, the US state department is compelling it to disclose about 52,000 American accounts kept with UBS.

Swiss authorities used to argue that if there is no criminality under Swiss laws (which do not recognise currency violations and tax evasion as offences) the information on offshore accounts could not be divulged.

The same position was taken in Bofors case also. Now that wall has been breached by this US agreement with Swiss authorities.
UBS, the world's largest private bank, also said that it would stop offering to American clients offshore private banking services that are not declared to the IRS.

In all these discussions, one critical aspect is not to be missed -- the wealth hoarded by Indian leaders in commerce/ politics/ military/ arts, etc in the foreign banks for the last five to six decades.

A recent development makes us alert to our own wealth stored abroad.

Liechtenstein is a country as well as a convenient "letter box" for moneyed people all over the world to hide their ill gotten wealth. Its crown prince, Alois von und Zu Liechtenstein, is angry with Germany for launching a massive tax-evasion investigation involving funds hidden away in his countries vaults. Germany's intelligence agency seems to have paid an unnamed informer more than USD 6 million for confidential and secret data about clients of LTG group a bank owned by the Prince's family. The revelations have already led to the resignation of the head of Deutsche Post - the former German mail service -the world's largest logistics company in the world.

The German foreign intelligent agency BND seem to have got more than 700 clients of the LTG bank and the German prosecutors are using this information to target hundreds of suspected tax evaders in the last few days. In the meantime LTG claims that the "stolen data' contain information about 1400 clients and only 600 of them are Germans.

The German government has announced that it would share information on accounts held in the tax haven with any government that wants it, for free.

Intriguingly, Indian government was silent on this issue and did not approach the German government for a long time for a look into that data. Later, it wrote a cursory letter under pressure from Opposition but has not disclosed the response of the German government.

It is common knowledge that trillions of dollars of Indian money is in various tax heavens like Antigua, Switzerland, Bahamas, Liechtenstein, Isle of Man, and St Kitts, etc.

Throughout the Nehruvian socialistic period, under-invoicing of exports and over-invoicing of imports was very common. Along with that, substantial portion of external earnings were siphoned off to these tax heavens. In a socialistic way, all leaders, be they from business, politics, film, sports or bureaucracy, participated in creating what we may call secular wealth cutting across caste and creed. Also, good portion of the defence commissions were settled abroad. Plus some of our bureaucrats and entertainers and artists have also accumulated wealth abroad. This lobby is well-entrenched and one of the main losers in the appreciation of the rupee.

Worst part of the story is the loss of these deposits to Swiss banks themselves up on the death of some of these depositors who have not passed on the relevant account information to their progeny.
The Swiss banks appropriate such sums after some years (seven to ten) after the death of the beneficiary if there are no claimants.

These are operated using codes but most of them require passport and its number as a proof. That is the reason one finds some persons travelling to Switzerland with all expired passports. Zurich is the only European town which has Hindi slogans written on the side of its trams. Of course it is supposedly linked to Bollywood, but the India traffic to Zurich has to be seen to be believed.

It is estimated that between $500 billion and $1,400 billion is hoarded in Swiss banks and add with that the money stashed in territories like Virgin islands and Bahamas and other assorted tax havens. We need to take steps to bring it back to India. The mechanics can be worked out in terms of amnesty and Swiss bonds issued against these dollars. It can tremendously boost our foreign exchange reserves and facilitate infrastructure investment.

To start with, we can add one column in our election affidavits regarding wealth accumulated abroad. Of course, the politicians are not going to declare the ill-gotten wealth. But, it may be useful for future regarding provision of false affidavits. The entire tax efforts of countries like India are subverted by these deposits.

The second and most important issue pertains to financing of terrorism. These secretive and non-transparent tax heavens can be a serious threat to India since the sources and uses of funds are not clear. The lesser the transparency, the greater the threat for civil societies. From that point also, it is imperative for us to get these vaults open.

The third point is that this should become a major issue in World trade and financial negotiations since what belongs to us cannot be denied to us for long. The entire issue of global financial flows and cross-country free flows become meaningless due to the presence of these tax heavens. Indian lead will shake the world and help large number of African and Latino countries.

Already, the Polit Bureau of CPI [M] has asked for government action in the light of the UBS developments.

Baba Ramdev, too, has demanded that politicians take steps to bring back the money.

It may be difficult to expect the major parties to take it up since the hands of many of its leaders are stained with rust and dust of Swiss bank vaults.

In the case of Bofors, it was the government of the day versus the opposition parties, and now it has to be a mass movement against all these tainted leaders. The citizens of India should fight to uphold the values of our republic which is not just a market or museum piece but a living civilisation wounded by colonialists and looted by current thanedars ruling the roost in the corridors of power. If the leaders keep quiet on this burning issue, we can conclude the elite of the country has failed us. Of course, the DDM (Desi Dork Media) - both electronic and print - will be campaigning to "fill up pubs' in the name of freedom- rather than any serious issue. Our media has become just entertainers and not interested in any important issue.

Let us remember that past history suggests that the elite of India failed India and not the ordinary farmers or workers. The elite helped in the plunder and devastation caused to this country.

The thunderous silence of our elite in politics/ media/ business/ bureaucracy and arts speaks volumes about our collective guilt.

"No criminals" in politics is a good campaign. But can we have leaders with funds stashed abroad? The black money abroad is the Gangotri of all crimes. It shows our distrust about our mother land and contempt for Dharma. Let us deal with that first.

The writer is professor of finance and control, Indian Institute of Management - Bangalore, and can be reached at vaidya@iimb.ernet.in. Views are personal.

Bringing down the house

DLF Chennai buyers have shown how group activism can cause builders to buckle to their knees. Developers have been milking the buyer for too long with overnight double digit price increases. It is time they get paid back in their own coin. I particularly like the line
"It is an unfortunate situation in which buyers are going back on a signed contract,” a senior representative of the developers’ association said. If customers take unfair advantage of the market situation then they would have to face the consequences of the breach of contract"

If the market was still in the bullish phase, developers would care less and cancel lower priced bookings and resell at a higher price. We need a lawyer to clarify what is a breach of contract ? What happens if someone cannot make payments due to job loss ? The Hindu has to be commended for its quality reporting.

Bring down prices or else….’

---

A worrisome trend developers are facing is of buyers wanting to pull out of a contract after construction has started.

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Breach of contract fears.

R. Balaji

“During two decades of our doing business in Chennai never have buyers wanted to cancel after a contract was finalised and construction started,” says Mr R.V. Shekar, Managing Director, Lancor Holdings.

A leading developer in Chennai , Lancor Holdings is among those feeling the heat of a slow market in the form of buyers trying to back out of a deal midway.

Breach of contract

Earlier, the company has accommodated buyers who wanted to back out because of personal or professional problems. But now Mr Shekar says it is the ease with which customers are considering a `breach of contract.’ Their demand is: Bring down prices or else… they threaten to walk out and take others. And these are people who have signed on the dotted line and made more than one initial payment.

As of now it is not a major issue for Lancor but is certainly worrisome. Developers and buyers may end up spending time and money on litigation, says Mr Shekar.

For instance, at a Lancor project on NH 45 where over 230 of the 640 apartments planned have been sold, all the approvals are in place and work has started. Over 150 buyers have signed the agreement and the property has been registered for 58 more customers. But about 30 buyers want to back out even after making a firm commitment, he says.

The reason: if one developer cuts down on prices why cannot another?

Mr Shekar has explained to the customers the rationale behind the pricing — basic price of Rs 2,100 and an all-inclusive (covered car park, registration, club membership, taxes) price of Rs 2,640 but some are in no mood to listen.

When there is a proper contract in place and the company is keeping to its commitment, the law will have to take its course, he feels.

Lancor is among the victims of the fallout of DLF Homes’ controversy where a large group of buyers have come together to enforce a price cut. An unprecedented event in Chennai that has grabbed wide attention. Leading builders dismiss the DLF issue as an aberration. But if it sets off a trend then they would have to depend on the judicial system to come to their aid, they say.

According to representatives of the Confederation of Real Estate Developers Association of India-Tamil Nadu, developers are now keen on having an arbitrator in place. Next week the association hopes to empanel an independent body headed by a senior advocate to look into buyer-seller disputes. “It is an unfortunate situation in which buyers are going back on a signed contract,” a senior representative of the developers’ association said. If customers take unfair advantage of the market situation then they would have to face the consequences of the breach of contract.

‘Time delay’

According to Mr Chitty Babu, Chairman and Managing Director, Akshya Homes, a developer who has delivered over 600 apartments on the OMR , the problem is partly due to the delay in statutory approvals and due to builders and buyers transacting unapproved projects.

A major factor is the time delay when the customer makes the initial payment in an unapproved project. When there is a long wait customers develop cold feet. If approvals come on time, the banks clear the loan and start sanctioning funds and the customers will be fully committed. Fast approvals will save nearly a fifth of the project cost for the customer, he says.

A Bill Maher video on the how badly F**** the US economy is

Unscrupulous real estate brokers will cheat you

The Hindu reports

Some go strictly by an unwritten code. They can be called honest brokers

Middlemen, or brokers as they are called, are found in almost all major business deals today. They advertise the sale, educate the client and broker the deal by functioning as a go-between.

It is in the property business that they are thriving. However, many believe that honesty does not always pay in brokering. That is, perhaps, why some real-estate middlemen become rich overnight. Their wealth often makes the buyer and the seller grow suspicious. But their capabilities in brokering and striking deals find little parallel.

They usually come as glib talkers. Their payment is fixed, often as a percentage of the sale value. In most property deals, brokers get two to four per cent of the total value as commission. Some go strictly by this unwritten code. They can be called honest brokers.

But there are others who do not care for the commission. Their aim is to strike the deal at any cost. And, often, they play an unconscionable game in achieving that end.

Desperate sellers

Their victims are usually desperate sellers. If you want to sell your property somehow, better beware. You may not enjoy the complete benefit from the deal if you fully trust the broker. Better make sure that you interact with the buyer.

Unscrupulous brokers often create situations where the buyer and the seller never see face to face. Their modus operandi is simple. They may approach you, saying that your property is not worth the price you ask.

After waiting for some time, you may be prompted to reduce the price. Then, they may approach again and make a negotiation.

For example, if you expect to get Rs. 10 lakh for your property, the broker offers Rs. 8 lakh or so. You may be somehow prompted to accept the offer.

The broker will tell you that if this opportunity is not grabbed, you will never get a better price.

Differing rates

The broker at the same time approaches a potential buyer offering him your property for Rs. 10 lakh or above.

He may be ready for a bargain. Yet, the price of sale fixed for the buyer will be more than the price of sale set for the seller.

The difference may be lakhs of rupees. But neither the seller nor the buyer gets the benefit. Only the broker makes money.

Al-Jazeera's coverage of the Indian housing bubble

Unfinished projects, shattered dreams, uncertain future, rampant greed, no accountability. This is what I was afraid of. Parsavanath and others builders need to take a lesson from this crash. Gravity is universal. In the credit unwinding spiral, there is the genuine buyer who is going to pay the price for the greed of the few. Lesson to be learnt for buyers. Go with completed projects and haggle hard. This is your time. Any investment in a project which is kicking off or half completed is destined to drag longer then you ever expected.

Here is Parsvanath's pricing At $400k per apt, at Rs 7000 per sq-ft, this is a price headed for a 50% correction in the next few years. I hope the couple hasn't take loans. If they have they will be bleeding pre EMI interest of close to 1.5L a month, not to mention the EMI interest which will kick in. This is a real life scary situation. God save these guys.

Thanks to Anon @ 9:34 am for the link

DLF feels the heat of CNBC's coverage

from moneycontrol.com

CNBC-TV18 learns that the company's Garden City project in Chennai is on shaky ground. CNBC-TV18 has access to e-mails of buyers of the project, including an online survey showing that over 50% of them want to pull out. The company started bookings last April and promised to sign the agreement within 45days. But nearly one year later, the project has not even got the necessary approvals.


Of the reported 1800 apartments sold in the project, nearly 53% of buyers want an out according to the survey citing delays in signing the buyers agreement. Other reasons including cost price, which DLF had hoped would be their USP has also gone against the company. At the
time of announcing the project DLF had quoted prices of 2800 per square foot, while the prevailing rates was around 3300 square foot. The prices now average between 1700-2700 per square foot and buyers are demanding that the company revise prices.


The final approval required is the stamping of the drawings by MSB panel. The panel meeting was completed on Jan 28, 2009 and we are expecting the final stamping approval anytime now. The price of Rs 2,800 per square foot is in itself the lowest price compared to prices charged by leading national and local brands and we are discussing this with an open view and are yet to take a decision.


When contacted, a DLF spokesperson said, ”The final approval required is the stamping of the drawings by MSB Panel. The panel meeting was completed on 28 Jan 2009 and we are expecting the final stamping approval anytime now. The price of Rs 2800 per square foot is in
itself the lowest price compared to prices charged by leading national and local brands. We are discussing this with an open view and are yet to take a decision.”


There are other issues as well; buyers want an Undivided Share Land clause to be signed by the company. Also; clubhouse facilities, which DLF claimed were exclusively for buyers' use, is now being thrown open to outsiders as well.


What are the options now available to the buyers? A minority section of say they might just re consider their decision to pull out if the company meets their demands. The others though say that they want their money refunded and have given the company till February 12 to do
so.

Hiranandani Faces Penalty, Denies MMRDA Violation Claims

How many thousands of crores have been paid to the politicians and babu's for this scam to go unnoticed for 23 years. It will be naive to think, Hirananadani is going to accept these acccusations without bringing down the house. These same allegations should be levied on the Raheja's for selling Jodi flats in the Malad(w) link road area where they have destoryed all the mangroves. These scams are part of the Indian scenario and nothing will be learnt. The Satyam case provides enough evidence that whistle blowing on these scams are just lip service to further personal agendas. The Indian legal and political system is of the rich, for the rich and by the rich. All the common man can do is to be vigilant and aware and not get caught up in this cesspool of corruption. In the past some reports have suggested Hiranandani was given the Powai land at 40 paisa per sq ft. The government officials who approved this paperwork should be prosecuted before Hiranandani. If someone approves such a deal, any moron with an iota of grey matter will take it. Why blame Hirananandani for a ultra ineffecient corrupt system ?

By ugesh sarkar, Section Real Estate
Posted on Thu Feb 05, 2009 at 09:38:36 PM EST
In what could be the highest penalty imposed on a builder for alleged gross violation of land misuse, the Mumbai Metropolitan Region Development Authority (MMRDA) has recommended to the state urban development department that developer Hiranandani Group be made to pay a penalty of Rs 2,000 crore. Though the developer is yet to receive a notice of levy for the amount, Niranjan Hiranandani, MD, Hiranandani Group, has denied the charge in totality, stating that the state agency was unaware that no development in the area had been done without obtaining the necessary permissions and sanctions of government departments.

Meanwhile, the metro authority has charged the builder with constructing large apartments instead of the 40 sq m and 80 sq m flats, for which permission was accorded. The second charge is for building commercial complexes in violation of the original agreement and the third, an add-on penalty component, for utilisation of transfer of development rights.

Hiranandani said development rules and notifications, since the 23-year-old Powai Area Development Scheme, comprising 92.2 hectares, was signed, had undergone changes and consequently implemented after sanctions during different periods. The MMRDA has used the current ready reckoner rates to compute the alleged violations to arrive at the penal sum of Rs 1,993 crore.

The Powai Area Development Scheme was not classified under any scheme for weaker section / lower income group of the society, he said adding that a Bombay High Court decision in 2005 stated that the development at Powai was not for any weaker section / lower income group of the society and the same does not apply to the said lands.

On increase in the size of tenements, Hiranandani said the scheme came after a tripartite agreement was signed on November 19, 1986. Under the agreement, there was a condition restricting sizes of the tenements. However, the MMRDA permitted the amalgamation of tenements as per its order dated August 18, 1989.

The larger premises were constructed utilising transfer of development rights subsequently, when the TDR concept was introduced in 1991. During the period when the tripartite agreement was executed, the development by TDR was not available.

The Bombay High Court is hearing public interest litigation petitions pertaining to the project development.

The MMRDA has also recommended that all concessions extended to the builder be withdrawn, to which Hiranandani said he had not availed himself of any concessions thus far.

Builders under pressure as buyers press for refund

Economic Times reports

Real estate boom are now under pressure from buyers and investors who look to exit these projects.

Already in a spot due to unavailability of bank loans and a fall in sales, the developers are less inclined to oblige the buyers who are coming together to mount pressure for refunds in projects that are yet to take off.

Several buyers and investors, angered by the developers’ inability to start work on projects, have stopped payment of installments on their purchases, adding to the companies’ cash problems.

Investors in DLF’s commercial projects in Delhi and Kolkata have come together with the help of brokers to put pressure on DLF to start construction or refund initial deposits. “DLF is way behind schedule in their projects. It should either start work on the project immediately and deliver in time or return our investment with 15% interest,” says Amit Jain (name changed), a senior executive with an MNC who invested Rs 1 crore each in DLF’s projects in Okhla in Delhi and Kolkata.

Mr Jain says since DLF follows a time-linked payment plan, it has been demanding payments from buyers even without starting construction.

The broker, who facilitated Mr Jain’s purchase, says DLF has not even paid the government to convert the industrial plots at Shivaji Marg and Okhla in Delhi into commercial plots. However, a DLF spokesman denied this saying, “We go by the agreement with the buyers signed at the time of booking. The allegations over the status of our projects are not true. We will deliver as per schedule.”

Several projects of Omaxe, Unitech and Parsvnath are also facing similar problems. Akash Verma, a Noida-based garment exporter, had booked an apartment each in projects of Omaxe and Unitech in Noida. He booked an apartment at the ‘soft launch’ of Omaxe’s Noida project in May 2007. Omaxe had promised to launch the project formally a few months later at a higher rate. The formal launch never happened and investors like Mr Verma are stuck. Omaxe has turned down requests for a refund. An Omaxe spokesman, however, said the company has ‘considered and taken care’ of all such requests.

Mr Verma has also been unsuccessfully seeking a refund of his investment in Unitech’s Grande project. “I am paying Rs 4.5 lakh as EMI. Unitech executives say the project will be delivered on schedule, but there is no worker at the site,” he says. A Unitech spokesman said, “We generally discourage cancellations. But if the buyers insist, we refund the money after deducting 10-15% of the total value of the apartment.”

Most realty firms do not encourage refund requests. Till the end of 2007, investors could easily sell their property in open market as the prices were going up. But with buyers disappearing from the market, investors are forced to approach developers for refunds.

Some property buyers are seeking refunds due to their weakened financial positions, while several others do so as they are not sure of the developers’ ability to complete the project. There are a few others who seek refunds as they feel that they can strike a better deal now with prices undergoing a major correction.

Top city builders meet to discuss slashing prices

This meeting by the builders smacks of an oligopoly where these moneybags decide to raise or drop rates by consensus. The SEBI and other organizations should look into this meeting for price fixing and prosecute the ceo's of these companies. Imagine a meeting between Airtel , Vodafone and Reliance to decide on per minute rates. This is a cartel and should be accountable for monoplistic practices. The biggest irony of this article is the shedding of crocodile tears for the poor laborer who has seen his daily wages drop to 50rs from 150 rs. If these builders who prices apts for 50,000 per sq/ft , they can sure pay a half decent wage to someone who toils in the heat and sun, while these neo-rich bozos sip drinks in the comfort of a 5 star hotel

The 2nd bigger irony is blowing the trumpet of the Times of India, that they were the first to report on the price drops. While they reported price drops, they also reported why prices are going to go up and how 40,000 per sq/ft is real steal for a crappy apt in Bandra. Such irresponsible journalism has made the times of India, the toilet paper of India.


Nauzer Bharucha | TIMES NEWS NETWORK

Mumbai: At least half a dozen of the city’s top builders met at a prominent five star hotel in central Mumbai on Friday night to brainstorm about the one thing that has been worrying them for the past several months—how to kickstart the virtually stagnant apartment sales following the downturn in the real estate market.
Among the several issues discussed was the possibility of reducing prices of flats if it helps sales to pick up. According to industry sources, the Maharashtra Chamber of Housing Industry (MCHI), which has leading developers as its members, is expected to explore this possibility at its meeting on Tuesday, although the matter is not on its agenda. Already, some builders have informally reduced their prices between 12% to 20% in their projects in the suburbs.
However, Mohan Deshmukh, one of the developers present at the dinner meet, denied that builders can ever take an unanimous decision to cut prices. “Every developer has his own priorities and it is up to him to decide on a price cut. The MCHI cannot take a decision on their behalf,’’ he said.
Although the property market began to flatten out about 18 months ago, Mumbai’s builders, by and large, have managed to hold on to their prices. Between 2004-2007, home rates shot up between 100% to 300% on an average, going up to 500% in certain high-end projects. Builders may move Centre to plead their case
Mumbai: Top city builders, who were peeling the pinch after global meltdown, participated in the brainstorming session to decide price cut on Saturday. The meeting commenced at 7.30 pm and wound up only at around 11 pm, sources said.
It is learnt that among some of the leading builders who were present at the meeting included Rajni Ajmera of Ajmera Builders, Dharmesh Jain of Nirmal Lifestyle, MCHI chairman Pravin Doshi (Acme Group) and Deshmukh, who is CEO of Deshmukh Builders and past chairman of MCHI.
There was complete unanimity among the participants that the industry is passing through an “unprecendented’’ crisis. This has affected not only the developers, but a host of ancillary industries, including a large army of unskilled labourers working at the project sites.
“A labourer who used to earn Rs 150 a day is today struggling to barely eke out Rs 50 a day because many projects have come to a standstill,’’ a leading developer told TOI recently. Virtually every Mumbai-based developer is on a cost-cutting drive including retrenching employees across departments.
The Mumbai developers are also thinking of representing their case to the Centre to increase the priority sector lending to home buyers from Rs 20 lakh to Rs 40 lakh. Early this month, the RBI had allowed banks to classify housing loans up to Rs 20 lakh as priority sector advance. The interest rate on such home loans is 1.5% lower than the normal rate of interest.
The downward trend in the property market began in January 2007 when banks began hiking their interest rates, and since then, bookings have continued to drop with every rate hike announced. The crisis worsened after the global economic meltdown affected the Indian market since the past few months.

Property consultants said even existing loan account holders are finding it tough to hang on as EMIs threaten to upset their monthly budgets. Last year, TOI was the first to report that several builders, dealing on a one-to-one basis with home buyers, had begun offering freebies like not charging for parking slots, not charging a premium for a floor rise and, in some cases, even offering to pay the stamp duty.

Email from a disgruntled Purva apt buyer

Lets vote with our wallets and boycott these unscrupulous builders

Dear Friends,

Please forward this mail to as many people as possible.

My name is Rishi Agarwal and I am a 1996 EE graduate from IIT Kanpur. I returned to India in 2005 and purchased a flat in Puravankara Fountainsquare. Please go through the message to see the horror story.

I wanted to write this mail to all of you so that all of you can benefit from my (our) experience with Puravankara Projects Limited. I purchased a flat in their Fountainsquare project in Bangalore and this is the story of all my fellow Purva owners.

The agreement that we signed with Puravankara has the following:

1. The delay from our side is charged at 24% per year.
2. The delay from their side will make them pay at 6%.
3. They don't have to pay the penalty if we delay two payments by more than 2 days.
4. What they call as delay is also decided by them.
5. They reserve the right to cancel the agreement at any time and
they will keep 15% of your money.

Sounds scary right? but every word here is true. I can scan and send the agreement to all of you.

Why would you think I signed the dotted line? Why did any of us sign
this flawed agreement? The thing is that when you go to a premium
builder (for which you pay a premium), you expect to have a smooth
transaction. You don't expect such uneven agreement. At the least,
you'd expect that they'll not exercise it.

Puravankara is exercising it bluntly. There are 200 of us who are
already in court against it but as you know we have no legal stand.
We have signed the dotted line. Their executives have been
nightmarish and are very discourteous.

Please contact Mr. Prem at premc@puravankara.com in case you want to confirm the validity of what I wrote in this mail.

Please come forward and teach the unethical business house a lesson.

Kind Regards
Rishi

Prestige Shantiniketan - Roof collapse.

Four injured as Prestige group’s 15-storeyed structure collapses
S. Rajendran and M.T. Shivakumar
The cement slab of the top floor collapsed first and then the rest crumbled

— Photo: Bhagya Prakash K

CASCADING EFFECT: One of the structures at Shantiniketan, Whitefield, which collapsed in Bangalore on Thursday.

BANGALORE: Four persons were injured and another 100 construction workers had a providential escape when a part of a 15-storeyed concrete structure under construction of the Prestige group crashed at Whitefield here on Thursday.

The block which collapsed is part of the 20 blocks under construction by Prestige in a joint venture with Shantiniketan. The top floor slab which collapsed first was laid only a few days ago.

The police told The Hindu that the accident occurred around 5 p.m. when a small portion of the top floor collapsed resulting in the slab of the floor below it collapsing in a short while. Owing to sheer weight, the slabs of the lower floors collapsed subsequently, all in a span of 50 minutes, although the embedded steel rods prevented the slabs from falling in a heap.

The injured were identified as Srinivas (20), Dasharat (25), Mahendra Prasad (25) and Dadudar (30). Dadudar is said to be a native of Bihar and the other three residents of Kadugodi and surrounding areas in Bangalore. They sustained minor injuries when they were running out of the building, and were initially taken to Vydehi Hospital and after first aid were reportedly taken away by the site engineers for further medical attention. The workers were evacuated from the site. Complete information relating to the building collapse is yet to be made available to the police. The Prestige Shantiniketan complex comprises several towers, each of them of several storeys and located in the vicinity of the International Technology Park. There is no information on the strength of the work force at the construction site. A Malaysian construction company (IJM) was building the superstructure for the Prestige Group, which has undertaken the joint venture project with Shantiniketan (Chaitanya Properties) of D.K. Audikesavalu.

Nayeem Noor, vice-president (public relations) of the Prestige group said the collapse occurred after the top floor slab was cast. “The super structure is intact and there are no casualties.” A head count at the construction site has been conducted and it is confirmed that there is no casualty including injury suffered by any person, he added.
Enough time to escape

N.M. Nachappa, security guard at the site, told The Hindu that “the entire building crashed in 50 minutes. There was enough time for all the workers to escape.”

According to an eyewitness, around 4.50 p.m., the slabs of the building started to collapse. Then there were around 120 people, including women and children. “Immediately after the incident, the workers at the construction site had left. Very soon they were sent to isolated places in a few trucks.”

“A Few officers, perhaps from the contractors side, had shifted all the workers to some other location immediately. They instructed the security guard and other workers at the construction site not to answer the media or the police,” he said.

The Bruhat Bangalore Mahanagara Palike has taken a serious note of the accident. Directions have been issued to stop construction pending an inquiry.

Several superstructures are under construction in the vicinity of the ITPL.

Don't buy unfinished homes

The news is coming thick and fast. DNAIndia is finally doing some realistic reporting. The game is simple. Its a buyers market and the buyer can demand a 40% reduction of a completed property. A deal will only happen if both parties agree and today there are no deals since there is a disconnect. Greed is good but only for a limited time. Now it is the buyers time to get greedy. As the article rightly points out, going for an under construction property is a disaster waiting to happen. There are thousands of new projects which are launched in 2008 and most of them will be delayed by 2-3 years beyond their projected dates. Already Raj Thackrey's campaign is having an effect on mumbai's and Pune's construction market where builders are attributing him to delays. They are also invoking the Force majeure clause which allows them to disown responsibility for building delays. 99acres.com and magicbrics.com have thousands of properties for sale and half of them are ready to occupy. It is a buyers market like never before. So if you have cash, you are king.

Liquidity crunch delaying projects, only 30% price cut can help: Experts

MUMBAI: Want to buy a home this festive season? Then don’t go for a one that is still under construction, warn experts in the realty sector. The global slowdown and crash of financial markets has left builders with little money and they are struggling to wrap up even the half-finished projects, let alone going for new ones, according to industry analysts. Experts warn that the financial strain on realtors is causing indefinite delays in the completion of many projects.

“Those who intend to buy property should go for only completed flats. It’ll be too risky to buy properties under construction,” said an analyst with a foreign brokerage who did not wish to be named.

Real estate is an end-user sector where the money mainly comes from home buyers and development happens in phases.

“But developers across the board raked in money from initial public offerings and invested them in buying land parcels paying huge premiums. Now, banks have stopped lending, money from private equity is very costly and unorganised lenders are charging interest rates as high as 30%. So how can developers complete projects profitably,” asked the analyst.

He cited the example of a Mumbai-based realtor whose high-end residential project in Lower Parel, one of the city’s commercial hubs, was to be completed in 2006 but has now been delayed till 2009. Uncertainty looms large over whether even this deadline will be met, he said.

An official of the realtor in question had earlier told DNA that the project would be rolled out before Diwali this year. An email sent seeking clarification on the new deadline remains unanswered.

This isn’t an isolated case. Analysts say delays of three to four years are likely in under-construction projects.

Despite the headwinds, developers have stubbornly stuck to their pricing. This could be one of the reasons why sales have failed to pick up, even though builders are offering freebies such as free stamp duty registration and parking space, modular kitchens and interiors, and interest-free EMIs till the buyer gets possession of the flat.

“A price correction of a minimum of 30% is required for sales to pick up. If this correction does not come in six months then some listed developers will end up being negative cash companies. Even if buyers are desperately looking for houses, they should wait for a minimum of three months before taking the plunge. Also, they should look only for properties that are ready and available for possession,” said an analyst of a domestic brokerage.

Vikas Oberoi, managing director of Mumbai-based developer Oberoi Constructions, agrees. “Buyers should be wary of under-construction projects because developers who are overleveraged will not be able to complete their projects. So a buyer should look at a developer’s past projects. At these times, it’s all the more important for people to be careful about where they invest,” he said.

And though the slump is pinching, consolidation in the industry is not seen coming. An analyst said, “Even if a developer gets land at a discount of 35-45%, he will not buy it to save money for construction. Those who haven’t seen free cash flows in the last 6-8 months will halt their launches and sit tight till the tides turn in next 18-24 months.”

Consumer court ruling : Builders must fulfil promises mentioned in brochures

‘Builders must fulfil promises’
Consumer Forum Directs Them To Deliver What Is Shown In Brochures
TIMES NEWS NETWORK

Pune: Providing relief to flat owners deprived of amenities by builders, the consumer disputes redressal forum, Pune, in a landmark ruling, has held that a builder will have to provide all the required facilities to a purchaser which he had promised in the brochure.

Even if an agreement between the two parties was silent on providing the amenities, it will be binding on a builder to give facilities which he had promised in the brochure, observed forum president Pradip Gaikwad and member Sulabha Joshi on July 16.
The order was passed on a complaint filed by senior citizen Parshuram Redij of Vijaya Rashmi Residency at Warje Malwadi.
Redij had filed a complaint against M/s Vijaya Rashmi Developers and its partners comprising Marathi actor Ravindra Mahajani of Paud road, Arun Nikam and Harishchandra Nikam, both from Kothrud, for deficiency in service. The firm had published an advertisement in a Marathi daily for undertaking a project at S.No. 43/5 at Warje Malwadi, where it had assured several facilities. Lured by the promises, Redij booked flat no. 4 in the A wing of the building for Rs 6,14,250.
After Redij took possession of the flat on October 30, 1999, he discovered that the promises made by the builder in the brochure that he would construct an internal road, garden, club house, swimming pool and security cabin after the completion of the project were not fulfilled. On various occasions, the senior citizen took up the issue with the firm and its partners. He appealed to them in vain that the needful should be done. Moreover, the flat owners suo moto registered the society by shelling out Rs 75,000.
Arguing in person during the final hearing, Redij alleged that the firm had transferred the development rights to M/s Vaishnavi Shraddha Constructions. He said he had filed a criminal case against the partners, which is pending before the magistrate court here.
Redij appealed to the forum to direct the firm and its partners to execute the sale deed in his favour, provide basic facilities and repay Rs 35,000 as expenditure incurred on registering the society with 18 per cent interest with effect from the date of taking possession of the flat.
On the contrary, the firm had argued that the complaint was barred by the law of limitation and that it had transferred all its rights and liabilities to M/s Vaishnavi Shraddha Constructions. The firm contended that the amenities mentioned in the brochure were not part of the agreement. The forum held that the firm could not be allowed to absolve its liability merely by saying that it had executed a deed of assignment in favour of a third party. The forum further observed that the firm and its partners had induced Redij to purchase the flat on pretext of providing facilities.
The forum directed the firm and the partners to jointly pay Rs 35,000 to Redij with nine per cent interest from October 30, 1999. They were further directed to provide all the facilities mentioned in the brochure and register the conveyance deed and sale deed in his favour as per the provisions of the Maharashtra Ownership Flats Act, 1963. The firm partners have being directed to comply with the order within 3 months.

Springfields apt owners face eviction

the builder in collusion with Corrupt BDA officials along has violated all building norms. Now BDA officials are expressing surprise. They should be sacked for their incompetence. Seven towers don't spring up overnight. I hope the residents bring the builder to book. Add IDEB builders to the list of builders to be avoided. Deccan Chronicle article here. As per the latest news the builder has to pay 25 rs sq/ft to BDA as a penalty to get the commencement certificate and then apply for the occupancy certificate. With 697 apts in the complex and 7 wings illegal (A,B.C are legal and D-J are illegal) the builder needs to cough up roughly 697 * 7/10 * 1500 (avg flat size) * 25 which is 18,296, 250 (1.8 crores)

1,300 residents left in lurch

BENGALURU

More than 1,300 residents including software engineers, bank officials, doctors and expats who have invested crores of rupees for a flat in Springfields Apartments will soon be homeless if the builder does not sort out the issue of occupancy certificates within seven days.

Springfields Apartments on Sarjapur Road which is said to be one of the few residential projects in the city with 82 percent lung space and just 18 percent of built up areas has built seven wings which includes nearly 50 flats in each wing without the commencement and occupancy certificates.

The residents who went to BDA authorities with complaints of the discrepancies are now facing a tough time running after the builders, advocates and the BDA authorities.

“The officers at BDA who promised to deliver justice to us have now sent an order asking us to vacate immediately. The builder in turn has been given seven days time but what about our woes? Who will listen to us,” said a techie on condition of anonymity.

Meanwhile, the residents told Deccan Chronicle that everyone had relied upon the BDA’s sanction plan and had together paid several crores of rupees to the developers towards acquisition of their respective apartments.

The directors Mr H.S.

Bedi, Mrs Avneet Bedi, Mr Pradeep Kumar Tewani and Mr P K Gajra have not only violated the statutory provisions but have also conducted criminal breach of trust, the residents of the apartment allege.

“The builder also said that BDA had issued occupancy certificates to all these buildings and only then hundreds of families occupied these apartments. Now, we learn that BDA has not issued occupancy certificates to many of these blocks,” said another resident, an expat.

The residents who actually started this protest to show a violation have now been rendered homeless.

“Where do we go? And why should we go? It was not our mistake. Why are we being targeted for no mistake of ours,” cried a doctor, who is residing in one of the wings and has been asked to vacate. The residents have now planned to approach advocates to make sure there is some way out of this situation.

Who is to blame?

It is surprising to know that IDEB and Parkway Venture could manage to construct seven wings, each consisting of about 13 floors without even obtaining the commencement certificate.

The BDA officials, interestingly have not even inspected the area to find out the discrepancies of the builders.

The builders who have been constructing the building from the past three years, as per the orders, have not only violated the BDA rules but have also separated about 1,710 sq m of area on the North West Corner from the main premises by constructing a compound wall.

The order also states that the entry to the premises from the north west side is blocked and the Set Back Line of 13 m is not maintained on the western side by changing the orientation and location of the basket ball court/tennis court. This modification has resulted in reduction of surface parking.

This is not all, while BDA had claimed ignorance all this while, even some of the major nationalised and private banks have sanctioned loans to almost 80 percent of the owners who have bought the flats.

“The banks have given loans to all of us without even checking? It’s ridiculous. For all these days we were only fighting for that land which has been taken to construct a hotel but now we have to fight for our own homes,” said a resident.

Mumbai builder arrested for land-grab

MUMBAI: The crime branch on Saturday arrested well-known builder Alpesh Ajmera (40) and Ram Narayan Singh alias Bacchi Singh, a henchman of underworld don Chhota Shakeel, in a land-grabbing case.

The anti-extortion cell is now looking for Alpesh’s brothers, Jiten and Rajesh. This is the third time Singh has been arrested in the past one month. He was earlier arrested in the Malad land-grabbing case and an extortion case.

Ajmera and Singh were produced before the Esplanade Metropolitan Magistrate and were remanded to police custody only till Sunday despite a plea for a 14-day custody. Both have been booked under charges of cheating, breach of trust, threatening and house breaking and theft.

Though the case dates back to 2005, it came to the crime branch only recently. The complainant, Shrishant Kalbag, who runs a supermarket in the western suburbs, had bought a plot measuring 2,000 sq ft near Bhavan’s College from Ajmera Builders for Rs 2.25 crore.

Deputy commissioner of police (crime) Deven Bharti said that Kalbag paid Rs 1.25 crore as down payment and applied for a loan for the rest. "Kalbag took legal possession of the plot from Ajmera and started work. But within a few months as prices shot up, Ajmera called Kalbag to his office in the presence of Singh and asked him to cancel the deal and surrender the keys of the shop," said inspector Vijay Salaskar.

When Kalbag refused, Jiten Ajmera whipped out his licensed revolver and threatened him with dire consequences stating that he was a relative of Lalit Dholakia, who is with the Dawood Ibrahim gang. When the threats did not work, on July 19 last year, Singh barged into Kalbag’s residence in Bandra along with five to six goons and forced him to open the door. Singh threatened Kalbag and his wife Heena with dire consequences if he did not sign the cancellation of deed. Kalbag approached the D N Nagar police who sat on his complaint after which he was forced to sign the cancellation deed, said Salaskar.

Later, when Kalbag went to his shop, he was shocked to see that goods worth Rs 30 lakh were missing. According to the complaint, Kalbag rushed to D N Nagar police station again but was shocked to see Ajmera chatting with the senior inspector and an encounter specialist. Singh, who was with Ajmera, told Kalbag, "Hamara koi kuch nahi bigad sakta"(Nobody can harm us). Kalbag approached the crime branch only recently after he read about Singh’s arrest.

Builder trick-o-treats

Just more pain to avoid..

Buying a house? Beware of builders' tricks

I. When do I get my house?

Most agreements do not clearly specify the date of delivery. For
instance, one says: "Completion of the building is expected to be
delivered by the date mentioned in the covering letter of this
allotment. The delivery of the possession is subject to force
majeure." What this means is that you cannot hold the developer
responsible if he does not stick to the promised delivery date.

There have been cases when the delivery has been delayed by 12 months
or more. Typically, the buyer would have paid 95 per cent of the
price by the time he reaches the expected delivery date. If he is
living in a rented house, delays will drive his calculations awry as
he would not have factored in this additional rent (see Double Bite).
Mumbai stockbroker Bhupendra M. Pitroda, 58, fought a legal battle
against Megha Property Developers for five years. Reason: delayed
possession.

Pitroda was promised delivery of the flat he booked in 1998 in Navi
Mumbai's Madhuri Cooperative Society Housing Project within 18
months. The builder later said that delivery would take another six
months. When Pitroda visited the site six months later, he felt that
the delivery would not happen soon. So, he instructed his bank to
stop payment of the balance 37.5 per cent of the apartment's cost to
Megha Developers.

The developer promptly sold off the flat. An aggrieved Pitroda then
moved the State Commission in July 2000. Three years later, the
commission asked Megha Developers to refund Pitroda the money he had
paid with 15 per cent interest. Pitroda was also awarded a
compensation of Rs 15,000 for the mental agony caused and Rs 5,000
for legal costs.

The developer appealed in the National Commission, which upheld the
State Commission order but cut the interest to 9 per cent. The
developer then moved the Supreme Court. "The Supreme Court judge
flung the papers in the face of the builder's lawyer and asked the
builder to compensate me immediately. The judgment was over in a
minute," says Pitroda. Through the legal battle, Pitroda made 25
appearances in the State Commission, three in the National Commission
and one in the Supreme Court.

Many agreements have penalty clauses for delayed delivery, but they
are without bite. For example: "If the company fails to complete the
construction of the said building/apartment within the period as
aforesaid, then the company shall pay to the allottee compensation at
the rate of Rs 5 per sq. ft of the super area per month for the
period of such delay." What this means is that for a 1,000-sq. ft
flat, you would get a compensation of Rs 5,000 per month�a pittance
(see Double Bite).

In most cases, buyers put up with the delay quietly rather
than 'antagonise' the builder. Most fear retribution, harassment and
further delays in delivery. This is not entirely baseless. For one,
agreement papers are designed to protect the builder. Two, your
intention to fight the builder may look like a joke given your
handicap in terms of financial prowess and influence. Three, there is
no industry regulator you can turn to for redressal. Suresh Virmani
of National Consumer Helpline says: "We generally encourage a
dialogue between buyers and sellers to settle disputes. If that
fails, the matter is taken to the regulatory body. But we can't even
suggest this in real estate because there is no regulatory body."

What to do. Don't just take the builder's word on the progress of
construction. Check it out from time to time, as Pitroda did. If you
feel a delay is likely, start building up pressure on the developer.
The best way to do this is to form a society, says Virmani. Usually,
builders have many projects running at the same time and they push
the ones where the pressure is higher. "The more the number of
buyers, the greater is the pressure," says Bharath Jairaj of Consumer
Action Group, Chennai.

II. Where are my papers?

A lot of builders are evasive about giving the completion certificate
at the time of handing over the flat. A completion certificate is
issued by municipal authorities and establishes that the building
complies with the approved plan. A developer would not get the
certificate if he deviates from the plan.

You cannot prove ownership over your house if you don't have the
certificate as you would not be able to get the house registered.
Also, you may not be able to get utility connections. You will have
problems selling, mortgaging or reverse mortgaging the house as it
will not be in your name. In the worst case, the unapproved parts of
your house would be demolished by the municipal authorities. Not a
happy state of affairs.

Businessman Mohammed Haroon, 45, got his flat in Tulip Garden,
Gurgaon, six years ago, but he has not got the completion certificate
yet. The same goes for the other 59-odd flat owners there. Together,
they took Sarvapriya Developers, which built Tulip Garden, to the
consumer court. "After four years, in mid-August this year, the court
directed the builder to hand over the completion certificates within
a month, or pay Rs 5,000 each as compensation to all the flat
owners," says Haroon. "But we know that none of the two will come our
way and are prepared to approach the Delhi High Court in this
matter."

What to do. Sale agreements often don't mention the completion
certificate. If yours doesn't and you notice it before signing the
papers, insist on the inclusion of a clause that you will be given
the completion certificate when the flat is handed over to you. Ask
the builder for it as soon as he announces that the house is ready
for possession. If, like Haroon, you move into the house without it,
the court will probably be your last resort.

III. What's the guarantee of quality?

Within a month of moving into his apartment in Mahagun Manor, Noida,
Rajiv Raghunath, 41, got trapped inside the house as the door lock
failed. In six months, the plaster started peeling off and the fans
stopped working. In another few months, water started seeping in as
the pipes had corroded. "I felt cheated. This wasn't worth my money,"
says Raghunath.

As of now, there is no way for a buyer to check the building
materials used or the quality of construction. Says advocate Anupam
Srivastava, who is with law firm Chambers of Law: "Quality is a
subjective matter. Buyers should enter into an agreement on the kind
of material that the builder will use."

In October 2005, Pune's Gera Developments started a trend by
providing a 5-year warranty on its buildings. The warranty, however,
is subject to the conditions that no structural changes be made to
the house and that there be no misuse.

What to do. Don't fall for the builder's glib talk. Insist on
including the sanctioned plan of the building and the specifications
of the raw materials to be used for construction in the purchase
agreement. If you are already facing quality problems, you can go to
the consumer court. Says Anand Patwardhan, a consumer activist and
lawyer: "If you want to approach the consumer court, move it within
two years from the day you take possession." Alternatively, flat
owners can form a Residents' Welfare Association (RWA) and get the
builder to fix the problems, as Raghunath, an RWA member, did.

IV. What is the price really?

Nishit Babyloni, 38, mech-anical engineer in BHEL, Bhopal, had booked
bungalow No. 105 with Ansal Housing and Constructions (AHC) in
Pradhan Enclave, Bhopal, in 2004. On a visit to the site five months
later, he found that his bungalow was not being built. He asked AHC
to give him bungalow No. 120 instead, as construction was in full
swing on that. AHC formally changed the allotment in February 2005,
but sent him a letter eight months later asking for Rs 3.15 lakh more.

Atit Arora, general manager (marketing) and project head, Ansals
Pradhan Enclave, Bhopal, says: "The bungalow's specifications were
changed. Babyloni was required to deposit the amount if he wanted the
new specifications. " Babyloni retorts that AHC did not tell him about
the additional work and the changes in specifications. "We were not
told that we would have to pay 25 per cent more for the new bungalow
till 18 October 2005." He is thinking of moving the consumer court.
But, it is not unusual for an agreement to say that a builder can ask
for additional payments if specifications are changed or there are
cost overruns.

There are legal loopholes as well. The Maharashtra Ownership of Flats
Act, 1963, protects buyers against malpractices in the sale and
transfer of flats. It gives homebuyers the right to inspect the
builder's documents such as the specifications that he has obtained
from the authorities. The Delhi Apartment Ownership Act, 1986,
however, is a different story. Although it was published in the
Gazette of India over a decade ago, brought on the statute book by
Parliament and given the President's assent, it is yet to be
notified.

What to do. The last stop is the consumer court. Says Srikumar, "Many
malpractices are offences under the Indian Penal Code, for which the
responsible party can be prosecuted." Keep checking with the builder
if any changes are being made to the specifications mentioned in the
agreement and the allotment letter. Also, try to get it mentioned in
the contract that if a sum higher than the original price has to be
paid by you, the builder would give you additional time for that. You
must also ask for a copy of the sanctions that the builder has taken
from the authorities to carry out the alterations.

V. What else do i pay for?

To make your house liveable, you will need electricity, water and
sewage connections. You will also need electrical wiring, appliances
like fans, lights and a water pump, which are unlikely to be part of
the package and generally won't be mentioned in the agreement. These
will be additional costs that you will have to bear. You might also
have to keep some speed money aside for registration so that it gets
done in a decent timeframe. In some cases, the builder may make a
verbal promise to get it done for you.

What to do. Builders generally have a take-it-or-leave- it attitude
with conscientious buyers while striking a deal. Even so, it pays to
be scrupulous and to read the agreement and its fine print. "Get a
lawyer, an architect or an evaluator to determine the correctness of
the purchase," says Srivastava. Finally, do some quick math and keep
aside some funds to get your house up and running.

VI. How big is house?

A typical home purchase agreement states: "The plans, designs, and
specifications are tentative and the developer reserves the right to
make variations and modifications. .." Simply put, in most cases, you
won't know the final area of
the house till you get it. The agreement will further state, "In case
of change in area, the difference in cost of area shall be adjusted
at the time of making final payment."

Shikhar Saxena, partner, Ace Equity Solutions, a leading housing
finance franchisee of ICICI Bank [ Get Quote], had booked a fully-
furnished, air-conditioned service apartment measuring 650 sq. ft
(super area) in Cabana Service Apartments in Indirapuram, Ghaziabad,
which was being built by Assotech Realty. He got an allotment letter
mentioning this area. However, when the builder offered possession,
the super area of the flat had increased to 671 sq. ft. "Once the
authorities approve of the floor space index, how can the builder
change it?" he asks. After holding out for over 18 months, the choice
before him now is to either accept all the terms of the builder or
seek cancellation of his allotment. Further, he was informed that the
maintenance charge, which was to be Rs 1.50 per sq. ft per month, has
been increased to Rs 7 per sq. ft per month. The agreement shields
the builder. It says "the monthly maintenance charges will be subject
to revision from time to time".

Assotech's Elegante project, also in Indi-rapuram, was to have
terrace gardens on the seventh and thirteenth floors. "There is only
a patch of green; the developer has built units on these floors too,"
says a buyer. Srikumar says there is nothing one can do unless the
size of the garden is specified in the agreement.

What to do. Builders usually follow the same practices through all
their projects. So, before buying, check out the builder's earlier
projects to see if he plays fair. Start a blog or join one to share
your experiences with others, though this doesn't guarantee
redressal. You can read about the mistakes and experiences of other
people on websites like mouthshut.com.

VII. What's the carpet area?

Most residential units in India are sold on the basis of the super
built-up area, which includes open spaces like space for lifts,
staircases and parking, among other things. But, what you really get
is the carpet area, which literally means the area that you can
carpet. This can be 15-35 per cent less than the super built-up area.
In 2005, HDFC [ Get Quote] chairman Deepak Parekh had said the
company would provide loans at cheaper rates to developers who sell
their flats on the basis of carpet area. But, there has been little
headway on this front. Some developers, especially in Bangalore, sell
on the basis of carpet area. In Pune, too, the builders' association
has decided to increase the carpet area by 25 per cent to arrive at
the saleable built-up area charged to the buyer. In both these cases,
buyers are aware of the area they will get. Though there is still a
long way to go, experts believe that soon properties all over India
would be sold on the basis of carpet area.

What to do. Buy property on the basis of carpet area, although the
builder will not like the idea. Argue with him that if the super
built-up area is mentioned on the basis of the approvals and
sanctions, the carpet area can be quantified. Says Srikumar: "There
should be a provision for termination of the contract and resumption
of the property so that builders don't have an upper hand. However,
in the absence of rules, buyers should be vigilant."

VIII. Will I get a well-managed property?

The developer may promise to maintain the building or complex in the
initial years. The service, however, may not be satisfactory.
Residents of Mahagun Manor in Noida have taken over its
maintenance. "The homebuyers cannot even use the Right to Information
Act, 2005, to their advantage because it doesn't apply to private
builders or even group cooperative housing societies," says
Srivastava.

What to do. You are unlikely to get relief through correspondence and
phone calls. You can go the e-way to attract the builder's attention.
For months, Delhi-based developer Unitech ignored the complaints of
the residents of one of their premier offerings, Uniworld City. Then,
a resident shot a nine-minute video that captured the visible flaws
of the project, and posted it on YouTube.com, a broadcast site. Their
grievances were soon attended to. You can use websites like
www.consumerhelplin e.in and www.cgsiindia. org to seek further
guidance.

Though the dice is clearly in favour of the builder, the buyers can
still fight back and many of them are doing so. Now, the government
urgently needs to put a regulator in place to ensure proper
disclosures and protect the buyers.
What we need

Mostly, a home is the biggest investment of one's life. And yet, most
people buy it in a hurry. In this hurry, they sign all the papers
without even reading it, let alone questioning its clauses. It may
all seem illogical later, but it doesn't when it actually should.

The Indian real estate market does not have a regulator. The need of
the hour is to take lessons from streamlined markets abroad and
introduce comprehensive disclosure norms. For instance, US homebuyers
are entitled to receive a number of disclosures during the course of
the house purchase. These disclosures give a homebuyer a somewhat
transparent and fair picture of what he is getting into. On the other
hand, Indian homebuyers sign agreements that are not clear. What's
more, they even get surprises in terms of extra costs. Take a look at
what a buyer in the US state of California is entitled to know from
the builder.

Real Property Disclosure Statement. This document details the
condition of the property and potential hazards, or defects that may
be associated with it. While the seller is principally responsible
for the disclosures presented in this document, the agent is also
supposed to inspect the property and disclose any observable defects
detected in the process. The document also lays down any special
taxes that may affect the property's value.

Financing Disclosures. Various financing disclosures are made during
real estate transactions. They give important details about the loan
the owner may have taken for the property.

Truth in Lending Statement Disclosure. This has details about the
terms and conditions of credit, including the amount financed, the
finance charge, and the annual percentage rate.

Real Estate Settlement Procedures . This contains detailed estimates,
by the broker and the lender, of settlement and closing costs to be
provided within three days after you apply for a loan. It also
provides detailed accounting of actual disbursements and closing
costs once the loan transaction is completed.
'Check builder's credibility'

Vincent Lottefier, Chief Executive Officer, India
Jones Lang La Salle Meghraj, a real estate consultancy firm

Cause of the malady. Generally, reputed builders deliver on time and
as per promised specifications. Small developers, however, default by
stretching their projects beyond the promised delivery date. Often,
this is caused by funding issues. They may also skimp on construction
costs, banking on the buyer's ignorance about quality parameters.
Sometimes, they submit incomplete drawings to the municipal
authorities. There are also fly-by-night operators, who pocket their
clients' initial payment and then disappear altogether. In bigger
cities, most developers are established and experienced players with
a reputation to protect. Here, the incidence of gross defaulting is
less than 10 per cent. This can, however, be as high as15-20 per cent
in emerging suburban areas, where there are a lot of small
developers. Many developers who respond to sudden property booms in
suburban are as have no experience or technical knowledge and often
do not have banksbacking them. Most emerging suburbs are also defined
by unclear land titles. Navi Mumbai is a case in point.

What buyers should do. 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
all the approvals. A buyer is entitled to ask for a copy of the
project's drawings, duly stamped by the municipal authorities.

Legal recourse. Buyers in Maharashtra can take recourse to Section 8
of the Maharashtra Ownership Flats Act, 1963, which makes a developer
liable to refund the money obtained from a customer with 9 per cent
interest if he is unable to justify non-completion of his project.
Most states have similar regulations.
Reputed developers do undertake remedial action if aclient is not
satisfied with the final product. This is unlikely in the case of
unknown one-time operators. Buyers should keep in mind that a
developer is supposed to make improvements, repairs and alterations
until a society is formed.