Dubai: NRI buyers are no longer waiting for India’s developers to deliver on their promises. Where needed, buyers are negotiating with other builders to finish long-delayed or fund-starved projects. Or in some cases, actually taking on the responsibility of completing projects on their own.
In short, property buyers - expat Indians or resident - are done doing nothing. Mariam N from Lucknow is one such.
She had invested in a villa at an upscale residential community that was to be developed by the Ansal Group. “They had a solid reputation, the project suited all my requirements as an end-user, and they launched it in 2010 at a fairly attractive price of 5.4 million rupees,” said Mariam. “But that was the only good thing - it got hopelessly delayed and I finally decided this was not what I bought it for.” So, Mariam negotiated with the developer to take on her villa project on an “as-is” status in January this year and is now going to build the rest of it. Some of the other buyers at the community are on the same track.
“I did not end up paying more to complete it - but what I cannot reclaim are the two to three years when the project got stuck,” said Mariam.
The current legal status is that buyers in a project delayed by more than a year can take the developer to task.
Not an isolated instance
Property buyers in India are finally feeling empowered… and they do need to thank RERA (Real Estate (Regulation and Development) Act) for it. The law was passed in May 2016, but it is now that defaulting developers are paying the price for it.
Under the Law, they cannot get away with making promises… and delay delivering on them. Or worse, not deliver at all.
Buyers thus have the law on their side, with the Supreme Court being called upon to deliver judgements that safeguards property buyers.
“Along with several other NRIs in Dubai, I bought at a Unitech project in Noida, Delhi,” said A.M., who runs a media firm. “I paid off more than 50 per cent of the property value of 7.5 million rupees, which was when the project stalled completely.
“In July, buyers got confirmation from the Supreme Court that another entity - NBCC - will take on all stalled Unitech projects and bring them to completion. And that NBCC will operate under a Supreme Court appointed committee.
“It’s probably the best outcome for buyers caught in stuck projects.” (In A.M.’s case, she needs to get lucky twice over. She paid more than 70 per cent on another project, also in Noida, which too, unfortunately, has since got stuck.)
Other property buyers expect their voices to be heard loud and clear in India’s courts. When even that doesn’t work, homeowner groups are sending their concerns directly to the country’s president and prime minister to intervene on their behalf.
A better informed buyer
What RERA has done, irrevocably, is convince property buyers that rules are no longer skewed in favour of developers. But Shajai Jacob, CEO for the Gulf markets at Anarock Property Consultants, said: “Even with RERA certification, all housing projects are not created equal. Projects by reputed developers are the best bet for a safe investment. NRIs should verify the credibility of the builder, including his past record for timely completion of projects as well as construction quality.
“The legal status of a housing project is the function of whether or not the developer legally owns the land it is being built on. And whether or not he has all the development permissions. Buyers need to verify the legal status of a project and have every right to ask for all relevant documentation.
“NRI buyers are no longer at the mercy of second-hand information on things like construction progress. Those states in India where RERA has been implemented also have dedicated RERA websites that provide a database of registered projects as well as live project updates.
“Details like launch date, expected possession date, developer details, building details, booking status, etc. can all be found on a project’s RERA page.”
Which explains why just about every Indian developers’ websites in recent times would show that it is in the process of being updated. It was also an opportunity to scrub off any tall claims they had made in the past through their websites and which they failed to deliver upon. And under RERA, that would have made them liable in a court of law.
It may also be no coincidence there has been a drop in the number of exhibitions featuring investments in Indian real estate being held in the UAE and other Gulf cities. Developers cannot afford to get caught in making commitments they fail to see through. Instead, only a select developers keep making the trip to Dubai and other cities to convince buyers to come in now.
It has not helped that India’s property market continues to experience lax demand, and even among NRI buyers. After a relatively better showing in 2018, demand has lagged all through this year.
And then there are the tough rules that have come into play.
“Under RERA rules, the developer will have to bear penalties on delays - but they do not risk the entire project,” said Azaz Motiwala, Chief Marketing Consultant at Ikon. “Delays could also be due to bureaucracy and other external factors over which developers may have no control.
“Hence, developers are keeping a “safety margin” while mentioning the possession date of a property in the buyer agreement. But truth is, no developer can afford to delay possession to avoid penalties.
“RERA has created barriers that will force bogus developers out of the market in the coming days.”
Cracking the whip
The Supreme Court has been lending a hand in the clean up. Developers who played hard and fast with clients’ monies - and hopes - are being put through the wringer.
Consider the fate of a four-tower cluster - and of its owners - in the south Indian state of Kerala. Under the Court’s directive, the four towers are to be demolished because the builders involved violated rules on construction near coastal areas. The buildings are currently being evacuated despite stiff opposition from the affected owners, and even the overt support of the state government.
“A majority of the owners who bought the apartments in 2006-07 knew the builders were facing legal action for violating coastal rules,” said a property consultant based in Kerala. “They started moving in from 2010 onwards, and the case continued to drag on through the years.
“In this case, developers and the property owners themselves are to be blamed for the sorry state. Everyone assumed that the legal action would just go away after the buildings were complete.” (Apartment owners in these towers will be left with 2.5 million rupees as against the 4.5 million rupees and over they bought it for. Whether the concerned builders get to pay a price will be known later.)
Finally, it comes down to developer credibility. “NRI investors should avoid housing projects by unknown developers, especially when it comes to under-construction projects,” said Anarock’s Jacob. “These under-construction projects used to be the long-time favourite category for NRI investors due to the lower rates compared with completed projects.
“Today, it is mandatory for every under-construction housing project in India to be certified under RERA. Investment in projects which do not have this certification will inevitably spell trouble.
“NRI investors especially need to know how to safeguard themselves from unethical practices - by both real estate developers and property brokers.”
And if they don’t know how, the Supreme Court can always help out.
“A complaint can be filed online on the relevant state government’s RERA website and paying the registration fee.”