It seems like open season on the builders for their various deficiencies and problems that they have given to customers. There was a time when the relation between property companies and consumers was great – you booked a flat or a villa, the company gave you the delivery of the flat within some time period of the promised time and the end value of the property had gone up in that time period. However, after the 2008 economic problem, it became more tricky. Builders started facing problems in terms of finding working capitals and loans, the property market was down, and there were also problems with regard to the land acquisition done by government agencies being reversed by the courts (a few of these acquisitions were reversed because of different reasons).
At the same time, with delayed deliveries of these properties to the end consumers, they face a lot of problems. The loans for these properties still had interest payments to be done and rent for the properties in which they were staying continued to happen. In addition, taxation also became a problem since the housing loan tax benefits have a validity in terms of number of years and when these deliveries get delayed, the taxation benefits cease to apply. But after some time, the property buyer no longer worries about these matters, in fact being more worried about the status of their property since they have already paid most of the money to the realty company. In the case of flats, it is even more problematic. Property right in terms of flat ownership can only happen if the structure has been built and some amount of completion happened, as opposed to buying land.
So, in the past few years, courts and consumer forums have been coming to the aid of end consumers. Approaching these companies in the case of delays or some other deficiencies typically did not yield anything with consumers feeling that companies were playing them along or being uncaring of their problems and not providing any solutions. A number of people started approaching the courts and consumer forums for help in this regard, and judgments in this regard have started coming out and providing solutions to people. Realty companies sometimes crib about how they are face a difficult business environment, but for the consumers, life is typically much more difficult. In most cases, the situation would be that they are facing a difficult economic and financial situation and need some kind of settlement. As in this case, where the delivery of the property has been delayed for many years and the builder has not been providing any relief; so when the judgment provides for compensation along with an interest payment, it provides the relief that the consumer is looking for and provides an escape cause – hopefully this judgment would also ensure that builders take this situation much more seriously and with regard to the feelings of the consumer (link to article):
The apex consumer commission has directed real-estate major Unitech Limited to pay over Rs 60 lakh to a Gurgaon resident for not giving him possession of an apartment booked a decade ago at Greater Noida.
The National Consumer Disputes Redressal Commission (NCDRC) asked the firm to pay the amount with an interest of 18 per cent per annum, from the date the total demand amount was deposited with the Unitech, which is also facing several other complaints, including a joint claim by 144 home-buyers.
A bench headed by Justice J M Malik held that the desire to acquire the property had “ruined the life” of the buyer and the real estate major “harassed” him by asking “for interest on the delayed payment when there was no progress of project”.
There was a huge boom in the housing market from 2003 onwards, that lasted till 2007-2008 and then there was further growth after that again from 2010-2011 (although not at the same level as earlier). A number of housing projects were launched and money taken from consumers for the delivery of houses and flats. The initial set of deliveries was fine, however, over a period of time, the concept of deliveries on time has totally fallen by the wayside for a significant number of projects. There can be a varied number of reasons for this
– the builder over-extended themselves and are now running into some kind of financial trouble,
– the builder is not capable and was trying to take advantage of a booming market,
– regulations have changed and is impacting the housing project (for example, the builder could have promised a project where not all approvals were in place or these were later reversed by a court, as has happened in Noida and Greater Noida)
– Overall cost of construction has increased and any further delay also means a further increase in costs, leading to a spiral which pushes the developer to financial distress
– numerous other reasons
Now, some of these reasons may be justified, others may not be. However, if you consider the side of a home-buyer, they have forked out money for these housing units, and in many cases, they are paying the EMI for the housing unit (and paying back money to the bank along with interest) along with rent for the place they are currently living in (and which they had anticipated they will not be living in anymore, having been given their own housing unit); or it could be the case of somebody investing their money for the future and the money has now got locked up.
Whatever be the reason, if you consider the case where money is payable to a builder, and there is a delay in payment by the consumer, the builder is prompt in charging interest for the money payable, and if there is a delay in paying of the money, they can even cancel the allotment. However, this was not balanced well, since delays by the builder in giving the property do not envisage the same kind of interest and penalty.
Over the past few years, consumers have finally started seeing a balancing of these terms, with the builders getting charged in courts and consumers forums for their acts of either delay in allotment, or with some kind of deficiency in what they have provided. As a result, they have started seeing more penalties levied on the builders; which is tough on the builders but provides some support to the consumers (although it can take some time to get these judgments). In this case, it is a reputed builder who has been ordered to pay a penalty as well as provided a time frame in which to do the allotment (link to article):
The National Consumer Disputes Redress Commission (NCDRC) has ordered the Jaypee Group to pay homebuyers in its Kalypso Court project a penalty of 12% per annum for the delay in handover of flats. It has also directed the company to pay an additional penalty of Rs 5,000 per day per flat if possession of the flats is not given by July 21 this year.
Bookings for flats in Kalypso, a part of Jaypee Greens at Sector 128 in Noida, began in 2008 and deliveries were scheduled for 2012.
Aggrieved by the delay, 10 Kalypso Court homebuyers had filed a case in the NCRDC through their association, Developers Township Property Owners Welfare Society. In the application, the buyers alleged their homes were to be delivered within 39 months of booking but the handover had already been delayed by four years.
Over a period of time, the regulator DGCA (who controls the airline business in India) has allowed airlines to increase rates for their different services; so for example, there is the ability to charge extra for carrying luggage (or rather Spicejet has a fare without baggage, but this could become the normal fare, which means those who are carrying luggage might be forced to pay extra for that benefit). In addition, charges for seat selection, window seat, aisle seat, for the ability to have members of a family sitting together, all of these are extra charges. These are called unbundling, which means that airlines are allowed to charge for many different kinds of services that were uncharged in the past.
One of the one that pinches the most is about cancellation charges. There was a time just a few years back when the charge for cancellation for a domestic ticket was Rs. 750 (and this is not someone playing with a trip, there can be valid reasons why someone has to cancel – for example, for a previous trip, I had to cancel when my kid fell ill and the doctor recommended against going on the trip). Then all of a sudden, the cost of cancellation increased to Rs. 1500 for the ticket, which was a big increase – and all airlines did the same (who wants to not get money?). Then the cancellation charges kept on increasing, and now Indigo has sent a proposal for increasing this cancellation charge to Rs. 2,250. In the past, the regulator has studiously ignored any calls by customers to look at these increasing cancellation charges, but as of now, it seems that the recent proposal has actually managed to get the attention of the regulator who has promised to look into these increasing charges (link to article):
The regulatory move comes as a leading low cost carrier last week hiked cancellation charges to a flat Rs 2,250 for all passengers cancelling up to 2 hours before the flight departs. Before this, passengers cancelling were charged Rs 1,900 if they cancelled tickets more than a week prior to scheduled departure. This was the fourth upward revision in a year. Other airlines are also expected to follow suit.
“As the safety regulator, we ideally should not interfere in the commercial decisions of airlines. But in this case we are getting complaints from the public. Based on the Lalit Gupta report, we will act if the cancellation/rebooking charges are found to be unreasonable,” said a senior DGCA official.
Of course, for the past some time, the regulator has not been getting into this matter because of their claims that these are commercial decisions that are between airlines and their consumers; however, in that case, they are defying their own mandate, since the regulator is also meant to protect the interests of the consumer against unfair moves by the airlines.
It happens once in a while. So many times, there has been the story that airline tickets were suddenly available for $1 or so, technical glitches and so on. Prospective travelers immediately snap up such tickets as soon as they are available; the airline may whine and scream about this being a mistake, but they have to honor the deal. The buyer has bought this legally and apparently in good faith; even if there are conditions on the site about the airline having the final say in the ticket, it would be a horrible Public Relations move to deny the ticket; the loss of goodwill would be far worse than the amount saved by denying the ticket. This is true for other providers as well, such as when a shop may come out with a bargain and later realise that there was a problem with the price listing.
In this case however, Snapdeal came out with an obviously faulty listing that showed the iPhone gold version of iPhone 5S for an amount of Rs. 68. A consumer came across this price, and it was a superb bargain, and hence quickly snapped this up. When Snapdeal would have come across this, they would have realized that something was wrong, but it does not matter. They had an item for sale which was bought by the customer in an obviously above board transaction. When they declined to go ahead with the transaction, the consumer went to the consumer forum which ruled against Snapdeal (link to article):
Online shopping portal Snapdeal has been asked to pay Rs.10,000 in fine by the State Consumer Dispute Redressal Commission for refusing to deliver a gold version of Apple’s iPhone 5S (16GB) to one Nikhil Bansal for Rs.68. Bansal had allegedly ordered the iPhone from Snapdeal last February when it had appeared for buy for Rs.68 on its website.
Snapdeal in its defense said that the ‘iPhone 5S available for Rs.68’ incident was a technical glitch. The forum – in its order dated February 12 – has dismissed the argument. Snapdeal has also been directed to deliver the iPhone to Bansal at the same price that it was ordered, that is, Rs.68.
E-commerce chains need to be more careful of such cases. Mistakes will happen from time to time, but if the merchant refuses to go ahead with the transaction, it would not be good for their public image, and hence they need to reconsider their approach in such cases.
In the recent past, there has been a lot of complaints from house buyers about the tendency of many builders to charge additional amounts that were not specified in the original contract. For example, when somebody bought a piece of land for a certain consideration to be paid in installments, the expectation is that they would get the land at the designated time. So when the property developer comes up with a new demand, for whatever reason, it can be a shock to the buyer and lead to a tremendous feeling of frustration. Earlier, such cases would be grudgingly accepted, but in the past decade or so, the intervention by consumer forums and courts has led to more and more buyers challenging the developers if they feel that they have been wronged.
There have been so many cases where buyers have been wronged in some way or the other, and people have their own experiences. For example, somebody bought a flat in society with a promise that the bottom level would be stilt parking, but was later converted to shops at the bottom level; or the concept that suddenly the developer decided that the super area was not rightly corrected, and recalculation led to new charges, and so on. There can be many such experiences of people, where the developer feels that he is in a position to dictate terms, but the trends have changed to some extent; now if you feel aggrieved over some action of the developer, challenge it (link to article):
Builders cannot demand hidden charges which are not part of their contract with buyers and are liable to pay compensation for delaying delivery of property, a Delhi court has said, observing that they are “not holy cows” who cannot be questioned by their customers.
Holding that builders cannot levy any additional charges without any justification, the court said they were adopting tactics to achieve their illegal purposes and arm-twist the buyers to extort more money by raising the cost price or levying additional charges which do not form part of the original contract.
Additional District Judge Kamini Lau made the observations while directing real-estate major TDI Infrastructure Ltd to withdraw its demands for overdue and other charges and hand over a plot’s possession booked by two brothers in the firm’s project in Sonepat within two months.
“Unless these hidden/extra charges form an essential part of the contract within the knowledge of customer, the builder cannot charge the same without offering any justification..