PROJECT DELAYED?

One of the biggest reasons projects get delayed is the number of approvals, clearances and permissions the builder needs to acquire before he can begin construction! Or so we hear…!

 Although sometimes genuine, a delay in the project you have invested in can make your heart skip a beat. 
And today, such delays are a common sight in India. 

Developers generally include a grace period of six months, in their agreement with buyers…and most of us take this type of a delay for granted. But… when the delay is even longer, things get out of control! Read on…

Mahesh Kapoor (name changed), a Delhi based professor, is among the scores of buyers left helpless and frustrated due to delay in construction of projects. Professor Kapoor invested a major chunk from his life savings in a project launched by a new builder in 2008. While the builder’s name was new, the prices of the property were extremely affordable compared to other players… 

Having lived in an accommodation his university had provided all along, Professor Kapoor dreamt of having his own little home…and thus, Rs 10 lakh was paid as booking amount.

In 2009, the project was shelved. Professor Kapoor was forced to shift to the developer's residential project at another location. And that was not all…he had to pay an additional Rs 2lakh as booking amount for the apartment there.

Much to his horror, one year, and this project too was shelved!

On request for a refund, the developer offered him to pay 50% of what he had invested in total… i.e. Rs 6 lakh. The booking agreement did not have any penalty clause for delays in construction. It was loss either way. Professor Kapoor claims to have been asked to take what was offered unconditionally or fight it out in court. The later, was already a lost battle…and thus, Professor took his refund and signed an affidavit forfeiting all claims against the builder.

This is just one example…there are thousands of people who fall prey to project delays daily!

The crisis of 2008-09 impacted projects of all companies. Even though it counts as a loss on the part of the builder, it also counts as a major loss for helpless investors.

Another major reason for delays is that developers have also been facing challenges in sourcing funds. With banks tightening credit conditions for the real estate sector, developers are forced to borrow from NBFCs at 16-18% interest and from PE funds at rates between 20-24%. [Source: Business Today]

Although most of the delays are out of our control, we as investors and buyers need to be extremely vigilant and alert to avoid risk of getting trapped in a delayed project. If investing, you are entitled to as where the funding comes from… banks or foreign private equities or other investors.  This way, the builder cannot site funds as a reason for the delays.

We can ask for a copy of the project's drawings, duly stamped by the municipal authorities and the construction schedule from the builder.

However, it is advisable to process the deal through an attorney rather than independently.

As far as refunds are concerned, they can be claimed if a project is delayed beyond the period stipulated in the agreement.

But the point is that unlike other financial institutions, anybody can start a realty firm...Thus, it is us who need to be vigilant.

If you are one of those stuck in a delayed project your nearest consumer court can help you out.