Delays deal double whammy to flat buyers

Abhay Kulkarni booked a 2BHK flat in 2008 and was promised possession by March 2010, ahead of the Gudi Padwa muhurat. Three Gudi Padwas have come and gone since, but Kulkarni’s dream home is still under-construction and he continues to live in a rented apartment.

“Besides the monthly rent of Rs16,000, I am also saddled with the pre-equated monthly instalment (EMI) of Rs20,000 for the part of my housing loan that has already been paid to the builder,” says the Ghodbunder Road resident.

“The builder keeps extending the deadline every six months and I can’t even take legal action because I have paid Rs10 lakh in cash for the Rs45-lakh home,” adds Kulkarni, who also does not want to let go off the appreciation on the property, the market value of which is Rs60 lakh now. “The benefits are on paper, and the misery is real.”

Lakhs of home buyers across the metropolis share a similar fate with nearly three out of four under-construction projects overshooting the deadline, some by more than three years. The worst affected are those who even sold their existing properties to raise funds for their new homes.

The rot set in with the financial crisis of 2008 and many developers who had spread themselves too thin in the preceding years found the going tough.

“Things have become increasingly tough with all the leveraging in the past four years and the cascade effect is getting bigger by the day. Sales have come to a standstill and builders have too little money with too much work to execute,” says an industry observer.

It’s not just small-time operators who are breaching the deadlines, but even the top developers are citing a standard line of excuses. Developers are in denial about monetary constraints and maintain that the delay in execution of projects is due to red-tape.

“The process of getting permissions takes too long. The environment and high-rise clearance alone takes two years, which not only derails the schedule but also escalates the cost for the developer,” says Dharmesh Jain, MD of Nirmal Lifestyle and vice-president of MCHI.

But it is no secret that most permissions get stalled because developers carry out rampant illegal work and then expect the civic authorities to regularise the wrongdoing.

Though the law has provisions to redress concerns of delayed possession, it’s not practical for home buyers to seek legal recourse. “Not only do they stand to lose the cash component that they have paid upfront, but the painstaking legal procedure is loaded in favour of the developers, allowing easy exit routes in case of a litigation,” says Vinod Sampat, a housing activist and advocate.

He adds that the upcoming housing regulatory bill has a provision that allows a developer to refund the amount with an interest of just 9% per annum.

“The moment a home buyer makes noise about the delay, the builder will be more than happy to refund the low-interest money,” says Sampat.