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Old December 4 2011, 05:51 PM   #1
 
 
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Smile Demand compensation from builders for construction delays

Hi
Greetings

just came across a wonderful article.. hope this may hold some answers to the respite of those who are awaiting a long cherished home..

Very clearly delay is actually a DENIAL of SERVICE from a builder

First Published: 22:47 IST(3/12/2011)
Last Updated: 22:51 IST(3/12/2011)

Most agreements that you sign with builders stipulate a hefty rate of interest for delayed payments from your side. But search for a similar penalty clause for delays on the part of the builder in handing over possession, and you will find none. Fortunately, despite such one-sided


clauses in the agreement, consumers can get compensation from builders for construction delays. Under the Consumer Protection Act, a consumer is entitled to compensation for any service that turns out to be ‘deficient’. Since delays in the delivery of any service constitutes ‘deficiency’, one can demand compensation for such delays.
The Supreme Court (SC), in the landmark judgement in the case of Lucknow Development Authority vs MK Gupta, made it clear that “when possession of property is not delivered within the stipulated period, the delay so caused is denial of service” and a consumer who is a victim of such delay is entitled to compensation.

Another important point that the SC made in this case was that compensation awarded by the consumer courts in such cases should serve the dual purpose of recompensing the individual while simultaneously bringing about a qualitative change in the attitude of manufacturers and service providers towards consumers.

Rajiv Kumar Agarwal: I booked a plot in Faridabad with a private developer in 2006. They are yet to give me the possession. In mediation proceeding at the direction of Consumer Forum, they agreed to give possession by March next year. Can one get compensation for delayed possession in this case? The developer charged 18 % per anum interest for delayed payment.

Answer: You certainly can and you should demand it. But before doing that, I would suggest that you please go through the order of the National Consumer Disputes Redressal Commission in the case of Shri JL Sethi Vs Senior Citizen Home Complex Welfare Society decided on August 21, 2006). It would help you in your case. You can find the order on the Commission’s website-www.ncdrc.nic.in. Here, the National Consumer Disputes Redressal Commission has dealt in detail with the question of payment of interest to consumers in cases of delayed construction and the percentage of interest that can be paid.

In this case, the District Consumer Disputes Redressal Forum had awarded 18% interest on the ground that the builder was charging 18% for delayed payment from consumers.

While upholding this, the National Commission quoted two SC orders: In the case of Sovintorg India Ltd vs State Bank of India, (1999), the apex court had held that interest can be awarded in lieu of compensation or damages in appropriate cases. It can also be granted on equitable grounds.

Of course, you have to show that the builder delayed the possession process much beyond the stipulated time, on the basis of the time-frame given by the builder (or the promise made by the builder) towards completion of the project and handing over the property. You also need to show the loss suffered by you as a result of such delay in terms of the loss of interest on the amount deposited with the builder (beyond the stipulated time ) and also the amount being spent by you on a rented accommodation.

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Old December 4 2011, 06:00 PM   #2
 
 
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BlessU, great share . The fact of the matter is that u need to fight out for the compensation in courts . Most, if not all of the Builders would not pass u any kind of compensation on delays in construction .
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Old December 4 2011, 06:09 PM   #3
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Quote:
Originally Posted by MANOJa View Post
BlessU, great share . The fact of the matter is that u need to fight out for the compensation in courts . Most, if not all of the Builders would not pass u any kind of compensation on delays in construction .
agree Manoja, on demanding this compensation from Parsvnath I was told "sir ya to possession le lo ya delay penalty le lo " .

I wish I had time to fight a legal battle.
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Old December 4 2011, 06:30 PM   #4
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ah! a really nice topic to disucss ... all the more because just like me, quite a lot of people are ignorant about our rights and process to enforce it.

Most of the builders cannot meet their committed timeline - it's common across real estate industry - so my first question : has any builder has ever paid to buyers according to delayed penalty clause ? (please qoute some real life example)

Also, i heard that builders play with words quite well - the exac word might say that "Possesion after 3 years of start of construction" and they might take the money around a year before in the name of pre-launch/ launch. So that gives them 4 years from the start of payment

Finally, common man want to avoid police/ court at any cost. The reason being ignore of procedures and also he/she is already struggling to juggle office, family, inflation, corrpution and what not. So, in usual circumstances no one would like to take on the mgihty builders.

So, my second question is - is there a easier way to get the builder pay for delay ?
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Old December 4 2011, 06:41 PM   #5
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Yes, builder do pay delay penalty, but it is not easy to get money from them , it is tough, but not impposible. The way is UNITY among buyer. The real example is Crossing republic Gajiyabaad. Buyer their got united and aftter several meeting with builder and some protest they got many of thier problem solved like Delay penalty, high maintaince charge etc. See site of CROMA for more detail. It is another story that they are rather unfortunate and still fighting a very tough fight of proposed dumping ground nearby......


Quote:
Originally Posted by vikash.kumar View Post
ah! a really nice topic to disucss ... all the more because just like me, quite a lot of people are ignorant about our rights and process to enforce it.

Most of the builders cannot meet their committed timeline - it's common across real estate industry - so my first question : has any builder has ever paid to buyers according to delayed penalty clause ? (please qoute some real life example)

Also, i heard that builders play with words quite well - the exac word might say that "Possesion after 3 years of start of construction" and they might take the money around a year before in the name of pre-launch/ launch. So that gives them 4 years from the start of payment

Finally, common man want to avoid police/ court at any cost. The reason being ignore of procedures and also he/she is already struggling to juggle office, family, inflation, corrpution and what not. So, in usual circumstances no one would like to take on the mgihty builders.

So, my second question is - is there a easier way to get the builder pay for delay ?
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Old December 4 2011, 09:18 PM   #6
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It is pathetic situation and builders never give penalty so easily, even after several similar cases in consumer court, SC etc went against them.

Unit with buyers definitely work wonders, but it is just not possible in all the projects.

One new thing I heard about the delay penalty is that builders have one sided clause like " buyer is not eligible for delay penalty if they were ever late in making payments on time". Now, if you made all the payments on time, still builder could show it late by saying that "your check/draft was delayed by 2 days from getting cleared by his bank".
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Old October 19 2013, 10:02 AM   #7
 
 
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Even before the real estate regulator is formed, consumer courts are taking the lead in establishing the best practices for the sector. On the most common issues — developers taking more than the time they promised in which to deliver a flat — consumer courts are coming down on the side of the buyers.

This time we examine a recent judgment by Maharashtra State Consumer Disputes Redressal Commission to figure out if it has a wider application for others in a similar situation. The recent judgement puts the onus of delay beyond reasonable limits on the developers and relieves the buyers the risk of being duped by developers when they renege on their promise.

The case

The Maharashtra State Consumer Disputes Redressal Commission, in a judgement on September 13, gave a landmark decision in favour of the buyer Anant Ieetkar. Ieetkar had booked a flat in December 2008 in Kalyan, an extended suburb of Mumbai, and paid approximately Rs 19 lakh to the developer. The flat was supposed to be delivered by September 2010. The project was in limbo for years. Construction had not begun. Ieetkar waited until 2011. Eventually, he filed a complaint with the commission.

In his complaint, Ieetkar alleged negligence on the part of the developer in not handing over possession by the promised date. He asked for delivery of the unit, additional charges for the mental harassment he was put through, and the interest payment as per the agreement. In his complaint, Ieetkar also provided documentary proof of the current market value of the flat from a valuer.

The developer admitted to receiving full payment for the flat and that construction would begin "as soon as possible" after getting requisite permissions.

The commission called this case as the "best example how the developer exploits the prospective purchasers" and ordered the developer to pay the current market value of a flat with the same specification in the same locality, which would be around Rs 60 lakh, in case the unit was not delivered within three months. In addition, the commission also directed the developer to pay Ieetkar Rs 3 lakh as compensation for mental harassment and Rs 30,000 for legal charges.

In its judgement, the commission quoted a judgement from the Supreme Court, which held that "while quantifying the damages, consumer fora are required to make an attempt to serve ends of justice, so that compensation is awarded, in an established case, which not only serves the purpose of re-compensating the individual, but which also at the same time, aims to bring about a qualitative change in the attitude of the service provider".

According to Uday Wavikar, the lawyer representing Ieetkar, compensating the consumer at the current market value will increase consumer's trust in the system. "In earlier judgements, consumers were merely granted a certain amount of interest on the principal amount paid. In reality, no amount of interest is enough, considering the rising real estate rates. But with a compensation like this, a consumer can at least consider buying a house in the same area," says Wavikar.

Consumer forums across the country are lined up with similar complaints against developers. But as the Ieetkar judgement shows, such wilful default on the part of developers would now entail a heavy price.

Some developers agree. "Dedicated execution is of utmost importance to ensure timely delivery," says Ram Raheja, director S Raheja Realty, a Mumbai-based developer.

"The key factor for delays in majority of the cases is cash flow. The diversion of funds is an unethical practice but it may not be true for all developers. I believe that defaulters should be punished. However, the buyers also have to be very diligent and should ensure they get the documents, especially the approvals checked by professionals," adds Raheja.

The Checklist

Even as the judgement in this case could inspire more complaints, it is not yet a settled question of law as it can be potentially appealed with the National Consumer Disputes Redressal Commission and finally, the Supreme Court.

Let us take the example of a flat, say 1,000 sq ft in 2007 in Borivali, Mumbai. The going rate then was Rs 6,000 per sq ft. The agreement says the year of possession in March 2010. The developer, however, does not hand over the keys until March 2013 as the work is not complete. When the buyer asks reasons for the delay, he is presented with an option: take back the Rs 60 lakh paid from 2007 to 2010.

The buyer had two choices then. One, he may wait indefinitely for the project to complete, as he has already exhausted his funds. Two, he can take Rs 60 lakh back and look for other options.

This is also not possible as the rates in the area have doubled and he will get a far smaller unit for the same price at that locality. This buyer in this case has lost both the house and time. The developer will sell the same flat to another buyer at the current market value say Rs 12,000 per sq ft and would make Rs 1.2 crore, an extra profit of Rs 60 lakh.

"In some cases, where the buyers are able to exert some pressure, the developers have paid about 10 to 12 per cent interest on the amount refunded," says R Madan, an advocate who is fighting on behalf of buyers. "However, the interest was calculated from the date of possession mentioned in the agreement till the date of refund. The developers happily paid that interest as it was only for 2-3 years while they used the buyer's money for 6 years without interest. On the other hand this interest was not substantial for the buyer to match the current market value of another flat in the vicinity," adds Madan.

In India, sale agreements are usually prepared by the developers. The usual agreement for a standard under-construction project would usually indicate 3-4 years as the time-frame for completion. The buyer is bound to arrange the fund within this period while the developer is bound to keep his side of the deal and hand over the keys on the mentioned delivery date.

It is expected that the developer — being a businessman — must have considered all possible factors while finalising the cost and the time frame for delivery. "He has presumably paid for the land and cleared the legal title before accepting bookings. Otherwise it would amount to cheating," says Naresh Mehta, a property consultant.

"He must have anticipated the fluctuations in demand, the rate environment and cost of inputs before fixing the price. He is supposed to be aware of the time needed for approvals, procurement of men and material and the construction process before he lays down the delivery date in the agreement," adds Mehta.

"So, after the agreed date of delivery, the developer cannot justify delay on any of these factors as they are supposed to be factored beforehand. Now, in the absence of any natural calamity, if delay occurs beyond five years, it can easily be called 'developer made' calamity," says Paresh Parekh (name changed), an aggrieved buyer who is preparing to take a legal action against a developer in Panvel.

There are several examples of buyers caught in similar circumstances. If the pecuniary value of one's complaint is up to Rs 20 lakh, the complaint can be filed with a district consumer forum.

For value between Rs 20 lakh and Rs 1 crore, the complaint can be filed with the state commission and for value above Rs 1 crore, the complaint can be filed with the NCDRC.

Buyers in similar circumstances should consult a professional to build their case and get their due.








Delays can attract high penalty - Indian Express
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Old October 21 2013, 01:47 PM   #8
 
 
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