Realty bites: How builders take home buyers for a ride

Many home buyers have been short-changed as builders cancel the deal on their own. The real estate bill aims to stop the practice

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Puja Bhattacharjee | September 2, 2013


The real estate sector has been facing various troubles in the absence of a regulator
The real estate sector has been facing various troubles in the absence of a regulator

The Real Estate (Regulation and Development) Bill says:

No unilateral cancellation of flats

The promoter shall not cancel the allotment unless he has sufficient cause to cancel it in terms of the agreement of sale and if so cancels the agreement of sale, he shall give due notice to the other parties to the agreement of sale and tender a refund of the amount collected along with interest at such rates as may be prescribed.

Provided that the allottee may approach the Authority for relief if he is aggrieved by such cancellation and thinks the cancellation of the allotment by the promoter is unilateral and without any genuine cause and is not in accordance with the terms of the agreement of sale.

So what's been happening so far in the absence of such a law?

When Usha Bisht, 32, came back to India from Cyprus in 2009, all she wanted was to settle down with her family in a house of her own. Her husband who worked in the IT sector took a transfer to Noida. Initially, they moved into a rented accommodation in Noida hoping to buy an apartment of their own. It was around that time that she came across advertisements by Arihant Infra Realtors Pvt Ltd.

Bisht says she went for an apartment yet to be built because the ready-to-move-in options were way costlier and out of her reach. So she booked a 1,025 square feet two-bedroom apartment in Arihant Arden in 2010. Some time later, the area of the flat was increased by 35 square feet.

“When I asked them the reason behind this, I was curtly told that ‘either you take it or leave it’,” says Bisht. She accordingly paid 10 percent of the basic sale price (BSP). Initially, the apartment cost around '18 lakh. The builder charged an extra '50,000 for the underground parking. After addition of 35 square feet to the area of the flat, the total cost stood at '20 lakh.

Meanwhile, Bisht and her husband applied for a bank loan. “The bank had approved our loan after checking a no objection certificate from the government body concerned,” says Bisht. “Our loan was sanctioned in April 2011 but it was never disbursed,” she adds.

By this time, residents of Shahberi village in Noida Extension had begun agitating against land acquisitions. Bisht was anxious with the unwelcome developments and wanted to cancel her apartment. “The builder pacified me saying that our project which was in Bisrakh village will not be affected by the agitation. They told me that the bank was confused (hence, did not disburse the loan) and the situation will be back to normal soon,” says Bisht.

Soon after this, agitations began in all the villages. When Bisrakh also erupted into an agitation, Bisht requested the builders once again to cancel her flat. She was placated again and told that the matter would be resolved soon. “They told me that the construction had already started and from there it would only go forward, as the dispute was between the authority and the farmers,” Bisht says.

In 2012, she received a letter from the builder saying that the dispute was sorted out and the banks had started disbursing funds. At this point, she was informed that the floor area ratio (FAR) had been increased as the builder had suffered losses. “I was unable to understand how the builder could have suffered losses. When the agitation started, only the ground floor had been constructed,” Bisht says.

“We were just told (nothing in writing) that FAR will be increased. It was not clear how many floors were going to be added. When I asked them to show me documents to support their claim of losses, they refused,” she adds.

By this time, all agreements had been signed and the builder was asking for a consent letter to increase the FAR from Bisht along with an interest of '1.25 lakh. Bisht owed the builders interest from March to April 2011. But, according to her, what builders were charging her was much more than what she owed them in interests.

“They were charging me interest from March 2011 till the end of the agitation period. But the court had ruled that the authorities would charge the builders no interest during the zero period. The same rule was applicable to the buyers. I asked them to issue me a certificate stating the time period for which they were charging me interest, but to no avail. I kept getting threatening letters asking me to make payment or suffer the loss of my apartment,” says Bisht.

Bisht agreed to pay the interest amount only at the issuance of an interest certificate – which was consistently refused by the builder. Moreover, the builder refused to entertain any of her queries till she signed the consent letter to increase the FAR.

“I sent them a cheque for the 30 percent of the basic sale price which was due as of March 2011. Arihant builders did not cash the cheque and kept threatening me to cancel the apartment,” sayd Bisht.

So finally Bisht sent them a legal notice saying that the interest amount being demanded by them is illegal and asked for a written explanation for the increase in FAR. “In response to the legal notice, Arihant said that I owed them '6 lakh, but in what context was not mentioned. There was no mention of the interest being charged and FAR,” Bisht says.

“I called them up and visited their office several times after that to clarify matters but they kept on telling me that FAR consent letter has to be signed if I wanted to retain my apartment,” says Bisht.

In April 2013, Bisht received a letter from Arihant Infra Realtors stating that her apartment had been cancelled. “After deducting the service tax, they returned the whole amount,” she adds.

Bisht feels that the builder wanted to cancel her apartment on any pretext. “Back when I purchased the apartment, the price was '1,800-2,000 per square foot. Now the price is almost double. The builder got greedy and wanted to sell the apartment at a higher price,” says Bisht.

“As per the agreement, if the buyer breaches any of the terms of agreement, 10 percent of the amount paid to the builders would be deducted. But nothing was deducted apart from the service tax. They wanted us to be happy that they did not deduct any money. They will now be selling the apartment at a much higher price,” she says.

Bisht is thinking of taking legal action against the builder but is unsure how to proceed.

The bill clearly states that the buyer can approach the authority itself in case he/she is aggrieved by the cancellation of his/her apartment.

HEADS WE WIN, TAILS YOU LOSE

Narendra Kumar Mishra who had booked two flats in Supertech Eco Village II in Noida Extension tells a story of confusion, contradictory statements and the prolonged harassment he had to suffer at the hands of the builders. Like most real estate projects, this too was launched before obtaining the required permissions.          

Mishra had booked two 550 square feet 1 BHK apartments against a booking amount of '1 lakh for each apartment.

“I found out that I was allotted only one apartment due to some confusion,” says Mishra. He was told that all other apartments have been booked and hence nothing could be done. So he agreed to transfer the booking price of this flat towards the other and hence the matter was sorted out.

When the Shahberi controversy over land acquisition broke out in 2011, initially Supertech sent an email in May to all investors assuring them that the project was on and they need not panic. In July, Supertech sent the buyers another email, saying that a small land parcel which was earlier part of Eco Village II project was returned to Greater Noida industrial development authority (GNIDA) as per the supreme court verdict since it was part of the Shahberi village.

“I was asked to accept a flat in Eco Village III and submit an acceptance letter. I had booked a flat on the fourth floor of Eco Village II. Now I was told to take a flat on the 13th floor of Eco Village III,” Mishra says.

Puzzled by the conflicting messages, Mishra did not take any decision. When Supertech sent out a final letter asking for the acceptance letter, he decided to settle with what he was being offered.

“When I went to them with the acceptance letter, I was shocked to learn that my flat was cancelled. The reason given by them was the late submission of the acceptance letter when I had submitted the letter well in time,” he says.

Mishra relentlessly pursued the marketing department refusing to accept the blatant violation of his rights.

“They agreed to give me my flat back on the condition that I buy it at the present rate, thereby paying the difference in per square foot rate,” he says.

Mishra had bought a 550 square feet apartment at '1,900 per square foot and now he was being asked to pay '3,400 per square foot.

He says the builder never offered to return the '2.24 lakh he had already paid. He has approached the Noida Extension Flat Owners and Members Association (NEFOMA) with his grievance.

BOOKED TWO, GOT NONE

Lalit Gupta booked two 1,195 square feet flats in Earth Towne which was being developed by Earth Infrastructure Limited in Bisrakh village. He had initially paid the 10 percent booking amount (at the rate of '2,100 per square foot) for both the flats and was awaiting the bank’s approval for a loan to make further payments when the farmer’s land acquisition controversy erupted. The bank at this point in time refused the loan as they did not deem the project bankable. Shaken by the events, Gupta asked for refund of the entire sum he had paid for the two flats. The realtor assured him that the issue would be resolved soon.

In November 2011, after the dispute was settled, Gupta was sent a cancellation letter for one of the apartments claiming that he had defaulted on the payments. When he tried reasoning with them, he was told he would have to pay the escalated price of '3,300 per square foot if he wanted his flat.

“Moreover, they also increased the area of the flat to 1,295 square feet. They were making layout changes without informing us,” he says.

A new problem arose when the realtor shifted his remaining apartment to the 22nd floor. “I had booked both the apartments on the seventh floor,” he says.

“As one of my flats was already cancelled, I was cautious and when the negotiations did not yield any result, I decided to accept what was available,” he adds.

When Gupta accepted the flat on the 22nd floor, the realtor asked him to pay interest for the amount which he did not pay while the farmers’ agitation was going on in full swing along with the restoration charges.

“Restoration charges are paid if the buyer wants the flat which has been cancelled restored to his name. The restoration charges were around '200 per square foot. The second flat was never cancelled,” he says.

“I met one of the directors who refused to entertain my plea and asked me to go and talk to the office,” he adds.

He got a cancellation letter for his second flat in April 2013. Gupta says Earth Infrastructures Ltd had agreed to deliver the flats by August 2012 and in the agreement promised to pay the allotees a fine of '10 per square foot in case of delay.

“I have to pay a penalty for not paying them during the conflict which in any case is unfair but they never came forward to pay the delay charges. The agreement is one-sided and meant to suit the builder’s needs,” says Gupta.

“Initially, I had thought about going to the consumer court. I was told that the consumer court can only provide a nominal compensation. If I wanted my flat back, the Allahabad high court was the only option. A real estate regulatory authority will be much easier to approach provided it is not influenced by the builders,” he adds.
Now, Gupta’s case has been clubbed with other cases of flat cancellations and is being represented by the Noida Extension Flat Owners and Members Association (NEFOMA).

“We had submitted a written petition to the Allahabad high court and we have made the Uttar Pradesh government, GNIDA, CREDAI and eight other builders a party to the petition. The cancellations have been on different grounds. Since the land was allotted by the government, buyers were assured that all disputes will be sorted out,” says Vijay Trivedi, vice-president, NEFOMA.

(This story appeared in the July 16-31 issue of the print magazine)

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