All about the price of project de­lays and project de­vi­a­tions

A vig­i­lant ap­proach will go a long way in pro­tect­ing buy­ers from fi­nan­cial losses and fraud­u­lent prac­tices by de­vel­op­ers

HT Estates - - HTESTATES - Anuj Puri

Reams of newsprint have been ded­i­cated to dis­cussing the suf­fer­ings of con­sumers in the In­dian real es­tate sec­tor. Who has not heard about home­buy­ers’ woes re­lated to late de­liv­ery of projects, de­vi­a­tion of hous­ing projects from promised qual­ity, ad­di­tional pay­ments due to change in apart­ment area and in­ad­e­quate pro­tec­tion of their rights?

The ques­tion that in­vari­ably arises is whether the de­vel­oper is at fault, or whether larger mar­ket forces be­yond the con­trol of de­vel­op­ers are at play.

Con­struc­tion de­lays: Is the de­vel­oper or ap­proval author­ity re­spon­si­ble for this? Tech­ni­cally speak­ing, the time spent in ob­tain­ing all req­ui­site ap­provals adds to the to­tal time of com­plet­ing a project.Th­ese ap­provals can be needed at any stage be­tween the launch of the project and the ac­tual han­dover of apart­ments to buy­ers. De­lays ex­pe­ri­enced for ap­provals au­to­mat­i­cally im­pact the spec­i­fied de­liv­ery time.

A de­vel­oper has to ob­tain sev­eral ap­provals from the state and cen­tral agen­cies and min­istries be­fore launch­ing a project. In ev­ery busi­ness, there are two main fac­tors that cause the over­all price of fin­ished prod­ucts to push up- high hold­ing costs (determined by the time pe­riod of hold­ing raw ma­te­rial) and in­ter­est costs (when funds have been bor­rowed).

In the real es­tate sec­tor, land is the ba­sic raw ma­te­rial. The longer a de­vel­oper has to hold his land; with­out get­ting any re­ceipts through the sale of pro­posed apart­ments, the higher is his project cost.

In the cur­rent sce­nario, ob­tain­ing the 57-odd per­mis­sions to begin con­struc­tion of a project can ex­tend to two The dif­fer­ence in the promised qual­ity and ac­tual de­liv­ery sta­tus of the apart­ment con­tin­ues to be a prime con­cern for real es­tate buy­ers. A change in the apart­ment area af­ter buy­ing from the de­vel­oper can oc­cur i f a change in project plan is ne­ces­si­tated due to a de­sign or ap­proval is­sue. A de­vi­a­tion of up to 10% is usu­ally ac­cept­able. How­ever, for a higher de­vi­a­tion, a cus­tomer must def­i­nitely seek legal re­course. Project de­vi­a­tions can hap­pen be­cause of struc­tural de­fi­cien­cies of the over­all sys­tem. How­ever, at times de­vel­op­ers also tam­per with the over­all project qual­ity or make ar­bi­trary changes in their project de­signs with a clear in­tent to max­imise profit.

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