In a housing market like India crying for uniform Builder Buyer Agreements, it would be a far cry to expect the mandatory Disclosure Standards. Track2Realty takes up the issue.
Rakesh Mehra was promised nothing less than a moon with the under construction property, when he visited the project site. The sales team of the builder was so very desperate to book the deal that they offered a supposedly lesser cost per sq feet than the otherwise revised price from the same date. The gullible buyer was even told that all that he needs to book this Greater Noida West Property was to just make an advance payment of INR 2 lakh now.
The underlying verbal commitment was that if he ever wished to exit after his due diligence and/or unavailability of unit choice in the given property then his advance payment would be fully refunded. Later the lawyer of this home buyer advised him to not go ahead with the said property that had various pending payments with the Greater Noida Industrial Development Authority. However, on refusal to go ahead with the booking, the sales team of the developer turned out to be different set of people and a hefty INR 50,000 was deducted from his booking amount.
This is not a one-off stray incident of cheating in the housing market in this part of the world. Srikanth had a similar experience with the Gurugram-based developer when he wished to sell out his much-delayed under-construction property due to medical emergency in the family. The developer refused to transfer the property in the name of the new buyer. He instead offered him to buy back the said property at three years old price when Srikanth had booked the apartment. The choice for this harassed home buyer was to either forget about the appreciation or else get into a costly and lengthy litigation.
The exploitation of the home buyers does not end here. In many cases, across the Delhi-NCR property market, the builders don’t even make an upfront payment when they buy back at the discounted rates. They are silent on the terms sheet of repayment and later insist that once the unit is resold then only would they refund the earlier buyer.
What is even more scarier is the Escalation Clause’ that the builders invoke mid-way and threaten to halt construction due to input cost price hike. Today, when the input cost hike is a real challenge confronting the sector this clause is back in the reckoning not just as an exception but the rule. A poor home buyer who somehow manages to pay both the rent and the EMI is suddenly confronted with the additional blow of a few lakh rupees.
Needless to say, the genesis of all this real estate malpractices lies in the ‘Unfair Contract’ that the builders so conveniently get away with. The violation of settled principles of law is seldom challenged by the cost conscious buyers apprehensive of lengthy and costly litigation. The Supreme Court in a recent judgment has also pointed out the buyers’ travails when it comes to lengthy and expensive legal battle against the builders.
Advocate Nirmit Srivastav, who is handling many cases of unfair contract against the builders categorically calls it a disease of the housing market. He suggests that whenever there is any kind of discrimination against the home buyer and the builder is placing himself on a higher pedestal, one is basically witness to an unfair contract.
“Under Section 47 (1) (2) of the Consumer Protection Act, if an unfair contract has been executed, the buyer can get it declared null and void. The power to declare it null and void lies with the State Consumer Commission, if the total sale consideration is less than INR 10 crores. If the consideration is higher than INR 10 crores, the buyer can approach the NCDRC. The builder may also have to pay a penalty and adequately compensate the buyer, at the rate of 15%-18%,” Srivastav maintains.
The real problem is that the buyers are kept in dark about the terms & conditions of the contract till they make a sizeable payment to the builder. The Builder Buyer Agreement is mostly not showcased and by the time the buyer gets a copy of the contract he is in the vicious cycle of payment and/or compromised refund.
No less than the apex court of the country, the Supreme Court of India has categorically called for a uniform Builder Buyer Agreement to ensure uniformity in the real estate contracts across India. It has been argued before the Supreme Court that the builders use manifestly arbitrary one-sided agreements that do not place customers at an equal platform, which even violates Articles 14, 15, 21 of the Constitution of India.
The irony is that even when the project is delayed or possession is denied for whatever reasons, in most of the cases local police finds its hands tied to register an FIR against the builder due to arbitrary clauses of the agreement. In an ideal scenario the police should immediately file an FIR against criminal conspiracy, fraud, cheating, criminal breach of trust, misappropriation of property and violation of corporate laws. It also violates one’s fundamental right to life & livelihood. The issue has come up before the Supreme Court multiple times and till date it is in the corridors of official uncertainty.
The only way Indian housing market can clean up is sound institutional mechanism of disclosure standards. What precisely are the disclosure standards? Is it different from the RERA uploads on part of the builders? In the matured economies of the world, in real estate transactions there is a specified ‘Disclosure Form’ signed by the seller that contains clause of legal penalty if it is later discovered that the seller knowingly lied about or concealed significant facts.
Disclosure Standards are definitely different from the present declaration with RERA where each State has its own set of RERA rules. The mandatory uploads on the RERA website are in most cases 150 DPI scan copies that are not even readable. Disclosure Standards are more like the stock market transparency index where the attached Risk Factors are clearly defined. It is all about the buyers’ awareness with the product disclosure, land disclosure, pricing disclosure, price fluctuations, legal and/or future legal issues etc.
But then in a housing market where basic issues like title insurance and uniform builder buyer agreement are at the drawing board stage, who would care for disclosure standards?
Ravi Sinha
#RaviTrack2Media
Track2Realty is an independent media group managed by a consortium of journalists. Starting as the first e-newspaper in the Indian real estate sector in 2011, the group has today evolved as a think-tank on the sector with specialized research reports and rating & ranking. We are editorially independent and free from commercial bias and/or influenced by investors or shareholders. Our editorial team has no clash of interest in practicing high quality journalism that is free, frank & fearless.
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