Redevelopment of Housing Societies: Bumps, Bash And Bouncers From Builders

Mumbai, India (PressExposure) March 17, 2011 -- In cases of redevelopment, it is said that till you do not leave the society, you are the KING. The day on which you handover your property to the builder for redevelopment and leave the society, the builder is the KING.

Prospective housing societies dreaming of redevelopment of their property often get confused about choosing the right builder. Market of redevelopment for residential property is booming and numbers of small time builders and real estate companies belonging to third tier have joined the band in an effort to grab their chunk of this rewarding pastry.

Builders play very important role in redevelopment sector. Getting re-housed in a redeveloped building is a dream of lifetime of a middle class family and the housing societies should not take chances.

Numerous cases are reported where the dreams of innocent middle class families are crashed when the redevelopment assignments undertaken are neither accomplished in given time by such builders chosen by housing societies nor are the promised facilities made available or never provided.

Before choosing a builder, the housing societies need to know more about the background of builder. Choosing the right builder by the members of the society is vital and important because it is the builder who builds your dream home. Here are some tips or guide to choose right builder.

Word of mouth referrals is a simple and easy way to get information about the builder who has done the redevelopment works successfully in nearby societies or for the societies of your friends or colleagues.

Conduct a check on the background and reputation of the builder. Make research on projects they have completed, ongoing projects and future projects. Visit their office, buildings or projects they have completed and get customers response about the builder.

Ensure that the builder belongs to a respected trade organization or Builders' Association. The organizations or associations such as Builders' Association of India and Confederation of Real Estate Builders Association of India who has promulgated a strict ethical code of conduct is mandatory for compliance by all the builders who are members as also other builders.

This code of ethics formulated by BAI/CREDAI are certain rules that need to be followed and builders or the builder members who default or violate these rules, are listed in list of blacklisted builders. The society should not be solely guided by lucrative offers given by these builders which ultimately would prove fatal and disastrous due to project over delayed or abandoned.

There are instances for erroneous selection of builder or developer where the redevelopment projects got inordinately delayed for one reason or the other and the members of the society continue to stay in their temporary accommodation without any further rent reimbursement made available from the builder for the delayed period.

There are types of voracious builders of third tire who have delayed the redevelopment projects due to paucity of inflow or diversion of funds from the assigned projects in order to acquire more and more projects beyond their financial means or are simply not capable to execute the projects due to lack of competency. Often, builders have compensation agreement clause that assures the members of the Society a daily/monthly damage for delayed possession beyond the specified date as mentioned in the Development Agreement. However, the builders disregard the same. Builders who offer unreal excuses to escape paying penalty can be dragged in the consumer court for a breach of contract and cheating.

A "landmark judgment" delivered recently by a State Commission has ensured redress for a harassed Matunga couple. The Maharashtra State Consumer Disputes Redressal Commission has directed Khar-based Monish Builders to pay Arti and Vikas Modi Rs 7.86 lakh as damages and hand over possession of the Chunabhatti flat they had bought in 2006. "When the purchasers complain, the builders show them provisions of the Maharashtra Ownership of Flats Act, 1963 and willingness to give full refund with interest at 9% so that after using the flat buyer's money for years, the builder can sell the flat at much higher rate," the forum said.

The building is under construction and none of the buyers, including the Modis, have yet been given possession. The Modis booked a 580 sq. ft flat in Mohan Mansion, Chunabhatti, for Rs 22.4 lakh. Over a period of time, the Modis paid the builder Rs 20.18 lakh. They were promised possession before June 2007, but when the builder failed to deliver and Modis were forced to rent an apartment for five years.

The commission found the builder guilty of deficiency in service. In 2006, the Modis invested their life savings in a flat, and can't afford to buy one at the present rate, said the commission.

A builder who is awarded the assignment of redevelopment shall invariably specify in writing in the Development Agreement and in individual agreement executed with every member of the society, the date by which possession of the flat is to be handed over. Default would attract penalty under both Consumer Protection Act and the Maharashtra Ownership Flats Act. The builders are careless about compensation because there is no real estate regulator yet. As such, the unscrupulous Builders take advantage of this helplessness.

Often, builders have an agreement clause that assures buyers a daily damage for delayed possession, but few buyers, if any, invoke it. Recently, the Maharashtra State Consumer Commission directed a developer to shell out Rs 20 lakhs at the rate of Rs 2,000/- a day for a delay in giving possession. It is a rare case in which damages per day were claimed, and given.

The builder's contention was that the old building was "in ruinous'' condition and was on marshy land which required piling work for about six months to make it strong. But, State consumer commission brushed aside his plea and ordered the builder to pay compensation and stated that builder problems can't justify delay.

It has been also been noticed that during the process of redevelopment, the terms of Development Agreements as agreed upon are twisted and unhealthy attempts with ulterior motives are made by the Builders to twist and grossly violate the rules of MRTP and DCR by unlawful planning and constructing additional/unauthorized areas that are beyond their entitlement (i.e. beyond the plot FSI and the TDR/FSI loaded) for their hidden financial gains. The buyers of such unlawful flats/properties land themselves in deals that lead to litigation at a later date.

A complaint alleging several violations of building regulations and environmental norms by IPS officers' building Vasundhara Housing Society at Juhu had been lodged with the Juhu police.

A complaint was filed for registering an FIR against the housing society and the BMC's Building Proposals Department under the Environment Protection Act, 1986. The complainant stated that the 12-storey twin structures did not obtain the Ministry of Environment and Forests' clearance. Such clearance was mandatory for projects worth over Rs. 5 crores under the Environment Impact Assessment Notification of 2006. "Despite the lack of green clearance and other violations, the BMC issued an Occupation Certificate to the building in 2007," said Joshi.

The complainant also alleged violations of the Development Control Rules including the absence of a refuge floor and allowing more commercial area than was allowed in such constructions. As per the rules, up to 15 per cent of the total built-up area of such societies was to be used for commercial purposes. In this case, 25,000 sq ft of the total 70,000 sq ft built-up area i.e. almost 36 per cent is meant for commercial use. It was further stated that the society rented out the space to a popular electronics store for a monthly rental of Rs. 25 lakh and a deposit of Rs. 3.5 crore.

The members of the cooperative housing societies in Mumbai are required to be vigilant while handing over their properties for redevelopment to such builders who, by rewarding the office bearers and their associates with greens and glitters, carry out the unauthorized/additional constructions for their hidden financial gains which as per the rules, they are not entitled to. When unauthorized constructions beyond the laws are the statutory norms of such builders rather than the exception to the rules, the strict laws of the land have always to be upheld by taking stern actions under the laws.

The builder must deliver the project in time along with 100 per cent transparency in all the dealings. He must stick to the promised terms and conditions and pay penalty if the project delivery is late. Trust is the most important element in a society-builder relation and that should be well taken care of by the builder. Get all the promises or agreements made by builder in writing. It should outline the work to be done, date of completion, amenities or facilities promised.

The Builder selected, should be of unshakable reputation for quality, efficiency, trust, meticulous planning, top quality amenities, superlative designs, timely completion, guaranteed possessions and handing over of property of the Society for rehabilitation of its members.

To sum up this article, I once again stress that a prudent and perceptive managing committee of every Society is expected of lot of thoughtful process while moving the proposal of redevelopment and select the builder who domains knowledge, experience and expertise in design, planning, construction and executing the same with passion to deliver human friendly projects.

Upholding the law for the welfare of the community is more valuable for society than extra heap of cement and concrete. Plenty of judgments are overlooked by greedy Builders to earn a lump of extra money through illegitimate avenues.

Dilip Shah
Counselor and Analyst for Redevelopment of Housing Societies

About Counselor and Analyst for Redevelopment of Housing Societies

Counselor and Analyst for Redevelopment of Housing Societies

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Press Release Submitted On: March 17, 2011 at 8:11 am
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