Can a builder profit from your investment?
Many buyers pay transfer fees of 100 to 1,000 per sq ft to builders to exit from a project, but this could be illegal, say experts
Nitesh Gupta booked a n ap a r t m e n t i n Indirapuram in 2008. A year later, his wife was diagnosed with cancer and he decided to sell the house and spend the proceeds on her treatment. To his horror, the builder in question refused to execute a sale deed in his favour and also demanded ₹ 300 per sq ft as transfer charges. Unable to exit the project, Gupta could not get the money when he needed it the most and lost his wife within three months.
Sumant Goel, too, could not rustle up finances urgently for his son’s education abroad by selling his Gurgaon apartment. The builder demanded transfer charges of ₹ 150 per sq ft, something Goel could not manage at a moment’s notice and, therefore, had to postpone the sale and look for expensive education loan options.
Most developers in DelhiNCR and other states are charginging transfer fees from buyers who want to dispose of their apartments in group housing projects. However, thethese chargeses differ from projectp to project, bubuilder to builder,build even ddepending on the ininventory pendinpending with the developer. In most cases, especially, when it comes to upcoming builders, the first transfer charge is free. This is primarily because these builders wish to attract as many investors as possible at the onset.
It has also been found that in case of new and upcoming locations, there is a huge inventory pile-up and a demand-supply mismatch as the units in the secondary market are usually available at prices lower than the primary market and the price at which the builder may have launched the second or the third phase. This is when a developer steps in and stops buyers from transferring their property for a certain period.
The transfer charge also depends on the category and the quality of the property and in most cases ranges from ₹ 100 sq ft to ₹ 1,000 per sq ft. In case of properties priced in crores, transfer charges could be as high as ₹ 1,000 per sq ft. So, for a 6000 sq ft apartment worth ₹ 10 crore, a seller could be compelled to pay a whopping sum of ₹ 60 lakh as transfer fee.
Builders have dif f erent rules. Manoj Gaur, managing director, Gaursons, says his company, which has many projects in Uttar Pradesh, has no transfer policy and does not permit property transfer at the construction stage.
In Haryana, several builders charge a transfer fee depend-
₹ ing on the current price of the project. The transfer charge would double if a property was bought at, say, ₹ 2,000 per sq ft and its current value was ₹ 4,000 per sq ft.
Nikhil Jain, CEO, Ramprastha Group, says that they generally charge a fixed rate of ₹ 100 per sq ft irrespective of the stage of construction of the project.
Is it legal?
The question that arises then is whether transfer charges are