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Realty: Proposed rules to add more teeth to consumer rights

Right now, the realty market in India is fairly unregulated, or where there are rules, they are not exactly enforced. The major rules that are quoted are based on the judgments by consumer forums or courts, which are coming to the protection of consumers who have been struck by the high-handed behavior of builders or sheer arrogant behavior. Some of the complaints that consumers have is about projects not being on time, no proper scheduling if the project has got late, no work happening on stuck projects, number of flats or towers being increased after the project has started (and this has the complicity of local administration officials who approve such plans for a due consideration including cases where stilt parking has been replaced by ground floor shops since they got permission for such changes), projects being started even when they do not have the required permissions and the threat of cancellation later, and numerous others). If a consumer is late in making payment, the builder does not hesitant to levy late payment charges but is loath to payup if the delivery of the project is delayed.
In a situation where the government is coming into action long after the judicial process has begun, the Government is proposing rules to handle some of these misbehavior cases. Late payment charges can be linked to the home interest rates (making the penalty variable and proposing some relief to consumers), proposing strict action if the builder makes changes after the commencement of the project without getting the approval of the majority of the residents, and so on. This would be a central law, but can be used by state governments as a model law, and they can make their own laws in their own states to handle such complaints. Of course, all of this is with the assumption that such changes will happen – the real estate lobby is powerful (and very well politically connected) and they have their own sob story about government changing rules, bad economy, and so on. The Government has to ensure such rules don’t cause a shut down of existing projects that are in trouble, and yet ensure that builders do feel that misbehavior can cause them severe problems (link to article):

The draft Real Estate rules have been formulated by the housing and urban poverty alleviation ministry within two months of some sections of the Real Estate (Development and Regulation) Act, 2016, coming into force on May 1. The interest rate compensation has been proposed to be 2 percentage points over and above the prime lending rate (PLR) of State Bank of India. Normally, a home loan from SBI is pegged at 0.20 percentage points to 0.80 percentage points over and above the MCLR (marginal cost of fundbased lending rate) at 9.15 per cent, which is the PLR for a retail loan. That means, rates for compensation would be 11.2 per cent as against the home loan rate of 9.35 per cent to 9.95 per cent.

Doctors operate on wrong leg – procedures not followed

This is more in the nature of weird news rather than being news about a consumer being affected because of some misbehavior by a service provider. Imagine a patient coming to a hospital with a problem in one leg, having an operation, and then realizing that the entire procedure has been carried out in the other leg. And not just small work, but this was major work, including inserting 2 rods in the leg. The shock felt by the patient and his relatives must be incredible – they went to a better know private hospital, that also charges a large amount for such procedures, and had the correct expectation that things would get better. Instead, with the surgery having been carried out in the wrong leg, not only is the original condition not rectified, but there is further work to be carried out in the leg which was wrongly operated upon. This adds more cost, and is very traumatic to the patient, both in terms of emotional agony and physical pain, but will also take additional time to get better.
And it is very surprising that such a thing could happen – there are procedures and processes that are to be followed before the actual operation is to be carried out which leaves one to think that they were not referred to; further, even during the actual operation it would be clear that the problem for which they were operation on was not visible, and yet the operation continued. Seems very weird, and as the article below says, it seems like a clear case of medical negligence, which are being handled by courts and consumer forums nowadays (link to article):

“After the doctors analysed the condition of our son, they suggested surgery on the injured right leg. We agreed to it as it was important according to them. However, we were shocked to know that instead of performing surgery on the injured leg they operated on the other leg,” the patient’s father, who did not wished to be named, told IANS.
Ravi Rai told the doctors after the surgery that they had operated on the wrong leg, to which the doctors didn’t respond. He then informed his parents, who took up the issue with the hospital authorities.
According to the family, the doctors during the surgery also inserted two rods in his left leg, instead of the injured right leg.
The hospital when contacted, admitted to the mistake, and said: “Patient’s safety is of paramount importance to us. We are deeply concerned and are looking into the matter and will take appropriate action as deemed necessary.”

Airline industry – Regulator starts to impose controls on airlines

Over the last few years, the cancellation charges for domestic airline tickets has gone up. These charges have gone up from Rs. 750 just a few years ago to something much more (I actually saw a Vistara ticket where the cancellation charge was Rs. 4600+, this really blew my mind). The typical cancellation charge is now something like Rs. 2000 plus on almost all airline, and the regulator has been really being supportive of airlines in this regard, letting them increase their charges for the ticket plus also allow airlines to allow charging for many other services (so if you are traveling as a family, you may have to pay for seat charges to ensure that you can select the same seat – and Spicejet has provided a special hand-baggage only fare but the concept being that with fares changing, this might become paying extra for baggage). I had once booked a ticket from Chennai to Bangalore, the fare was less than Rs. 2000, but the cancellation for the ticket was actually showing more than the paid amount, it was approx. Rs. 2250.
As has happened in the past, normal customer reaction slowly makes the regulator, the DGCA (Directorate General of Civil Aviation) act, but slowly and years after these complaints have started to happen; to the extent that the regulator is accused of fronting for the airlines and only acting when there are multiple and vociferous complaints. The regulator also starts to act when influential and important people such as MP’s complain about these practices. So, finally the DGCA has got into action, and told airlines about a certain level that they cannot breach for cancellation charges, effectively capping the cancellation penalty at the base fare and asking the airlines to return the additional amounts that include taxes and other charges (link to article):

“There have been instances, where the cancellation fee exceeds the total fare charged and the passenger does not get anything when the ticket is cancelled,” said a senior aviation ministry official, who did not want to be identified. “Airfares that passengers pay have components like service tax and other airport charges in them and not returning these charges to the passenger upon cancellation could also raise legal issues.”
The cancellation charges that prevail can be quite steep. For instance a Delhi-Mumbai ticket booked through a travel site on June 7 costs Rs 2,419 with a base fare of Rs 1,559. If it’s cancelled, the passenger gets just Rs 404 back, with the rest deducted as penalty.
Analysts said airlines keep such charges at a high level in order to boost revenue via this route as they can’t raise fares for fear of losing customers. A tour operator said such penalties should be much lower.

A regulator does need to play a much more active role. Else, what will happen is that airlines will take whatever they can from consumers; and when one airline starts a practice, the others play catch-up and can sometimes exceed these charges.

Property – Firm told to handover project on time, else face strong penalty

And so the series of court judgments and orders by consumer forums continue. For the past many years, consumers have face an unending list of problems related to delivery of properties that they have paid for – whether these be flats or houses / villas. As compared to the previous decade which was a good time for everyone involved – rates went up, investor made money, properties were delivered on time and builders made a lot of money; the current decade has seen a large number of cases where deliveries were not made on time. Builders asked for payments, people took loans or arranged for the money and then found that the delivery of property was just not happening on time. And this was not only shifty builders, but even ones that were big names and had a better record in the past were now defaulting on delivery of properties on time, or were reducing the quality or the amenities to be provided, or something else which caused problems to their consumers (for example, in a few cases, the builders added new towers after the project was already sanctioned, which caused problems to existing builders because of the sheer reduction of free space and a greater feeling of being cramped).
Earlier, consumers would have worried or fretted, or when they contacted the builder, the builder would either soothe them with a new date or new schedule, or in some cases, would become arrogant and tell them that nothing can be done, they just have to wait. However, in the past few years, this equation has got more balanced. Cases against builders in consumer forums or in courts have gone in the favor of consumers, with compensation, penalties, and so on, to force builders to become more accountable and to deliver projects in time. One argument has been that if the consumer is late in making a payment, the builder will charge late payment interest of 18%, but does not believe in reversing this charge if the delivery of the property is late (link to article):

In a major setback to real estate major DLF, country’s apex consumer court has pulled it up for delay in handing over possession of properties to 50 allottees in its DLF Valley project in Panchkula. It has directed the builder to hand them over as per its latest deadline of November-end this year with a warning that the company will have to pay Rs 5,000 per day to each allottee for further delay.
A bench of National Consumer Disputes Redressal Commission (NCDRC) comprising Justice J M Malik and member Dr S M Kantikar has also directed the company to immediately pay each allottee, a 12% interest on their investment per annum from the date of expiry three years from the date of allottment on the letter till the possession is given. It has further ordered a compensation of Rs 30,000 to each allottee as litigation charges and for facing mental agony.

Couple attacked by staff on train – penalty on attackers

Indian Railways is a part of the Union Government, and hence, by extension, when one is traveling on a train of the Railways, one is using Government property. As a result, people employed on the train or providing services are deemed to belong to the Government. This should also include contractors who provide services to the passengers and if they misbehave, they need to be taken to task. Passengers have the right to ensure that they are not mistreated in any way, and the Railways also need to penalize such staff or contractors to ensure that they do not repeat such behavior (and if such behavior gets to be a pattern, then the contractor needs to be removed from service along with a heavy penalty).
The treatment meted out to a couple on a train begs to be punished. When the staff provided a water bottle that was not the standard one, the man asked for the proper bottle and was subjected to misbehavior (including physical assault). The problem is, previous cases of physical assault or other behavior by such contractors would not have been punished in the way that they should be, which emboldens the contractor and the staff to continue such behavior. Indian Railways, if it has to continue to attract paying customers, and also to avoid cases and legal problems, has to ensure that such behaviour is not tolerated and an overall sense of accountability in the organization needs to be present (link to article):

Taking serious note of the assault on a Bhayander couple by pantry staffers of an express train between Kota and Ratlam on Sunday night, Western Railway’s general manager G C Agrawal on Tuesday fined the caterer Rs5 lakh and ordered a high-level inquiry into the assault incident.
Businessman Pradip Gupta (48) and his wife Asha were assaulted by around 20 staffers of Sun Shine Caterers on the Hazrat Nizamuddin- Bandra Terminus train. Gupta had objected to being served bottled water ‘Pavan’ instead of ‘Rail Neer’ which has to be sold on railways.
The caterers, some uniformed, pulled Gupta by the collar around 10pm. The caterers abused him and assaulted him before pulling the alarm chain and abandoning the train.