The much talked about Real Estate (Regulation and Development) Bill will bring relief to the home buyers who till now were left to the mercy of the developers. In a series beginning this edition, we focus on the key features of the bill and how builders take buyers for a ride in the absence of such a provision
Transparency:
Everything in public domain
The real estate bill mandates that the developers get their projects registered with the real estate regulator and obtain all the necessary clearances before the sale of flats begins. For greater transparency, the bill states that the construction can begin only after the developer’s website has displayed all the details of the project, including the receipt of clearances. All plans and approvals need to be put up by the developer on the regulator’s website. It is mandatory to disclose all details of the project such as credentials of promoters, layout plan, land status, carpet area, number of apartments booked and status of statutory approvals. Real estate agents will also be asked to register with the regulator.
What has been happening so far in the absence of such a law
BK Jain, 65, spent from his life’s savings and pension fund to buy a flat in Triveni Galaxy apartments in sector 78, Faridabad. The project was being developed by Triveni Infrastructure Development Company (TIDCO). It was a construction-linked plan with a promised delivery date of three years from the commencement of construction.
Jain booked two flats in 2006 by depositing Rs 3 lakh for each. By 2011, he had already paid Rs 24 lakh. During this time, due to financial constraints he had to let go of one flat and merged the payment for the two flats into one.
“In 2011, the builder halted the construction citing shortage of funds due to losses suffered during the 2009 recession. It was a construction-linked plan. How can recession affect the construction? When I challenged their claim, they threatened to cancel my apartment,” says Jain.
Slowly one controversy after another started cropping up. “A flat buyer lodged an FIR against the builder alleging cheating and fraud. To date, almost 1,200 complaints have been filed with the economic offences wing of the Delhi police,” Jain says.
“Till 2008 there was some hope that the construction would be completed in a timely manner. Thereafter, my confidence waivered. I used to go to court to find out what was happening,” he says.
“Licence was issued by the department of town and country planning (DTCP) on the basis of technical and financial capability. The land which TIDCO bought from the farmers was embroiled in controversy. The farmers dragged the builder to court after the cheques issued to them for their land bounced. External development charges (EDC) and internal development charges (IDC) to the tune of Rs 100 crore are still due in its two projects in Triveni, according to the information obtained through the RTI. DTCP was content with the papers submitted by the builders. Not only did they not do proper investigation, the licence issued to the group has not been cancelled yet,” he says.
“An investor who had problems in getting his money back filed a petition in the Delhi high court, seeking directions to wind up the company,” Jain says.
The Delhi high court had ordered the liquidation of the company in 2012. The money obtained as a result will go to the coffers of the government and then to the secured creditors. The amount remaining after that, if at all, will go to the unsecured creditors that are the apartment buyers. The company filed an appeal against it in a double bench of the high court. The high court has stayed the order.
“The builder had asked us to pay an price escalation of Rs 200 per square foot so that he could complete the construction. All of us had refused that as we had no faith in him,” he says.
“There is a provision in the DTCP that if the licence of the builder is cancelled, the government can take over the project and develop it. We had sent a letter to DTCP to this effect in April this year but are yet to get a response,” Jain says.
To Jain and other buyers of Triveni, it appears that the builder has simply siphoned off funds. “The booking started in 2006 before the project was launched which is illegal. Those who issued the licence did not do justice,” he says.
“Construction has stopped for the last two years. Out of the total 23 towers supposed to be constructed, only 11 towers of different heights are standing. It was much later that we found none of the previous projects undertaken by the builder had ever been completed,” says SN Setia, a buyer.
“We are going to ask the courts to protect our rights. There are a lot of old and retired people who are left with nothing but hope. For us, each day is a challenge,” says Jain.
Jain says that he is lucky to have paid the entire amount through his savings. “There are people who took loans. They are paying EMIs to the tune of Rs 20,000 every month for nothing. The loan granting authority has not done due diligence,” says Jain.
Had the proposed law been in place, Jain and many others like him would have been spared the entire ordeal. Pre-launch of projects is deemed illegal by the bill.
Moreover, once the details have been worked out, they cannot be changed at the whims of the developer.
“The best clause of the bill is that it discloses all the details and brings about a lot of transparency. The buyers are kept in the loop of what is happening, which is the way it should be. If all the details about the project are revealed on the website in accordance with the provisions of the bill, then a lot of people will be spared the harassment I had been subjected to,” says Jain.
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Club, swimming pool and all such eyewash
Praveen Garg, 56, booked an apartment in the Valley View Estate located along Faridabad road in 2005. The land belonging to the BSF was being developed by Ansal properties and infrastructures limited.
“It was a very beautiful place amid greenery away from the hustle-bustle of the city. This prompted me to buy an apartment here,” says Garg.
In the brochure he was promised a club, swimming pool, proper drinking water and drainage facilities. The flat owners of all the 10 towers of the society paid Rs 25,000 each for the club.
“When I used to come for inspection, I was showed a building under construction which was supposed to be the club. It was much later that we discovered the directorate of town and country planning (DTCP) had approved construction of a community centre there, and not a club,” he says.
“The group housing scheme stipulates a community centre for the society, which is very much part of the common area and facilities. The charges for common area and facilities are included in the total price of the flat. There is no question of paying separately for them. The tactic here is to keep the base price low to catch the attention of buyers and then pile on additional costs,” says Gautam Gulati, senior vice-president, federation of apartment owners association (FAOA).
The amount paid for the club was never refunded.
The swimming pool never became functional as the supporting water filtration plant and dressing rooms were never built. Further inspection proved that the builder did not have the permission to build a swimming pool either. Besides, the firefighting system, drinking water and drainage facilities were left incomplete.
“The promised facilities were complete eyewash. It was a ruse on the part of the builder to sell flats,” says Neeraj Mahajan, a resident.
“The drinking water supply is so bad that the pipe fittings and geysers do not last for more than a year. Besides, the generator set is not of sufficient capacity. Now, we have rented a generator set for power backup,” Garg says.
“We had discussed our problems with the town and country planner who had directed the builder to refund the sum paid for the construction of the club,” says Garg.
So far, the builder has ignored the directive.
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(This story first appeared in the July 1-15, 2013 issue of the Governance Now magazine.)
