Wronged by a builder? Assert your rights

Troubles faced by home buyers from errant builders have been on the rise. But the good news is that buyers are fighting for their rights.

Consider the buyers of DLF’s Belaire properties in Gurgaon who did not get possession of their house after the promised three years; the original plan for a 19-storey building had been changed to 29 floors. Besides, it also turned out that the agreement they had signed was actually one-sided and did not allow much recourse for them.

As a result, the buyers’ association took the issue to the Competition Commission of India.  In August 2011, the commission directed DLF to modify the unfair clauses in the agreement and levied a fine of Rs 630 crore. This goes to show that as a home buyer, you can indeed change the trend of being short-changed, if you are aware of your rights.

Right to penalty for delays

Project delays are the most common cause of contention between buyers and builders. Some of the builders may offer a ‘choice’ to buyers to cancel their booking and get their payment back. However, it may not be a fair choice as the buyer incurs an opportunity cost due to not having invested elsewhere. A buyer must consider if he/she is getting fair compensation when taking this option.

Typically, agreements state the project completion time and specify a penalty clause in case of delays. Delays may incur a payment of Rs 5-10 per square feet or an interest payment of 5-10 per cent for the amount paid. Apartment buyers of Prestige’s Shantiniketan project in Whitefield, Bangalore, for example, fought against the delay of over two years. They set up an association to fight for their rights. Thanks to the pressure from the association and the plethora of consumer court cases filed by individuals, the developer settled the matter on an individual basis, by offering compensation in cash and kind. So as a buyer, you should remember to exercise this right.

Also read: Key features of real estate regulator Bill

Right to withhold payments

A builder may delay completion indefinitely. If a buyer withholds payments due to expected delays, you may face penalties from the builder for delay in payment. Most agreements state a high interest rate of over 15 per cent for payment delays from the buyer.

So, to be on the safer side, ensure that the agreement provides a way to link payment schedules to progress in construction. That way, you will have a right to withhold payments in case of delay. Banks too might aid in these cases. When purchasing a property on loan, banks, for instance, release payment after the buyer consents and they perform an inspection to assess progress.

Rights in case of deviations from original plan

Builders may change the specification including floor-plan, construction material and amenities. The Undivided Shared Land may be reduced, due to re-allocation of common area or increase in the number of floors. Besides reduction in parking space and open space, promised size or amenities in facilities such as club-house or play-area may be trimmed. In such cases, court rulings can come to your rescue.

For instance, the Supreme Court has ruled that a builder cannot sell parking areas as independent units. Recently, the Karnataka High Court ruled that in a group housing project, a minimum of 5 per cent of the total plot area must be set aside for civic amenities and 10 per cent for parks and open spaces.

Buying a home is a big financial investment. Buyers can protect their investment by doing simple things such as understanding the agreement before signing, ensuring that the builders’ promises are put in writing, consulting a lawyer and other buyers prior to accepting new amendments to the agreement. Also approaching the builder as a group, rather than as an individual and bringing up disputes before the consumer court strengthens your position at the negotiation table.

meera.siva@thehindu.co.in

(The copy has been edited for errors.)

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