Monika Bakshi, a working mother, had booked a flat in Aims Gardenia, Sector 75 in Noida in 2009. The project was supposed to give delivery last year. But, it is already running one year late. This is the first property investment Monika and her husband have made. They are paying Rs 30,000 per month for a rented flat in Sector 35 in Noida. For now, they are awaiting the penalty amount that the builder is supposed to pay them which will help them meet the EMI that they are paying to the bank for the house.

Monika is not alone in this journey. Several other home buyers are suffering at the hands of other builders in Delhi NCR for this very reason. The latest one that has joined the band wagon is Unitech project in Sector 33, Gurgaon. DLF Ltd was one such builder that was accused of drafting a “lop sided Builder-seller Agreement” as per the Competition Commission of India (CCI). Some of the allegations that DLF faced for their Belaire project in Gurgaon was unplanned construction, project delays, levy of parking charges and reduction of the proportionate ownership of land for each apartment owner.


DLF has been ordered to pay a penalty of 7 per cent of its annual turnover along with an interest of 9 per cent since the original order by CCI. However, the builder plans to go to the Supreme Court in appeal against this order.

These cases raise an imperative question - how many of the buyers actually get the promised penalty on behalf of the developer?

Experts say that promised penalty is paid to the home buyer, however, the amount paid is nominal. As per the clause in the Sale Agreement, developers charge penalties anywhere between 12-20 per cent to consumers in case of delay in making payments. However, in a scenario where developer delays in delivering the project within the stipulated timeframe, the penalties are anywhere between 5-10 per cent.

 
Suresh Gogia quote on delayed projects
Project delays and cost overruns are now common in the Indian real estate market. In Delhi-NCR, the reputed names that have disappointed their customers on this account include Unitech Ltd, DLF Ltd, Jaypee Greens and Raheja Developers. Despite the promised payment, the actual cost that the developer pays the consumer translates into Rs 5-7 per sq ft penalty per month, says Bharat Kalra of Buniyad Group.

In case of a construction-linked plan, 95 per cent of the payment is extracted in the beginning and middle phases of a project. The remaining 5 per cent is left for the time close to possession. Therefore, the amount that the developer has to pay in the form of penalty is finally deducted from this remainder amount that the buyer has to pay. It turns out to be a win-win situation for a developer while deep holes are dug into the buyer’s pockets.
 
Devina Ghidial quote on delayed projects
 
 
Solution lies in better accountability and disciplinary action

So, when the buyer is faced with such a situation, what alternatives does he have?

In case there is a delay in a project and the builder is not willing to pay a compensation as discussed in the builder-buyer agreement, buyers can approach the Consumer Court or the civil court for the execution of the penalty and grievance redressal, says Devina Ghildial.

Although there are not many existing options that a buyer can rely on, several suggestions that are tabled to the government on the part of policy makers are:

In most of the project delays in Delhi NCR, the work that should be completed in a week is extended to months owing to multiple round of approvals from the airport, fire and power authorities, quips Bharat Kalra.

 
Delayed projects

 

A regulatory body keeping tab on the developers, sending out legal notices and pushing for fast-track court order will help bring some discipline in the real estate industry. This body should ensure that at any given time, the developer should be allowed to work on only 2-3 projects at a time in order to avoid delays.

Most developers claim that the approvals at various stages of a project pose as hindrances towards the final possession of a project. If the single-window clearance is applied, one might see a turnaround in the completion time of a project, believes Kalra.

Confederation of Real Estate Developers Association of India (CREDAI) constitutes of developers who have been responsible for project delays too in the past. If CREDAI has been given the right to take action to ensure speedy delivery and address consumer grievances, the body should take corrective measures and de-list the developers who have engaged in unfair trade practices

.