Sluggish Realty Market Empowers Buyers
The property market in India was on a dream run like never before. Upbeat developers launched project after project even as bullish home buyers lapped them up. A large number of buyers bought at pre-launches, launches, in large cities and small, till the American subprime crisis hit and many dreams turned sour -- since the end of 2008. The current sluggishness in the realty market, however, could perhaps be used to shift the focus to buyer interest. In fact, the present situation has seen a sea change in the way buyers are expressing their grievances and trying to get an advantage for themselves. Says Rajiv Sahni, partner, real estate practice, Ernst & Young: "A noticeable difference in grievance redress is the emergence of young buyers, who are quality conscious and demanding for the premium they pay. Use of technology like internet groups, forums, blog sites has provided a platform for buyers to connect to a large target audience in order to collectively protect their interests."
Stressing on the aspect of time over-runs in real estate projects, Sahni adds: "Prior to purchasing the property, customers need to be aware of project development approvals. In case any approval is pending, it may be beneficial for the customer to understand the timeline required to procure it. Some other elements that can be checked include roads, open space; facilities offered, club membership, etc. Familiarisation with the buyers agreement is also beneficial." The aggressive mood among home buyers in India is not surprising, considering that the current scenario has made the problem two-edged for the Indian market. With cash-strapped developers reducing prices for already launched projects, a militant buyer lobby which paid peak prices during the Bull Run has come forward. On the other hand, despite the lower prices, developers are not able to meet development schedules and are battling the consumers on the timely delivery front as well. For buyers too the problems are manifold. During the bull run, due diligence was a neglected service. Many are not only battling delayed deliveries but a big question mark on whether they will be able to get the product any time at all.
An example of a deal hanging fire is the Shouryapuram project promoted by the NCR-based Nitishree Developers. A buyer booked a 175 sq yd plot in 2006 to be delivered in end-2009. The project was started in partnership with the Jaipuria group co. Buyers here have been in talks with the developers since 2007 since the distinct lack of activity was a cause for worry. But a bhoomi pujan within 6-8 months somewhat allayed fears. Persistent lack of activity drove the consumers back to the developer for reassurance. In 2007, the developers showed a document to consumers that proved that the land belonged to a consortium of 4-5 builders. For those who are still unconvinced, the developers have maintained that pockets of land have been registered and if buyers are still unconvinced they can get a refund. But there is a catch - the refund will come only in 10-11 months' time and that too after a deduction of 10% of the amount. So the question is, should the buyer opt out and hope that the money will come back to him within 10 months? What happens if the market cycle changes in the meantime and the value of the property rises?
Another example is Piyush Developers who pre-launched plots in Palwal. Buyers maintain that they have paid close to Rs 7 lakh already and were expecting possession by year end. However, not much action has happened on the ground. A month ago, a consumer wrote in saying his survey of the proposed plot revealed that there was not even a board up to indicate where the land was. The Piyush group spokesman maintains that the project is delayed but development work is on and possession will be given soon. In the case of three leading developers in the NCR region -- DLF, Unitech and Vatika -- consumers have formed redressal forums and have been negotiating with developers to bring down prices of property to realistic prices in sync with the current market trends. Asks one consumer, "If we don't pay on time, the developer charges 18% interest. But if he defaults, the penalty is a mere 5%. How fair is that?" Developers, meanwhile, say that they have customer redressal cells to take care of buyer grievances. Unitech, for instance, has a customer relationship management (CRM) department which tries to redress buyer grievances by taking corrective action. "We interact with the customer and try to find out a solution to their problem. The department takes care of all customer-related queries," says a Unitech spokesperson.The main problem is that today, when values are headed southwards, and these concerns have surfaced, developers feel that it is unfair to expect the new rates from them for those who had booked at peak values.
But the catch here is that the consumer has paid only a small part of his money as a booking amount. And the project still needs to be completed before all the money can be recovered. The Confederation of Real Estate Developers Associations of India (CREDAI) has addressed this issue in certain regions. "CREDAI Maharashtra has a zero wait period for redressals," explains Lalit Kumar Jain of Kumar Builders Pune and executive member CREDAI. The CREDAI redressal forums are active even in Chennai and Bangalore. Under these, the body directs grievances to the concerned developer to sort out. "In most cases the issues are sorted out at a bilateral level," explains Kumar Gera, chairman CREDAI.
"The advantage of choosing a developer who is a member of any formal organisation is that there is a peer pressure that forces him to settle the dispute amicably," explains Geetambar Anand, executive committee member CREDAI from the northern region. Agrees GP Savlani, resident director CREDAI, "Any membership to CREDAI, Naredco, CII, Assocham etc brings some accountability and a willingness to self-regulate. Consumers are within their rights to ask for this information. Consumers themselves are saying that their issues are legitimate. Most of those surveyed felt if the developer explained the actual situation to customers, the face-off would be much less. They understand the global situation and that all developers around the world have concerns over availability of cash. But developers are still shying away from addressing the issue and communicating the problems with consumers. A clear case of the need for a regulator, one would say. CREDAI's grievance redressal forum is a step in the direction of self-regulation. But with no statutory approvals to back them, users still need to be convinced.
Stressing on the aspect of time over-runs in real estate projects, Sahni adds: "Prior to purchasing the property, customers need to be aware of project development approvals. In case any approval is pending, it may be beneficial for the customer to understand the timeline required to procure it. Some other elements that can be checked include roads, open space; facilities offered, club membership, etc. Familiarisation with the buyers agreement is also beneficial." The aggressive mood among home buyers in India is not surprising, considering that the current scenario has made the problem two-edged for the Indian market. With cash-strapped developers reducing prices for already launched projects, a militant buyer lobby which paid peak prices during the Bull Run has come forward. On the other hand, despite the lower prices, developers are not able to meet development schedules and are battling the consumers on the timely delivery front as well. For buyers too the problems are manifold. During the bull run, due diligence was a neglected service. Many are not only battling delayed deliveries but a big question mark on whether they will be able to get the product any time at all.
An example of a deal hanging fire is the Shouryapuram project promoted by the NCR-based Nitishree Developers. A buyer booked a 175 sq yd plot in 2006 to be delivered in end-2009. The project was started in partnership with the Jaipuria group co. Buyers here have been in talks with the developers since 2007 since the distinct lack of activity was a cause for worry. But a bhoomi pujan within 6-8 months somewhat allayed fears. Persistent lack of activity drove the consumers back to the developer for reassurance. In 2007, the developers showed a document to consumers that proved that the land belonged to a consortium of 4-5 builders. For those who are still unconvinced, the developers have maintained that pockets of land have been registered and if buyers are still unconvinced they can get a refund. But there is a catch - the refund will come only in 10-11 months' time and that too after a deduction of 10% of the amount. So the question is, should the buyer opt out and hope that the money will come back to him within 10 months? What happens if the market cycle changes in the meantime and the value of the property rises?
Another example is Piyush Developers who pre-launched plots in Palwal. Buyers maintain that they have paid close to Rs 7 lakh already and were expecting possession by year end. However, not much action has happened on the ground. A month ago, a consumer wrote in saying his survey of the proposed plot revealed that there was not even a board up to indicate where the land was. The Piyush group spokesman maintains that the project is delayed but development work is on and possession will be given soon. In the case of three leading developers in the NCR region -- DLF, Unitech and Vatika -- consumers have formed redressal forums and have been negotiating with developers to bring down prices of property to realistic prices in sync with the current market trends. Asks one consumer, "If we don't pay on time, the developer charges 18% interest. But if he defaults, the penalty is a mere 5%. How fair is that?" Developers, meanwhile, say that they have customer redressal cells to take care of buyer grievances. Unitech, for instance, has a customer relationship management (CRM) department which tries to redress buyer grievances by taking corrective action. "We interact with the customer and try to find out a solution to their problem. The department takes care of all customer-related queries," says a Unitech spokesperson.The main problem is that today, when values are headed southwards, and these concerns have surfaced, developers feel that it is unfair to expect the new rates from them for those who had booked at peak values.
But the catch here is that the consumer has paid only a small part of his money as a booking amount. And the project still needs to be completed before all the money can be recovered. The Confederation of Real Estate Developers Associations of India (CREDAI) has addressed this issue in certain regions. "CREDAI Maharashtra has a zero wait period for redressals," explains Lalit Kumar Jain of Kumar Builders Pune and executive member CREDAI. The CREDAI redressal forums are active even in Chennai and Bangalore. Under these, the body directs grievances to the concerned developer to sort out. "In most cases the issues are sorted out at a bilateral level," explains Kumar Gera, chairman CREDAI.
"The advantage of choosing a developer who is a member of any formal organisation is that there is a peer pressure that forces him to settle the dispute amicably," explains Geetambar Anand, executive committee member CREDAI from the northern region. Agrees GP Savlani, resident director CREDAI, "Any membership to CREDAI, Naredco, CII, Assocham etc brings some accountability and a willingness to self-regulate. Consumers are within their rights to ask for this information. Consumers themselves are saying that their issues are legitimate. Most of those surveyed felt if the developer explained the actual situation to customers, the face-off would be much less. They understand the global situation and that all developers around the world have concerns over availability of cash. But developers are still shying away from addressing the issue and communicating the problems with consumers. A clear case of the need for a regulator, one would say. CREDAI's grievance redressal forum is a step in the direction of self-regulation. But with no statutory approvals to back them, users still need to be convinced.