For a property buyer, the Property Developer or Builder is the most important person in the life till the sale deed is signed. In most of the cases, the property developer occupies almost 100% mind share during the buying process. He may throw a lot of surprises and unexpected events in your life. Based on my experience with property buyers, i can conclude that hardly 5% property buyers are HAPPY with their interaction with the property developer.
In this post, i am using the term property developer instead of the builder. The reason being, anyone, and everyone claims to be a builder. The best example is Delhi. A guy next door may approach you to develop/re-construct your old house. He will construct 4 floors and retain one or two floors. Therefore, he calls himself to be a builder. Technically he is right but it will be appropriate to call him property developer. Therefore, this post is written from the wider perspective that includes anyone and everyone who is a property developer. Secondly, the reputed builders never indulge in the practice of false promises. Therefore, the property buyer faces this problem only with small time builders or the so-called property developer. Let’s check out the 5 false promises you should never trust.
Buyers Beware of 5 False Promises By The Property Developer
1. Your money is SAFE and you can take it back anytime if you wish to exit:
If any of the readers can give me a proof that he/she received 100% money back from the property developer in case of cancellation from buyer’s end, i will reward with an equivalent amount. The bank account of property developer is like a black hole. Once you paid you should not expect that you can easily get back your money in the event of cancellation. Whatever may be the reason for cancellation.
Normally, the builder’s don’t share the booking form with the buyer before receipt of booking amount. In the event of cancellation of booking, the buyer has to forego at least 10% to 20% of the booking amount. In one of the instance, it was the height of cheating, the builder mentioned in booking form that buyer has to pay 15% of the property value towards cancellation. Therefore, entire booking amount was forfeited. The property developer also threatened the buyer with a court case if the buyer fails to pay balance amount towards cancellation.
In small cities/towns, there is a tendency to pay booking amount / Token Money in cash. For example, one of the blog readers paid booking amount during a site visit in cash for a plot in Hosur and NO payment receipt was issued. The scheme was “Book today and get 20% discount”. The property developer insisted the potential buyers carry cash or cheque. After that, she found out that title was not clear and unfortunately she didn’t have proof of payment. By the way, a cash payment of more than Rs 20,000 is illegal in a property deal.
Therefore, the buyer can demand a copy of booking form in advance and also insist on payment receipt at the time of payment of booking amount.
2. We will change the Agreement as per your requirement
Another big lie from the property developer. Sometimes the property buyer is not comfortable with the certain clauses in the agreement. Though the property developer does not share the sample agreement till he is ready to sign. Some smart buyers get agreement copy from online forums or bank. A bank has a copy in case tri-party agreement is signed between the buyer, bank/HFC, and the property developer.
In one of the instance, the buyer had reservations on certain clauses and he insisted on a mail from the property developer’s end as a confirmation that specific clauses will be changed. The sales executive send a mail with confirmation on the changes. Based on the commitment, the buyer paid 40% of the property value.
At the time of execution of the agreement, the buyer insisted on changes as agreed upon and the authorized signatory of the property developer refused. He told that employee who committed these changes have left and he was fired for false commitments to the buyers. The buyer had no other option but to sign the agreement without any changes.
The word of caution is that sales force of the property developer is mostly hired on a commission basis. They hardly stay for few months. Therefore, any financial and legal commitments should be on the letterhead or from the authorized signatory as approved by the board of directors of the company.
The agreement should not contradict any commitment on letterhead. In certain cases, the property buyer is told that it is not feasible to make changes in the agreement. The property developer agrees to mention such changes on letterhead and issue separate letterhead with agreed upon changes. Therefore, agreement and letterhead contradict each other and in the case of any dispute, the agreement will supersede the letterhead.
3. The date of completion in Agreement is just a formality, We will complete the project much earlier.
It’s a new trend emerging in real estate sector. The property buyer is promised a date of completion say April 2018 but agreement mentions the date of completion as April 2019. The most common reason given is that the agreement is standard and can’t be changed. The project will be completed by April 2018. You can check my post, Why under construction projects get delayed?
My simple question is if the property developer is so confident about completing the project by April 2018 then what is the harm in including the same in agreement. Trust me, it is a false promise and project will not be completed by April 2019.
4. I am offering you the BEST Price. If you find lower price then take double the difference amount from me
Again it is a false promise. As i keep highlighting that builder’s rate card is superficially inflated. Preferably, you should buy under-construction property in resale. You will get a much better deal. You can check my post, Buy Resale Under Construction Property. The property developer will never agree on following 2 points
(a) The prices have corrected. Trust me even property developers in Noida also don’t agree on the price correction :). Wherein on records, the price correction is in the range of 30% to 40%.
(b) The property developer is charging a premium from the buyer. The pricing is designed in such a way that you will get a false impression that you are getting the best deal of the town. The price of 1190 sqft 3BHK will be compared with 1500 sqft 3BHK of another project. The property buyer fails to notice the price psf rather compare total price. Secondly, the price quoted is just a base price. You can easily add 10L to 15L on top of it. I shared it in my post, How builder overcharge property buyers?
5. You will get & pay what we promise/commit
One of the sales pitch is the sample flat. I shared my views in my post, Sample Flat – Trap from Builder. A buyer should not trust and go through complete specification/measurements. It should not come as a surprise to the buyer at the time of possession of property.
Moreover, hidden charges or undisclosed charges is another menace. The property developer keeps finding ways and techniques to fetch a little extra from the property buyer. The most common are VAT and Service tax. Any changes in service tax are charged retrospectively whereas it should be prospective in nature. Every few days, i come across a new type of charges like labor cess, metro cess, dual meter installation charges etc. Almost all these fancy charges are fraudulent and not applicable in 99% cases. If you ask property developer to clarify then he will not revert or look at you as if you made a mistake or committed a crime.
Words of Wisdom:
I will keep it short and sweet. Oral and verbal commitments have NO legal standing. Whatever you mutually agree with property developer should be captured in the legal agreement else you will be at the mercy of the property developer. If the changes are not captured in legal agreement then you are being trapped in the web of false promises just to close the deal. Therefore, you should be beware and always remember that prevention is better than cure.
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