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Irate customers start filing cases against real estate developers

Irate customers start filing cases against real estate developers
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First Published: Tue, Apr 07 2009. 12 26 AM IST

On the defensive: A file photo of Parsvnath Developers’ Green Ville residential property in Gurgaon. Ramesh Pathania / Mint
On the defensive: A file photo of Parsvnath Developers’ Green Ville residential property in Gurgaon. Ramesh Pathania / Mint
Updated: Tue, Apr 07 2009. 12 26 AM IST
New Delhi: After using a portion of his retirement money to buy an apartment in Gurgaon, on the outskirts of New Delhi, S.K. Bangia pursued the developer for almost a year to get the purchase agreement. He eventually got a letter cancelling the allotment of the flat, Bangia says.
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The 62-year-old former bank manager booked the apartment in a Raheja Developers Pvt. Ltd project in December 2007, the month that he retired, in his and his son’s name. His son wanted to borrow a home loan to finance part of the cost.
“They did not give (me) a buyer’s agreement and an approved sanctioned plan of the project, without which no bank gives a loan,” says Bangia, who sent a legal notice to the company in November, demanding the sanctioned plan and buyer’s agreement. A sanctioned plan is a project layout approved by the local urban development authority.
Homebuyers are taking recourse to consumer forums and the courts and online activist groups to resolve grievances against real estate developers. As slowing economic growth and a property market downturn cause cash-strapped realtors to abort or delay projects, property buyers are increasingly being forced to turn consumer activists.
On the defensive: A file photo of Parsvnath Developers’ Green Ville residential property in Gurgaon. Ramesh Pathania / Mint
Bangia, who approached a consumer court last month, claims he was targeted because he was trying to involve other buyers in his fight. He wants double the 9% interest Raheja Developers paid him on the money it eventually refunded him. Raheja, which charges 18% interest for delayed payments, says it’s following the rules.
“As per the terms of agreement to sell, it is mentioned that the company will give 9% interest,” said a Raheja Developers official who didn’t want to be named. “I am not familiar with this particular case...”
One reason for the increasing incidence of disputes is a decline in real estate valuations, which is prompting buyers who had booked property at high prices in the past to seek refunds and switch to cheaper developments, said Anuj Puri, chairman of Jones Lang LaSalle Meghraj.
“It is (also) true that many projects of developers have got delayed for genuine reasons—may be because of lack of finance or whatever—and at the same time the tolerance level of buyers has gone down,” he said.
Ajay Srivastav, a legal consultant who isn’t a practising lawyer, has taken Parsvnath Developers Ltd to court, saying he had already paid two instalments of Rs30 lakh each for a flat in Parsvnath’s north Delhi luxury development, La Tropicana, and the realtor demanded a third instalment before it was due.
He says the developer had been demanding a payment that was supposed to have been made only after the project breaks ground. Kapil Kher, his lawyer, says Parsvnath is yet to perform the ground breaking ceremony for the project. He says the company is yet to receive some mandatory government approvals.
According to Parsvnath Developers, the company had received all the approvals for the project by January this year.
“While we started launching the project, approval from Delhi Metro Rail Corp., from whom the land for the project was bought, was in place,” Neetal Narang, Parsvnath’s spokesperson, said. “The buyer’s agreement clearly says that approval from Municipal Corporation of Delhi and other authorities is awaited.”
Parsvnath said construction on the project had started. “The buyer’s agreement also clearly says that construction of flats is likely to be completed within 36 months of commencement of construction of the particular tower, on receipt of sanction of (the) building plan,” Narang said.
Members of an online forum consisting of apartment buyers in DLF New Town Heights are also thinking of taking action if DLF Ltd, the country’s biggest real estate firm by market value, doesn’t offer an exit option for buyers, according to forum members who didn’t want to be named. The forum, on Yahoo Groups, consists of about 600 buyers.
“Buyers cannot compel us to refund their money,” a DLF official, who did not want to be named, said. “They can go to consumer court if they want a refund.” DLF is in its so-called “silent period” ahead of its earnings announcement, requiring it to avoid public statements in line with stock market regulations.
DLF had recently announced a discount of around 20% for buyers in New Town Heights, located in Gurgaon. Buyers say the discount has been structured in a complicated way and the developer has not given buyers a clear exit plan.
Online forums have sprung up on the Internet in the past year to exert pressure on developers to reduce prices of apartments and to demand an exit plan for buyers.
“Filing cases could be one way of exiting from the project for buyers,” said an analyst with a domestic brokerage who didn’t want to be named.
“Also, it is possible that many of the buyers are investors who wanted to exit the project and cannot do so now because the structure of the project is not ready…even if the buyer is a genuine first-homebuyer, he is stuck because the projects are going nowhere,” the analyst said.
Two buyers have also filed a case in the national consumer court against Sahara Infrastructure’s Sahara Grace project in Gurgaon. Sahara Grace, offering 207 housing units, was launched in April 2003.
One of the two, a 54-year-old businessman, is demanding 18% interest on the Rs.2.3 crore he paid to Sahara Infrastructure—the full cost of a flat in Sahara Grace. The project had been delayed by around two years.
“When I booked the apartment I was promised possession on 30th June 2006 but they kept delaying the handing over of the apartment,” said the buyer, who didn’t want to be named because of the pending case. The buyer filed a case against Sahara in December 2007 demanding the payment of a penalty by the developer for the delay.
“We are asking for compensations for the delay,” said the businessman’s lawyer, Suryakant Singla. “We should be paid at the same rate of interest as they would have charged us if we had delayed their payments.”
An email query to Sahara went unanswered. In June, Sahara finally gave physical possession of the apartment to the businessman. But the case is still pending, with the next hearing due on 30 May.
Bangia, who has moved the national consumer court against Raheja Developers, is seeking a compensation of Rs14.18 lakh, which includes Rs5 lakh compensation for “mental torture”. The developer cancelled Bangia’s flat allotment for no reason, he says. After he sent a legal notice to the company, Bangia received the buyer’s agreement.
“However, immediately after that, Raheja cancelled my flat (allotment) because they felt that I was involving other buyers of the project in my fight for the buyer agreement and they thought that could trigger a mass exit of buyers from the project,” says Bangia.
Bangia eventually received a cheque of Rs16.55 lakh towards refund of his payment with 9% interest from the company. But Bangia wants 18% interest because that is what Raheja is charging customers for a delay in the payment of instalments.
“Whatever we do it is as per the terms and conditions of the agreement to sell,” said the Raheja official cited earlier. “In case someone breaches the contract, whether it is the developer or the buyer, then obviously the legal department will adhere to the terms and conditions of the agreement.”
shabana.h@livemint.com
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First Published: Tue, Apr 07 2009. 12 26 AM IST