Do not agree on this while buying under construction property

Do not agree on this while buying under construction property

Developers have been inserting clauses that can led to monetary loss and stress to buyers of under construction properties. Here are some of the clauses you must avoid.

Accept it or not, the real estate sales are slow and unless there is a real value-proposition in the offering, a buyer is smart enough not to invest in an under- construction property these days.

There is surely a big dream attached to the upcoming property you buy, be it for an investment purpose (renting out or selling off for a profit) or for end-use as an occupier. You must not just sign a sale agreement without reading it carefully or agree to any terms which later on become a costly proposition for you. There are many clauses being newly incorporated by the builders to protect their interest. That is no harm, if it is within limits and does not violate the buyer's interest and rights. Unfortunately, there is no guideline about the sale agreement and hence many builders do what they feel like.

Following are a few instances I have come across while doing home loan for my clients:

1. The builder takes a year plus ,after accepting 25% from you as booking money, to get the plans approved and upon receiving it, wants your to-date payment in 7 days max, failing which he has right to cancel your booking and refund without any reminder or discussion! They do this for a gain. They can now sell your flat at a higher price to a new buyer who will pay premium for the available sanction plan as well as not having to block his 25% for a year plus the year old appreciation for the location can sell the flat too. You have booked early, so your chosen flat will be selling now like a hot-cake!

2. You cannot sell your property unless the builder exhausts their stock! Now that is something you can never accept as a buyer, since the builder may never sell their entire stock! Even if they do or do not, you will never know.

3. You cannot sell your property at a lower price than what the builder is currently selling at! Again, you do not know for sure at what price the builder is selling. At best you can know what they are quoting openly. The advantage you must have that you booked the property many years ago, is to get an appreciation on it. It may not be as high as what the builder is selling at, but that's your USP as an investor while selling, which no one can take away from you.

4. Under subvention scheme, even if it is promised to be 'till possession', it suddenly expires! Builders define 'possession' as different than yours. For you, an OC is called 'ready for possession'. But there is a new term called 'soft possession or fit out possession' which means when builder is ready to allow you to start woodwork. Now, that can be one year before the building received the OC and actually fit for you to occupy. Why should you be paying rent as well as EMI for that one year if you knew?

5. You are not eligible for a delay penalty from builder who delayed his project for 3 years, if you have delayed your payment even by a day in any installments, you pay! Many builders have done this to their buyers. This is absolutely unfair and you must make sure that no one can deprive of your dues for a flimsy reason like this.

6. The square feet area can increase at the time of possession without any capping on the percentage! I have seen a 2800 Sft apartment becoming almost 4000 Sft and the builder demanding the 'balance payment' for handover. Now, how can anyone go so wrong with the math unintentionally?

7. Paying all the Govt. taxes upfront. Some builders will ask you to pay all the service tax and VAT in advance, though the building is only 10% complete. For your knowledge, both the above taxes are supposed to be deposited with the Government within 7th of the next month after raising the invoice in the previous month with you. But to your surprise, the builder will definitely deposit it as and when it becomes due as per slab casting and not at one go at the time of collecting from you.

8.Paying lakhs of rupees as 'Caution money' for doing furniture work and asked to get a refund after the society gets formed! The builder takes a 5 Lakh deposit from you to allow you to start the woodwork and the caution money is to protect them against any damages that may occur due to the carpentry or plumbing job etc. Fair. But not returning the money after the work is finished and the labours leaving your premise is not. You are told that the builder will deposit all such caution money (will be in crores depending on the number of flats he is delivering) to the society after being formed, that too, without any interest, and that is for you to get the 'refund' from the society-to-be-formed, which no one knows how much time will take or will it ever be formed at all, as in most parts of India(not every city is Mumbai) a society is not so strict a rule.

9. Amenities like clubhouse, gym etc be given by the developer after the possession! A gym without equipments, swimming pool without water connection, gas pipe without gas reservoir, garden without plants, fish pond without fish, fountain without water, children play area without swing or sea-saw....the list goes on. I am sure many of you have faced this. So, please be careful.

10. Builder having right to construct another tower or increase number of floors after you have purchased! If you have chosen the top minus one as your choice of floor, you surely do not want 10 more floors to come on top of you. If you have looked at a breezy direction for your balcony, then two taller towers in front is not what you are looking forward for.

11. Builder pushing you to take loan from their chosen lender as they have taken project finance from them! This is most unsuitable for the buyer. At the beginning it may sound like a 'time-saving', 'easy-process' kind, but soon you will realise that there is a bigger backdrop. The builder wants his credit-line to get free by transferring your individual loan to the same lender. It may not be the best choice for you, right? You might get a lesser rate, lower fee, a better product, a more suitable bank (as you may bank with another), a better service, some cash-back offer elsewhere. And why should you not opt for what is best-suited for you?

At the end, please be sure who is signing the agreement on behalf of the builder as you will later have no clue. Do not forget to keep a copy of the document with you for records and again, before signing any amendments on the agreement, do due diligence once more. It may cost you some time, money (if outsourced to a lawyer) and energy, but every effort is worth it! It's a tried and tested method and no amount of time is wasted for the 'dream home' you aspire.

Be informed. Stay happy.

Happy investing

Source:Moneycontrol.com