Agreements - reading between the lines
While signing the builder-buyer agreement, watch out for clauses relating to overheads, super area and delivery date
fter the 2008 global financial crisis, the real estate sector witnessed inadequate liquidity. The problem aggravated with domestic financial institutions reducing exposure to the real estate sector and drying up of private capital. With commercial projects (office space and retail malls) taking most of the brunt of the financial crisis, these projects were worst off in securing funding.
Even if a developer was able to get funding for a commercial project from a financial institution, the
An under-construction property in the primary market is considered sold when two agreeing parties – the builder and the buyer –- decide to sign the builder-buyer agreement. While there could be a difference between the quoted rate and the final negotiated rate, various aspects of builderbuyer agreements remain the same across markets in the country. These are carefully documented and often favour the builder/developer and protect his interests.
However, it is important to understand the terms and conditions specified in the sale deed or the agreement.
If not understood properly, clauses within the agreement could be misleading and ambiguous. Moreover, your builder may profit from some of your misses. The big concern for any buyer is the payment. Thus, understanding this part of your builderbuyer agreement is most important. There are a few clauses that need special attention. Here are some insights on the same.
Usually, at the time of signing the deed with your developer, the negotiated price is given. In addition it also mentions the overheads such as parking charges, fire fighting and electrification charges, external and internal development charges and the preferential location charges. Mentioning these overheads and understanding them thoroughly would save you from any sudden payments that may come your way.
Also, often your developer may put a small clause on the possible change of super area in the final assessment of the entire construction. The turn out of this clause could be devastating. The clause says that area of the apartment can increase or decrease, depending on market conditions and architectural changes, and price will be subject to change accordingly. And the size usually increases! In the absence of any regulations that could otherwise monitor the scale of change, your developer can charge you for the change. Most put a cap of up to 50 sq ft. Thus for the miscalculation of your developer you may have to shell out more while at the time of possession. This additional cost may be in the range of R2 lakh to R5 lakh for a mid-income house.
Builder-buyer agreements do not mention the exact timelines of delivery. The wordings put in the clause mentions the number of months for completion. This could be misleading. For any buyer it is difficult to really monitor the exact date of the commencement of the construction.
Moreover, because of the uncertainties within the real estate market, developers have started putting a clause, which gives them an additional six months for the completion of the project due to the uncertainties of the market. Often termed as the grace period, most builders are using the grace period to avoid any kinds of penalty due to a possible delay in the future.