The home buyers revenge

Written by Timsy Jaipuria | Updated: Jun 29 2014, 08:02am hrs
CALL IT realty bites. After decades of being at the mercy of real estate developers, home buyers are starting to flex their collective muscles. The Supertech case, in which the realty giant was asked by the Allahabad High Court to demolish Emerald Court, its twin tower project in Noida near Delhi, for violating building laws and to compensate home owners, is just the latest symbol of the fight back. The case is currently in the Supreme Court and affects 600 families who had bought apartments in the real estate project. The trigger was the original case filed by the Emerald Court Owners Residents Welfare Association, which had alleged that the approval and construction of the two towers were in complete violation of the Uttar Pradesh Apartment (Promotion of Construction, Ownership and Maintenance) Act.

In an earlier judgement, the Competition Appellate Tribunal upheld the order of a R630-crore penalty on realty major DLF for unfair business practices, which had left many home owners stranded. These are just two recent examples where homeowners are starting to stand up for their rights. There have been similar cases in cities like Bangalore and it indicates a turning point in the relationship between builders and buyers, which was earlier heavily loaded in favour of the former. Indeed, for decades now, real estate majors have had a field day with little or no resistance to project delays, use of sub-standard materials and shoddy construction and a wide gap between promises in glossy brochures and ground realities. More importantly, home buyers are not just taking the legal route but are also using social media, which has given them an additional weapon in their battle to maintain a more equal relation with real

estate players.

Recently, 1,200 home buyers in DLFs New Town Heights project in Gurgaon got together through a Facebook page to protest the delay in possession of their homes. Within months, the builder agreed to a 20% discount on each apartment and also doubled the compensation for the delay. Unlike the scenario seven to eight years ago, there has been a perceivable change in the relationship between the developer and the customer, says AS Sivaramakrishnan, head, residential services, CBRE South Asia, adding: Earlier, developers hardly ever addressed the grievances of end users. Home buyers today have devised methods of ensuring that their voices are heard. Customers today are creating large online groups, writing on blogs and other social media platforms such as Facebook, Twitter and Google.

Agrees Sachin Sandhir, MD, RICS South Asia: We have in the recent past seen strong reaction and resentment from home buyers in many cases. Easy access to information, use of social media and high awareness have made the home buyers more vigilant. Consumers are now working swiftly and in groups or associations to resist any fraud committed by the development firms.

Dhirender Gaba, chairman and managing director, Fairwealth Housing, a Delhi-based real estate firm, says the company is seeing investors who are coming up with detailed questions regarding a housing complex and want to know the exact positioning of the project before investing. Thats a change from earlier years when buyers would blindly invest in a project without much preparation or research.

The tipping point was the economic slowdown post 2008, when funds dried up and investment in the real estate market took a hit. The pre-2008 boom had led to frantic construction activity and a host of new players with no experience entered the real estate arena. When the downturn came, builders were caught with a huge inventory of unsold properties and were heavily in debt to financial institutions. Not surprisingly, many builders resorted to delays in construction or cutting costs in construction. In some cases, projects were announced even before the land acquisition process had been completed.

Building awareness

Compared to two decades ago, when there were just a handful of players, the real estate market in India is going through a revolutionary phase with cut-throat competition, growing advertising and marketing spends and hundreds of projects to choose from.

The Campa Cola case in Mumbai has dramatically demonstrated how buyers can get trapped if they do not perform due diligence on sellers and check that all necessary clearances have been obtained. In the Campa Cola case, residents claim they bought the apartments with the understanding that they would get occupation certificates in due course, while the Supreme Court has held that the residents had purchased the flats knowing that they were unauthorised. The fact that Campa Cola was a soft drinks company with no experience or credibility in real estate should have been reason enough for a closer scrutiny of the buyer-seller agreement and ownership papers.

Experts say its always advisable to take cues from the past and increase ones involvement in the process before signing on the dotted line. Customers need to do their homework properly and safeguard their investments in real estate. They can do so with due diligence by checking on parameters such as execution wherewithal, construction partners, projects delivered, banks funding the project, critical approvals and clearances such as environmental nods, court litigation and farmers protests on land acquisitions, says Shyam Sundar S Pani, president, Global Initiative for Restructuring Environment and Management (GIREM), an industry body focused on socio-economic infrastructure for work-life balance and cities of the future. He adds that they also need to do research on macro-level indicators such as social infrastructure development, employment opportunities and price appreciation. His final piece of advice is for customers to get the buyer-seller agreement vetted by a lawyer. In the current market scenario, in which a large number of projects are getting delayed, it is always advisable to invest only in those properties where one can see some actual construction on ground. This safeguards the initial investment made by the buyer.

Growing concern

Realising the importance of a healthy buyer-seller relationship, developers associations such as the Confederation of Real Estate Developers Associations of India (Credai) and the National Real Estate Development Council (Naredco) are raising awareness among end users and helping them fight cases of fraud against developers. Rohit Raj Modi, officiating president, Credai NCR, and executive director, Ashiana Homes, says even as the empowerment of buyers is a sign of a progressive system, there are instruments such as the Credai NCRs complaints portal and the Consumer Grievance Redressal Forum (CGRF), which the buyers can fall back upon to get their issues addressed. We have addressed more than 1,054 complaints to the satisfaction of buyers. If a buyer suffers any improper act on the part of a developer, who is a member of Credai NCR, then he or she can file an online complaint on our website, explains Modi.

The mechanism provides immediate resolution to the complainant within the prescribed time frame. If he or she does not get a satisfactory resolution within that period, then his or her matter gets scheduled for mediation at the Credai NCRs CGRF under the chairmanship of a retired high court judge, in which the member developer is advised to honour his or her commitments.

This is a very convenient mode of getting justice and immediate relief, but in cases in which the developer is not a member of Credai, the procedure may get a bit lengthy, as the buyer is only left with the option of taking the legal route under the existing system in the country. Despite all this, we highly recommend that people should do due diligence before buying a property, Modi adds.

Some developers are now trying to tackle the issue at the very beginning of the process, even before launching their projects, so that they do not end up in any litigation. As a developer, we make sure that legal papers and clearance certificates are approved by the authorities concerned beforehand, prior to entering into any deal with our customers. We also accrue the operation capital to avoid delay in completion, says Kunal Banerji, CMO of Gurgaon-based real estate firm M3M India.

Damage control

Although all home buyers do their due diligence before entering into an agreement with a developer, what happens if the damage has already been done Well, there are various methods that can be adopted, say experts. On a personal level, it is better to consult a lawyer for any legal action against the developer. In case of a fraud, a buyer can approach the consumer courts, too, if he or she is unable to afford a lawyer. But it is always advisable to maintain a record of all the conversations and transactions between the two parties. These may include mails, payment receipts, etc, says Sandhir of RICS South Asia.

To battle it out as a group, firstly, it is better to be in touch with fellow buyers within the same project, say Sandhir. It is in ones favour to know what others are planning to safeguard the investment. Secondly, if a group is being formed, it is advisable to join it only after doing due diligence. It might happen that the group formed might have some wrong intentions. If the group is formed to protect the rights of home buyers within the project, there is no harm in joining it, he adds.

Gurgaons Belaire Owners Associations president Sanjay Bhasin says: Buyers should not remain silent against unfair practices of any developer. Such a judgement (referring to the recent upholding of the R630-crore fine on DLF) would restore the balance between real estate developers and property buyers.