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HDIL flat buyers on warpath over builder’s failure to deliver

Comments Off on HDIL flat buyers on warpath over builder’s failure to deliver   |   January 29, 2014    03:56pm   |Contributed by manoja

Lalit Rao was just 32 and a newly wed when he decided to book a flat in Housing Development and Infrastructure Ltd’s (HDIL’s) affordable housing project in Kurla West in Mumbai. It was in 2009. He and 800 others are still waiting for their dream home even after completing the entire payment. “The flats were sold at Rs 5,250 per sq ft at the time. And relying on the company’s assurances, warranties and representations, a lot of us made a spot booking. With an upfront payment of Rs 5,00,000 we were promised delivery in 2010,” Rao told Firstpost. The project in question is Premier Residences. There are 1,200 flats spread over seven acres. The builder, one of the city’s biggest, is now trying to get more money from the buyers (over and above the final payment), without which he has refused to hand over the flats, alleges Rao. Rao is in a catch-22 situation. He can neither sell his flat nor can he move out from his current home. To make matters worse, he cannot prove that he is being pressured by the builder as HDIL hasn’t given anything in writing. “(Rakesh) Wadhawan will not discuss the amount to be paid on phone. People are being directly called to the office and conveyed this,” he alleges. Wadhawan is chairman of the company. Over the last three years, Rao says he has been running around the developer’s office and the regulators’. The entire experience has left him shattered. On the one hand, he is burdened with the monthly rent of his current flat and, on the other, there is the burden of the home loan. As a last ditch effort, he even tried to resell his flat but investors are no longer interested in buying a property marred by legal hurdles. “Till three months ago, flats here were being resold at Rs 12,500 a sq ft, now no one even wants to buy it at the booking price. The other properties in the vicinity, constructed by little known developers, are commanding a premium of Rs 15,000 a sq ft,” he rues. Central to the issue is a lack of regulatory laws, which is putting thousands of prospective homebuyers like Rao at the mercy of developers.

In 1993, the Supreme Court ruled in favour of MK Gupta in his case against the Lucknow Development Authority for not delivering his flat on time. This landmark judgment brought housing construction under the purview of the Consumer Protection Act, 1986. This, however, hasn’t done much to help consumers. Owing to the bonhomie between developers, the municipal and regulatory authorities and contractors, projects get sanctioned easily. Builders construct buildings with questionable quality and customers are left out in the cold. Rao and others are just the latest addition to a long list of victims. In October 2007, HDIL was awarded a redevelopment contract for the 276-acre slum rehabilitation project in Kurla by the Mumbai International Airport. The company was to rehabilitate around 65,000 slum dwellers who were impeding the airport’s expansion and posing a huge security risk. For HDIL, the project was a cash cow as it was getting transferable development rights (TDRs) in lieu of the resettlement of slum-dwellers. TDRs are the additional built-up area a builder gets in lieu of area relinquished or taking on slum redevelopment. The developer can the use the extra built-up area himself or sell it to someone else for a premium. The rehabilitation of the slum was to help Mumbai International Airport Ltd (MIAL) to expand and modernise. But slow movement on implementation of the project forced the airport authorities to terminate HDIL’s contract and invoke the company’s performance securities. While MIAL has alleged that the company failed to meet its 2011 deadline of constructing houses, HDIL is blaming government agencies for failing to come out with the list of slum dwellers eligible to be shifted to these buildings. The company has now moved court against the termination of the contract. The Premier Residences project was part of the saleable portion made available by the Slum Rehabilitation Authority (SRA) and so the company sold it in the open market. Industry experts suspect that SRA and the Mumbai Metropolitan Region Development Authority (MMRDA) could try to repossess these buildings and may, therefore, be trying to create third-party interests to get the courts to act in its favour. Residents point out that HDIL has missed several deadlines for the handover of apartments and the quality of construction has been extremely shoddy. “The builder has not paid any penalty for the delays. There were months that would go by when workers would refuse to complete construction because HDIL had not cleared their dues. But we are ready to forget all these issues as long as we get our houses. Even as we wait for justice, we are continuing to pay lakhs as home loan EMIs,” said Aejaz Saiyed, another customer who has not got possession of his flat.

The company’s demand for more money comes on top of this. According to Shabnam Latiwala, another customer, HDIL called her to its corporate/registered office at Bandra East three months ago and told her that she will have to pay more as the area of the flat she booked has increased. The reason? Balconies, flower beds and the service area have been included in the carpet area and this has led to an increase in the area of each flat, she was told. It is alleged that the builder is demanding the current market rate and in cash. “HDIL is using the excuse of fungible FSI. (Floor space index is the ratio of the total floor area of buildings at a certain location compared to the size of the land). But since our building was already nearing completion prior to 2012 and application of fungible FSI does not arise as it cannot be charged with retrospective effect. They thereafter said that it was a mistake on their part due to a computer error and it had now come to their notice that inadvertently they had failed to charge for the balcony, flower beds and service area. Interestingly, service area is the place outside the flat and sewerage pipes are passing through each floor. All these are lame excuses as the balconies and flower beds were very much part of our agreements and cannot be charged at this belated stage. Also, a physical verification has shown that the actual carpet area is even lesser than (what is) mentioned in the agreement,” Latiwala said. Adds Rao, “Fact is that even under fungible FSI, the builder has to pay a premium to the BMC for only 60 percent of the fungible area and that too at the ready reckoner rate (which would be quite lower than the rate at which we booked). So he is basically fleecing us at multiple levels.” According to the customers, the area of the flat cannot be increased at this juncture and it is just a ploy to ‘armtwist them to pay more. “The stakes are high as there are nearly 106 flats in each wing and there are 10 wings. The amount which HDIL seeks to grab runs into crores,” added ZR Munsi, who is also waiting for a flat. “At the time of buying the said flat, the purchasers had the option of opting fot a flat admeasuring 925 sq ft, or 965 sq ft. The difference was only 40 sq ft. Inspite of this difference of only 40 sq ft, many people opted for the smaller flat as they could not afford to pay for that extra 40 sq ft then. Now suddenly they are being asked to pay for 115 sq ft more and that too at current market rates,” adds Munsi. According to him, HDIL is misleading people by claiming the area has increased. In fact, the area has decreased and we have been short-changed even in the carpet area promised as per the agreement,” he alleges.

HDIL, on its part, maintains that additional payments have been fully accounted for but refused to comment on the delays or the quality of construction. “We are ready with 1,000 flats approximately at the Kurla Premier Residences project. The company has already handed over nearly 200 flats and is in the process of handing over another 200 flats. Additional payments, if any, taken for various utilities are fully accounted and duly acknowledged receipt is given to every buyer and for every payment made. Thereby, company has paid all requisite taxes and every transaction is registered as required for by the laws of the land,” a company spokesperson said in a statement. Some of the buyers, obviously disagree. They cannot form a society until they are given possession. Their battle is far from over. They have already taken to Facebook and Twitter to mobilise more support and are approaching the civic courts to get an injunction against the creation of any third-party interest on this property by HDIL. Following this, the consumer court will be moved for poor construction quality, lack of clubhouse facilities, changes in the construction plan, etc. Recently the Bombay High Court took up eight PILs against builders for over-charging home buyers, thereby giving these residents hope that all is not lost. “We will not give up. If we do not fight against this injustice builders will continue to take us for a ride,” said Saiyad. On Saturday (25 January), about 100 flat-owners approached HDIL to demand possession of their flats but the company’s executive director Joseph Putthatu did not budge and continued to ask for additional payments as the ‘additional amenities’ have been constructed. “We asked Putthatu to give us the carpet area promised to us. We were not consulted or asked about the extra carpet area, so why should we pay for it? We also raised the issue about the illegal way in which this extra money is being sought from us. The moment we pointed that out, and he realised that some of us were recording the proceedings, he quickly changed his stance and said that actually there is no sand availability and therefore we are not able to give possession,” said Rao.

When the customers countered the sand availability argument, Putthatu refused to entertain any further questions. Their protest was followed by another group of home buyers who were facing similar problems with HDIL’s Galaxy Apartments in Kurla East. And while their struggle continues, the real problem with the real estate sector cannot be overlooked – the absence of a regulator. The need of the hour is to take lessons from streamlined markets abroad and introduce comprehensive disclosure norms. The government has finally kicked up some dust by passing the Real Estate (Regulation and Development) Bill which seeks to rein in the developers and bring in some rules. Although, it’s too early to say whether the regulation will be able to bell the cat, it certainly has put some ground rules in place for those who provide what is invariably the most expensive purchase made by people in their lifetimes.


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