Due to the slowdown in Real Estate Market, Project Delay is very common these days. Completing a project on time is a big achievement. I saw one of the builders in Pune advertising heavily that he completed one of the projects on time. Project delay has huge financial implication for the buyer both in terms of Home Loan Interest Outflow and Opportunity Loss. Opportunity loss is potential rent received/saved in case of let out/self-occupation of a property. On an average, a project delay may cost you Rs 25,000 per month. In my post, Why Under Construction Projects get Delayed? i highlighted the reasons of project delay. Reputed builders try to complete the project on time or within 6 months grace period which is acceptable. They are conscious of their reputation and brand name in the market. Project Delay is common phenomena among mid and small builders. In most of the cases i observed that Project Delay is intentional due to fund crunch.
At the time of purchase, builder assures the buyer on timely completion by incorporating penalty clauses w.r.t project delay in the agreement. From my experience, i can say that these clauses are drafted perfectly in legal terms so that buyer cannot claim the penalty. In short, builder immune himself from any such claims in future. One of the common reason given by builders for claim rejection is the delay in Govt approval. In fact, most of the times delay in govt approval is intentional from builders side to buy more time to complete construction. Therefore, any assurance on project delay through agreement can be completely discounted by the buyer. Now you must be wondering what are the options available with a buyer in case of a project delay. Let’s check out
Project Delay – What to Do?
1. Check your Agreements: The first and foremost point is to check all the agreements signed with the builder. A buyer should go through all relevant clauses related to project delay. Though i mentioned that builders include foolproof legal clauses but still it is important to understand these clauses, to proceed further.
2. Check the Reasons for delay: In case of a project delay, the critical task for a buyer is to find out exact reasons for the delay. Don’t expect from builder to share the exact reasons. It is imp that you should check the progress of the project at regular intervals right from the beginning. Every 3 months, you should check the status of the project against timelines and bottlenecks. Any such status check will give advance warning about the project delay. Normally, i observed that buyers become active only a couple of months before the possession. It’s a shock for them when they come to know that project is delayed by few years. Therefore, to know exact reasons for the delay, it is important to keep track of the project from the date of purchase.
3. Verify Builder’s Claim: After finding out the reason/s for the delay you should independently verify the builders claim related to project delay. These days most of the information is available in public domain. It is not that difficult to obtain the information as it is perceived by the buyers. Recently one of my clients nailed the builder for the project delay. Builder gave an excuse that he has not received permission from Pollution Control Board therefore project got delayed. When the buyer approached Pollution Control Board, he came to know that builder intentionally applied for permissions with a delay to delay the completion of project. When we produced the evidence in front of builder then he agreed to pay compensation to my client. The only condition was that he will not inform the other buyers regarding compensation.
4. Connect with other Buyers: It is important to create or be a part of a group of other buyers in the same project. You may find a lot of online forum with discussions on specific projects. It is important to discuss the future course of action with other buyers. The group of buyers puts more pressure on builder compared to a single buyer. Recently a group of buyer won a case against one of the reputed builders of NCR. Therefore, in case of a project delay you should connect with other buyers in the same project to discuss the future course of action.
5. Written Communication: In case of project delay, buyer/s should not discuss anything orally with the builder. Builders are street smart and they know how to handle such situations. All communication with the builder should be in writing preferably by a group or association of buyers.
6. Pressurize to complete the project: Before taking any action against the builder, the strategy of buyers should be to claim penalty or compensation for the project delay. 2nd action point should be to get written commitment on the completion date of the project. A monitoring group of buyers who stay in the same city should be formed to the monitor weekly progress of commitments from builders end.
7. Approach Consumer Forum: If nothing seems to be working and buyers anticipate further project delay then they can consider approaching consumer forum. A buyer is availing services from a builder. Any delay in the timeline is a deficiency in service. According to some legal references, the builder should obtain all govt permissions before starting a project. Therefore, an excuse of delay in govt permission is just an excuse. Besides penalty for delay, buyers can also demand additional compensation for opportunity loss in terms of rent etc. It will pressurize builder to complete the project on time under fear of compensation for the project delay.
Concluding Remarks: It is important to check the progress of the project at regular intervals. Normally buyers are happy if there is a delay from the builder in raising demand note in case of construction linked plan. It’s a first signal for the delay in the project. A buyer can insist on the timeline in construction linked plan to monitor the same. To avoid any such unpleasant experiences buyers should avoid purchasing a property under pre-launch offer. Before signing below the dotted line ensure that construction is in full swing. Lastly, you can map the construction progress against original timelines given by the builder. It will give you a fair idea of any future delays. A delay of 3-6 months is acceptable, but any project delay beyond grace period is not good as it also increases the overall cost for builders. It may further delay the project.
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