Consumer not ‘King’ in Indian Real-estate

Consumer not ‘King’ in Indian Real-estate
Jul 2018 , by , in Property Talk

There has been a continuous stream of discussions on the sufferings of homebuyers and how the coming of RERA will change it all. But is it as simple as it looks.Realty Plusdelves deeper on the subject to understand why unlike other sectors, consumer is often short-changed in real estate sector.

Instances of unfair treatment of homebuyers by developers are a regular feature across the country. Non delivery of possession on time, skewed sale agreements, improper amenities, substandard quality, extra charges, deficiency in service by the broker etc., are some of the major complaints of the home buyers.

Not just the failure in delivering houses on time there have been reports of somebuilders in NCR using the clout of their political influence in arm twisting the residents.A renowned builder with projects in Noida, Gurgaon, Zirakpur, Mohali has on various occasions tried to threaten the residents with security guards and fabricating criminal cases against them.

According to Centrik Legal Advisory, the most common grievances of home buyers are –
• Delay in possession: Inept or delay in delivery of property building futile financial burden on the homebuyer.
• Unnecessary charges: Builders charging exorbitant rates from consumer such as late payment interest.
• Scrap of project: Builder scraps the project for some reason irrespective of the bookings done.
• No refund of amount: Fake promises are made by the builders to extract money from the naïve consumer but fail in delivery. Therefore, no refund of the amount is made.
• Non-acceptance of surrender: Even though the builder has surrender but he does not accept, taking consumers on the ride.
• Sale of property to multiple buyers: Selling the property to multiple buyers where the owner is unaware of the fact which makes the property defective
• Profile funding: Builder uses decent homebuyers to fund the property from the bank.
• Non-payment of interest and penalty charges: Builder intentionally does not pay the interest or the penalty charges when the possession is delayed.

The unorganized structure of the real estate sector and lack of clear regulations and regulatory body has been the main reason for customers not getting the due attention and services from the developers. According to consumer bodies, the lobbying between the real estate companies and political parties is another reason that the homebuyers have been vulnerable to mistreatment.

There are many cases recorded from across cities where, residents are cheated and then intimidated by the builders despite paying a hefty amount month after the month for basic facilities, or the lack of it.
‘RERA’ of not much hope:

Prior to the enforcement of RERA consumers could file their complaints either in Civil Court or Consumer Court, but either the processes went for too long or the compensations awarded were too little. With RERA came the first regulator of Indian real estate industry.

RERA was launched with the aim to create an equitable environment between the seller and the buyer of properties. RERA, intends to bring in accountability and transparency in real estate and provide a quick redressal system to address consumer’s complaints within the stipulated time limit of 60 days.But by far apart from Maharashtra and Madhya Pradesh no other state has implied RERA in its right spirit. Many states are still outside the ambit of RERA and various others have diluted its provisions in favour of builders.

Under RERA, both new and ongoing projects have to be registered with full disclosure of project information. Once aproject is registered, the homebuyer at least has a fighting chance for a redressal. But some states have diluted the definition of ‘ongoing projects’ and thus many properties remain outside the ambit of RERA. Sadly, because of this, homebuyers still continue to suffer with non-delivery of their home or below-par quality of construction.
For example, UP issuance of partial completion certificates to facilitate tower wise completion will not fall under the ambit of RERA. On the other hand, Gujarat notification states that projects launched before November 1, 2016, will not be covered under the law.

Also, the issue of project maintenance is not covered under the provisions of RERA rules. There have been many complaints of developer charging maintenance fees during the time of handing of possession but not providing adequate maintenance or amenities and facilities as promised. This aspect remains unaddressed.
If the homebuyer’s interest has to be saved in order to bring back their confidence in real estate sector, then the states need to adapt to the RERA in true spirit and letter of the law.

Insolvency & Bankruptcy Code (IBC)Inconsistencies
Under the Insolvency and Bankruptcy Code Amendment Ordinance, 2018, homebuyers will get due representation in the committee of creditors (CoC) that takes a call on resolution proposals, making them an integral part of the decision making process. This status means a homebuyer, who had paid money for buying property in a project that has been stalled by insolvency, will have a better chance at receiving re-payment of their investment because they would be third in the ranks of receivers (post payment of secured creditors and employees’ dues) in the hierarchy of distribution of proceeds of the liquidation sale.

However, the conflict between IBC and RERA has become evident in a few bankruptcy proceedings in the recent times. While IBC allows companies to file for bankruptcy to provide relief to debtors or creditors, RERA looks at providing relief to home buyers and seeks to hold developers or builders responsible if the project is delayed. A case in point is the Amrapali project. The Supreme Court held that financial creditors cannot take over homes belonging to the home buyers. In other words, Supreme Court upheld the rights of home buyers ahead of the creditors. But, as per provisions of the IBC, home buyers are as of now the “unsecured creditors” and their priority to be compensated comes after the institutional or other creditors who have provided loans to the developer.

Experts believe that the contradiction between the fundamental provision of RERA and IBC may drag cases to judicial and legal forums.

While, RERA does not provide an assurance that by simply registering the project with the regulator, it will be completed and handed over to homebuyers the IBC too ranks homebuyers much below other creditors.
What the sector needs is well implemented policies and regulations for building confidence in property buyers and creating an investor friendly climate. There are many organized & professional developers, big and small across the country that are following transparent business practices, but they remain few and far in-between. A well organised and regulated real estate sector is more likely to grow rapidly in the long run.

About Admin

Loading...