Why you should do background check for small real estate builders

POSTED BY manish ON November 5, 2012 COMMENTS (48)

Should you buy real estate properties from small builders ? While you keep hearing about big real estate projects, there are tons of buildings and buildings and apartments build by small builders also and they are quite high in number. Today I want to share 3 instances of dealing with small builders.

Builders Background check

Case 1 : Real life case of Real Estate Fraud

One of the readers had invested in a property with a small size builder , but now he found out that the builder is arrested for fraud. He is now stuck with the investment and paying the EMI for the property whose future he is not sure about. Here is the full case

In Jan 2011 i have booked,Registered and stamp duty paid property located at Navi Mumbai(CIDCO property)and all the required documents are submitted to HDFC for under construction property.After verification and search report the Loan sanctioned. The payments are made according to Demands and Work completion by developer on time to time basis.Till the 70% of work completion all the payments are made(April 2012),but after that 19th July 2012 the developer has arrested by local police for cheating and fruad registration(Double registration) on his running projects.

In this issue he was arrested and the news spread across through all the media news papers that Customers are Cheated for Crores of rupees by Navi Mumbai Developer since May 2012.In this case on his arrest i have also made police complaint that, “The construction work has stopped since last two months and Developer has shut his office and mobile.According to media news i am also feeling that i was cheated and the home loan EMI are still there.”Now the developer and Police is also asking me to take back my complaint otherwise developer will sell that property to others and only give me the money which i have paid till the date. When i asked my bank about this to kinldy hold my EMI till the issue will solved.How do i pay EMI of the loan which i took for my Home and without getting home how do i proceed further for EMI?Bank said,”We have given a Loan to you not developer,even though all the documents are clear from Developer according to procedure.And my registration documents are Mortgage with the bank.So i have pay the EMI for the 70% Loan amount which i took from bank till the 70% work completion by developer.”Now i am paying EMI’s without getting Home. So guys pls think 100 of times before proceeding for Under-construction property.It doesnot matter whether it is a branded or Unbranded(Known/unknown Builder)

Case 2 : Unathorised Floor in the Project

One of the readers shared on our jagoinvestor forum that he has invested in a real estate project by a small builder, but the builder has violated rules and added another floor without approval. Now his money is stuck with the builder and he is not able to take any concrete decision

Recently I have booked a flat in bangalore with a small time builder. The catch is he has got approval (BBMP approval) for G+4 floors but he built an extra floor (My flat is on 4th floor). Does SBI approves the loan for apartment in such project? The builder is saying that there are 20+ loan approved from SBI (total 120 flats in project) and he will get my loan approved as well. He is also saying this is quite common practice now a days in Bangalore and he will keep this floor for renting purpose only.

Even if SBI approves my loan, should I buy this flat? What are the complications, I would face in future if selling off this flat (or will live in that flat). I have given 20% of the money as booking amount.
What are your suggestions in my case?

Case 3 : Builder not replying to many queries

I had a terrifying experience with a small builder, who projects himself as a Mid size builder(He completed one small project, of 20-30 flats and he himself given promotion as midsize builder and compares himself with some reputed mid size builders in Chennai).

I got all the documents from builder in a professional way(he gave all documents in set saying these are the documents required for legal verification) and gone for a lawyer verification(its my mistake not to wait for lawyer opinion) and he gave me enough evidences that he applied for a project approval form SBI( I told him, i will get HL only form SBI, after reading articles in Jagoinvester, Thanks to Jagoinvester for their precious articles) i believed him because he behaved very professionally(He is educated and worked for a consulting firm for more then a decade, making me believing he is professional) and i overshoot-ed the lawyers advice( i didn’t receive it for 15 working days) and made agreement and paid 20% of the property cost and then got a call form lawyer(actually lawyer couriered me the docs, but I didn’t receive them) saying courier was returned and he asked me to make a personal visit to his office.

The facts came into the picture with 10 queries( all of them are so simple like EC patta and couple of explanations) and i sent the same list to my builder and got promised, those silly queries will be answered in 5 days, and i waited for 15 days but no reply to lawyer from builder and after repeated follow-ups’(not with Mr. Professional, but with a staff in builders office) finally she went with answers and from my side i too gave the agreement copy for further evaluation and final advice from lawyer( as he is empanelled with SBI, it can be submitted for loan processing). The horrifying truths came out, he further raised additional queries and a builder cheating was projected. There are multiple problems in the land (it is total of 1.5 Acer).

1. Some part of the land was amortized with a PSU (not SBI) for 50L and he paid the amount in the month of July and obtained NOC (still the documents are under encumbrance) and attached the NOC with the documents and he is giving for customers for property verification. But when my lawyer made a background verification( as he has good networking with many bankers), it came to the limelight that he obtained loan again for 50L in the same bank after a month of time.

2. some part of this land is hereditary(legal heirs are 2 brothers and one sister) , sister didn’t sign the document and her brothers sold(here it is JV) the land to the developer, got her signature as witness.After some time she can go and fight legally for her rights on the property, and lawyer requested for a rectification deed and he objected and told he can provide a NOC(generally NOC is valid for 6 months of time, i really don’t know how NOC is valid in this contest)

3. DTCP approval is not obtained

4. There is difference in land available as per patta and land showing in project documents

5. Parent documents before 2004 are missing and told those can’t be retrieved

After presenting all the above(only critical are mentioned) queries, he tried to convince me and get my loan from some other financiers(of course i have a option to choose form PSU and NON-PSU), and offered some gifts (as he is planning to market his flats in Diwali offer such as free modular kitchen,( he increased the price of the flat by rs.200, but not for my booking, as I have done it earlier. Just to hold my booking he offered me this Diwali gifts)) and some other junk promises. I demanded for immediate cancellation of booking and refund all amount on the same day. However, I am in confusion state. If he clears all the above queries it is a great deal in that area and the price I paid was killer price.
I requested him to put all his words in a piece of paper (of course it is a judicial stamp paper of Rs.20, again Kudus to Jagoinvester for education me how to deal in such cases, especially with builders)Got a concrete promise to fix the queries in 15 working days else the entire amount will be refunded. 15 days passed and I have no communication from builder or from his office.On the final day I gave a call, asked him the status, and got a horrifying answer that he is still fixing the problems and when questioned deeply, got the terror answer that he did not start anything until date. Moreover, requesting me to wait for another 2 weeks.

I rejected his request and told him to arrange for cancellation deed and check, for the amount, and he rejected saying he will deduct rs.25 as per agreement. I initially rejected his check and told him I will collect the amount what ever after presenting the issue in front of consumers forum. Moreover, after short conversation he realized that I would make mess( i searched this property in internet and he also told me 70% of his customers are thru internet) if the total amount were not refunded. So guys please be aware and do a lot of background checking before investing your hard earned money.

Vultures are all around us in the form of builders, relaters and especially mediates or brokers or agents or what ever it is… (via)

Background Check of Builders before you purchase Property

It would not be fair to say that one should avoid small builders, but one has to be more cautious with the small builders compared to bigger ones. Here are the 5 things one should always check before they deal with a builder – small or big. This checklist will make sure that your pain is reduced later and the chances of getting in trouble will be minimised.

1. Enquire about their previously Completed Projects

You should always ask them directly about the previous projects they have completed. Better visit them too, and ask the locals and people living there about delays if any and the issues they faced. You should also search about those projects on internet and watch out for any grievances and complaints.

2. Check if they are part of some builders association

There are few associations and groups for builders community and there are codes of conduct defined for builders. Some of those associations are “Builders’ Association of India” (BAI) and “Confederation of Real Estate Developers Association of India” (CREDAI). Its always a good idea to watch out if the builder you are dealing with is a part of those associations or not. While you can’t say that not being a member is always a wrong thing, but you can always ask him why he is not a member. I would say a builder who is part of those association would be more serious and professional compared to other small time builder.

3. Check the rules incase of Delay or Cancellation of Project

You should always ask for the rules and terms and condition which will apply incase of delay or cancellation of the project. Ask them for an agreement copy even before paying the booking amount. Do not get too impulsive with the project and hurry. Watch “Compensation clause” which talks about the compensation paid to the buyer in case of any issues.

4. Search on internet for his review and past

Always do a thorough research about the builder and his quality of work on internet and different forums. While in general all the builders have some or the other bad reviews from someone, watch out that the internet should not be filled with bad reviews totally! In case you do not find any information or very little information about the builder, then you are mostly dealing with some new guy in town, who might be truly unprofessional. Avoid it.

Do you know someone who had dealt with small builder and was stuck with the situation or faced any issue? This can even happen with big builders. Share your experiences in comments section…

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48 replies on this article “Why you should do background check for small real estate builders”

  1. Ramesh Kiran says:

    Whether it is small apartment or large apartment, please ask for the following documents before you go for the legal advice. Always get at least 2 legal opinion regarding the building. In Bangalore, fee for legal opinion is aroung 6-12k. 2 out of every 3 customers get ripped while purchasing a apartment in Bangalore as there is no legal regulator who oversees real estate dealing. It is something like pre 1980 in the stock market befor SEBI was formed. Well, hopefully the real estate bill would be passed this year.

    1. Building approved plan – You cannot build an apartment in a 40 x 60 site or lesser. You get only 4 kitchen approval. So please check before you give the down payment. Most of the small builders don’t have sufficient capital, so they rely on the apartment booking advance for construction. Ask for the building approval plan, if he says he doesn’t have it. Then ask him to send an email to you or if you are so interested in the apartment, apply through RTI the approved building plan. This is the most important document apart from the legal papers for buying an apartment. Most of the builders bullshit saying that they have almost sold all the property. In smaller apartments you could put a primium on the ground +2 floors as they would be legal and the top floor would be illegal.

    2. Check if there any case against the building. You could apply an RTI asking if there is any case related to the site. If the builder gives you the approved plan, then attach the approved plan along with the RTI. There are only 9 zones in BBMP limits and each zone is headed by Joint Commissioners. Most of them are very helpful. So, you could also call them to their office and check if there are any cases(such as court case, illegal structure, no oc certificate) pending against the building. Asking for information is your right. It is very easy to obtain through RTI and you don’t need to run from piller to post in most cases. Most of the times you can get the document within 10 days. Talk to the office who is incharge of the RTI and he should be able to help you. You don’t need to go to their office, you could just call them and ask about your application.
    http://bbmp.gov.in/zones

    3. Parking – If there is only a small basement and there are no parking places for all the apartment then it is 100% sure that this building is illegally constructed. As per the BBMP, 1 parking place is a must per apartment. It doen’t matter it is 1 or 2 or 3 bedroom apartment.

    All the best and good luck !

    1. Thanks for sharing that important points . !

  2. Prasenjit Halder says:

    Hi,
    My promoter/ builder has done the same thing with us.
    He sold the property which is already mortgaged to bank against bank loan.
    Is there any vigilance dept , CID , CBI can help us out on this matter?
    I guess local police , political leader would get bribe to close the matter!
    Please help us how can we take strict action against this culprit?

    1. All I could think of is to go to consumer court !

  3. Sukomal says:

    Manish Your articles are really eye opener…

  4. manik says:

    if promoter constructed illegal floow for rent what should we do? can we get mutation on my valid sanctioned floow?

    1. ASk in simple language please !

  5. Jig says:

    Thanks for your time Manish. I will look on that sure.

  6. Jig says:

    I was just looking for properties on one wellknown website of our town. ( surat ). you can find many properties listed on suratrealestate.com. I was checking about one property TP details approval, i found that area TP ( town planning) has not yet passed by govt and which is under sanctioning.I checked this details on local municipality website.
    I know personallly that project location and surprised, how it can be possible and how this property can be listed on website.

    Guide me if i was doing checks in wrong way as i dont know whether it should be like this only or i m looking at other things?

    Thanks

    1. Whats so surprising there .. real estate is known to be sold to people even before all the approvals ! .. so i dont see anything surprising there !

      1. Jig says:

        So Manish,
        What we should check for under construction property? if that complete project is under sanctioned?
        Also you meant , banks are giving loan on such unsanctioned project?

        Regards
        Jig

        1. jig

          I will do a article on that very soon !

          1. Zaheer says:

            Waiting for topic as an article… thank you very much

  7. Shivakumar says:

    Hi,
    I am from bangalore,i know something about A Katha and B Katha.I would like you to get more inputs from the lawyers here.A Katha and B Katha came into existence bcoz BBMP maintains 2 registers:
    A Katha : Legally valid.
    B Katha : This is a way for BBMP to collect taxes from illegal converted land.
    Lets say you have 1 acre of land near bangalore.You will divide that land into plots leaving space for roads and others ,then you sell it to people.People who buy this land will build houses and apply for facilities like water supply,sewage,electricity. So BBMP collects taxes and enters the details in a register called B register.These sites are called B Katha sites.You will not get loans from any banks to construct houses o these lands.This is a short cut for BBMP to collect more money.
    Technically speaking you will be the “owner of a part of agricultural land”.
    Recently Delhi government legalized several such colonies which came up illegally outside Delhi.
    Karnataka Government mooted the same law but it was held by the Governer.

    1. naveen kumar says:

      SHiva,

      nice info, u explained in detailed thanks.. i read in news paper about bangalore case its true

      naveen

    2. Thanks for that information Shivakumar !

  8. Kiran says:

    Even I had bought without proper investigation…
    Builder has constructed one illegal floor; till now we have not got all the original bills which we are supposed to get. Except concrete/cement work, most of the work was done on my own – like electrical work, tiles work, sanitary fittings etc. Builder is very irresponsible and does not care about anything. At final stage of completion – we (few of the buyers) took in-charge and got things done for common area – like getting lift work, generator, common area painting etc with pending money which we had to give it to builder.

    1. Kiran

      I am sure this is a huge learning for you . Next time go for under contruction properties !

  9. Krish says:

    You just refreshed mybitter memory and finding myself hard to pen down this comment. The example 2 that you described is also my case. Worst I had fallen for it 8 yrs ago. I learnt it hardway that nexus exists between builders and private banks. I was naive and young and in those days and thought bank approval means property must be clean without any issues. The bank had sanctioned the loan and I registered the property without any independent lawyer verification.

    When I went to do the Khata, the municipality officials raised the red flag that it was a unathorised floor. Adding salt to the wound, the bank doubled the interest rates from 7.25% that I had taken initially to 14.5%. I was stuck badly and because of these legal hassles, no one would buy it. I had tough time servicing my EMIs.

    Long story short, 8 yrs forward, I have cleared the loan. Although today being a NRI, I can afford to buy few such RE properties, I have not bought single property ever since. My faith & trust levels are completely shaken by this incident. In my NRI circle of more than 15-20 friends, everyone has the story to tell about RE frauds, empty promises, legal issues and so on. The buyers are often ending up as victims with no assistance from any corner. I also see this as big opportunity loss for nation’s economy in terms of foreign investments, local jobs, trading of materials and affordable homes for buyers.

    1. Thanks for sharing that Krish .. Looks like this A katha and B katha is a really big pain !

  10. naveen kumar says:

    Here is my exp,

    There r many cases , where even in district head quarters level apartments r constructed few of them doesn’t have proper approvals from local authorities and legal proceedings … People living there, who r interested in buying not well versed with all sort of rules and formalities falling prey to builders

    One such case i heard from my close friend(SBI BANK EMPLOYEE), in one of the construction apartment, agreement is made as such even after buying the flat ownership of the land still lies with the builder….

    Unknown people simply buying….

    1. Thanks for that update !

  11. praveen says:

    It is very common practice by mid size builders in Bangalore to build extra floor than BBMP approved plan. I noticed that common BBMP approval is G+3 but most of the builders will construct extra floor. He will assure that it won’t any effect on you since you are buying from approved plan but Even then it will have cascading effect like no A katha will be issued from BBMP which means that whenever you sell the property it might create some trouble. if property is not A katha it means that there is some problem in the construction or title. I advise always to go for SBI approved property than other public or private banks. I feel SBI follows strict protocol before approving home loan. This is best bank for HL I agree that you may need to run several time but it ensures that everything is clean.

    1. Thanks for the information Praveen , I am doing a post on A & B Katha and it will help !

  12. RV says:

    I would like to share my experience in Chennai.

    I found out that one of the reputed builder associated with one of the reputed builders association has built two extra apartments in addition to the approved number of apartments. Beware!

    I booked another flat by giving post dated cheque with a small builder(that’s the condition builder has put to give the legal documents), and later my lawyer found out that the patta is a duplicate one. I immediately stopped payment on the cheque and got back my cheque.

    In another instance with a very reputed builder who has built 50+ projects, i found that there is a land problem by heredity and the case is with the court.

    In another instance with a small builder who gave all legal documents without booking advance, there is some parent documents missing for the land which is being constructed. The builder himself didn’t know that such parent documents are needed to claim possession.

    1. Thanks for sharing that experience Rajash ! …

  13. Siddhant says:

    The issue is not with small builders, DLF GURGAON anybody…….,
    The issue is non existent rules in the sector. In fact I will rather go with smaller builders because I have a better chance of conviction & getting the flat, than the bigger builders. who are all politically connected & no one can touch them (Remember hiranandani’ fraud in POWAI kya ukahd liya uska)

    1. Yea .. from one angle, small builders can be more helpful , but just as a personal level checklist, one should always look at few things .

  14. KRANTI says:

    As rightly pointed above in the article & comments, any gentleman carrying out a real estate transaction must do a hell lot of homework and must stick to it in spite of anybody’s assurances.(bank,best friend,agent etc.).

    Today every person wants to own a property,hence the said hype.

  15. becareful says:

    Hi Manish,

    I had a terrifying experience with a small builder, who projects himself as a Mid size builder(He completed one small project, of 20-30 flats and he himself given promotion as midsize builder and compares himself with some reputed mid size builders in Chennai).

    I got all the documents from builder in a professional way(he gave all documents in set saying these are the documents required for legal verification) and gone for a lawyer verification(its my mistake not to wait for lawyer opinion) and he gave me enough evidences that he applied for a project approval form SBI( I told him, i will get HL only form SBI, after reading articles in Jagoinvester, Thanks to Jagoinvester for their precious articles) i believed him because he behaved very professionally(He is educated and worked for a consulting firm for more then a decade, making me believing he is professional) and i overshoot-ed the lawyers advice( i didn’t receive it for 15 working days) and made agreement and paid 20% of the property cost and then got a call form lawyer(actually lawyer couriered me the docs, but I didn’t receive them) saying courier was returned and he asked me to make a personal visit to his office.

    The facts came into the picture with 10 queries( all of them are so simple like EC patta and couple of explanations) and i sent the same list to my builder and got promised, those silly queries will be answered in 5 days, and i waited for 15 days but no reply to lawyer from builder and after repeated follow-ups’(not with Mr. Professional, but with a staff in builders office) finally she went with answers and from my side i too gave the agreement copy for further evaluation and final advice from lawyer( as he is empanelled with SBI, it can be submitted for loan processing)

    The horrifying truths came out, he further raised additional queries and a builder cheating was projected. There are multiple problems in the land (it is total of 1.5 Acer).
    1. Some part of the land was amortized with a PSU (not SBI) for 50L and he paid the amount in the month of July and obtained NOC (still the documents are under encumbrance) and attached the NOC with the documents and he is giving for customers for property verification.
    But when my lawyer made a background verification( as he has good networking with many bankers), it came to the limelight that he obtained loan again for 50L in the same bank after a month of time.
    2. some part of this land is hereditary(legal heirs are 2 brothers and one sister) , sister didn’t sign the document and her brothers sold(here it is JV) the land to the developer, got her signature as witness.
    After some time she can go and fight legally for her rights on the property, and lawyer requested for a rectification deed and he objected and told he can provide a NOC(generally NOC is valid for 6 months of time, i really don’t know how NOC is valid in this contest)

    3. DTCP approval is not obtained

    4. There is difference in land available as per patta and land showing in project documents

    5. Parent documents before 2004 are missing and told those can’t be retrieved

    After presenting all the above(only critical are mentioned) queries, he tried to convince me and get my loan from some other financiers(of course i have a option to choose form PSU and NON-PSU), and offered some gifts (as he is planning to market his flats in Diwali offer such as free modular kitchen,( he increased the price of the flat by rs.200, but not for my booking, as I have done it earlier. Just to hold my booking he offered me this Diwali gifts)) and some other junk promises. I demanded for immediate cancellation of booking and refund all amount on the same day. However, I am in confusion state. If he clears all the above queries it is a great deal in that area and the price I paid was killer price.
    I requested him to put all his words in a piece of paper (of course it is a judicial stamp paper of Rs.20, again Kudus to Jagoinvester for education me how to deal in such cases, especially with builders)
    Got a concrete promise to fix the queries in 15 working days else the entire amount will be refunded.

    15 days passed and I have no communication from builder or from his office.
    On the final day I gave a call, asked him the status, and got a horrifying answer that he is still fixing the problems and when questioned deeply, got the terror answer that he did not start anything until date. Moreover, requesting me to wait for another 2 weeks.

    I rejected his request and told him to arrange for cancellation deed and check, for the amount, and he rejected saying he will deduct rs.25 as per agreement.

    I initially rejected his check and told him I will collect the amount what ever after presenting the issue in front of consumers forum.

    Moreover, after short conversation he realized that I would make mess( i searched this property in internet and he also told me 70% of his customers are thru internet) if the total amount were not refunded.

    So guys please be aware and do a lot of background checking before investing your hard earned money.

    Vultures are all around us in the form of builders, relaters and especially mediates or brokers or agents or what ever it is…

    I don’t say all are wrong, i have a very very pleasing experience with a small relater who sold a plot to me, and his service is awesome.

    1. Shib says:

      Why don’t you publish the name of the builder here, so that others do not get duped. If not the exact name, please give enough hints so that we would not get trapped.

    2. I read your long experience (also included it in original post) . I think do not relax and give him air to breathe ! .. Just file a complaint with local police for the fraud and also file a case with consumer court , He has to give your money back !

      1. becareful says:

        Hi Manish,

        Thank you for the suggestion, he returned the entire amount with out any deduction.

        1. Spartan says:

          Can you please publish the name of the builder or drop hints so that we can be wary as end customers like ‘shibu’ pointed out. I know a lot of my friends who booked apartments with similar builders and this would help us immensely.

  16. Shib says:

    Banks are not liable… why why why… Banks do the background check too, they wash their hands off saying “We have given a Loan to you not developer”… then why do banks do a tripatite agreement (tripartite means customer + bank + builder)?
    Also banks charge around Rs10,000+ as processing charges, which they say goes into background check, hiring lawyers etc, then why didnt they do a real background check? Is it a just a way of earning free money?
    I do understand that this article is about being cautious about a builder, but as a common man, this is not easy. Lot of builders also advertise that “their property is pre-approved by certain banks”… what if that builder does not deliver? (Also, if the property is pre-approved, all paperwork is done, banks just keep pocketing the processing charge, free money)

    1. Still I am not sure if you can make banks liable ? Its like banks will lend you after all their processes, but even their background check will only “reduce” , not “eliminate” the fraud chances . Also no agreement says that bank will not take its EMI if something happens ! .

      1. Shib says:

        That is exactly my point. Why are banks not liable… why there is no clause for penalty on banks if they do not do their homework… why is it that the consumer has to bear the brunt always? Banks do charge a sizable amount as fee for processing charge, I as a consumer is paying this amount to reduce my risk, and to do all the background checks. Let the bank waive off all processing fee, and I’d rather pay it to a lawyer to get this work done.
        Manish, your article is indeed an eye-opener, but as a consumer, I am not fully convinced with the system, which is anti-consumer. On one hand, the home-buyer is at the mercy of the builder (with the agreement which is heavily tilted towards the builder), one the other hand, banks are holding the loaner by the neck. Sorry state of affairs !

        1. But then banks will just not lend, they can only lend on their terms and conditions . OK tell me , Imagine you opened a bank and you are a banker , a guy asks you to lend him to buy a house , Will you not act like the bank is acting right now ? Think from business point of view .

          The problem is we judge other entities while in our shoes ! . Are you getting my point , I am not saying what you say is wrong , As a consumer even i want what you want, I am just trying to show you the bank business side? Will you as a BANK enter into an agreement saying that if builder messes up , You are free to not pay my EMI, I will stand with you on this issue ? Seriously you will do that ?

          Manish

        2. Ramadevi says:

          Processing fee is not an inurance premium that guarantees against risk; for that matter, even if you pay a lawyer to do background check, not only will the lawyer’s fees be much more than the processing fee, but also please note that the lawyer isdefinitely not going to bear the risk if anything goes wrong. Processing fees charged by banks are exactly what it states: the charges incurred by the bank to process your application; these are not any kind of risk premium.

          1. Thats a great comment !

  17. Krishna Prasad says:

    Sir,

    Very informative article. I will narrate my experience. I booked an apartment by one of the prestigeous bulider in Bangalore. Because of the reputation of the bulider the bank( non PSU) agreed to release the entire amount of the loan I had applied for, though the registration of the apartment took place much later. The builder was punctual and handed over the apartemnt within 2 months stipulated date. Today, if I had to purchase the apartment I would not have gone with this arrangement. I should only thank my stars.

    Regards.

    Krishna Prasad

    1. Thanks for sharing your experience Krishna !

  18. Abhinav Gulechha says:

    Dear Manish

    Thanks for providing this valuable information. In case one is purchasing an under-construction property, it definitely makes sense to do bit of due diligence and background check. Real estate in all probability is a person’s biggest investment, as compared to investing in say mutual fund or FD where people micro-check the small differences in rates of return, it makes real sense to do maximum due diligence on builder.

    Generally people have a notion that since bank is involved in approving a loan, the buyer need not worry. But this is a wrong notion. In case of relatives of one of my friends, who is a PSU bank employee, he approved a home loan and it turned out that builder was a cheat. Not only he (bank employee) had to personally bear the loss to the bank, the investor was left nowhere. So, the point you made on investor personally checking agreement and compensation clause is very relevant and one should not leave everything to the bank.

    Abhinav

    1. Thanks for sharing that experience Abhinav .. I agree that maximum due deligence has to be done by the person buying the property !

  19. Santanu says:

    Good point Manish.
    I think we should avoid them, if possible. I am telling this from my personal experience. Recently I have purchased a flat in Newtown Rajarhat, Kolkata. Before that I did a huge research and also studied many of your posts to clear all loan related doubts.

    When I was ready with everything, I found there are basically 2 types of flats available in almost every area.

    1) Companies tied up with Govt. and make the project. (In kolkata few of them are Bengal DCL, Bengal Shrachi, Bengal Greenfield etc). They are companies who build flats in a land which is Govt approved.
    2) In this category, Builder purchased his own land and develop his own.

    Now in case of 1st option, Involvement of Govt. is crucial and you can be assure that there will be less risk in case property or land point of view.
    But we have seen many issues with in case of 2nd types.

    For this reason, a flat in category 1 type of complex will cost more. In my case I have compared 2 complexes in a same area. Where my flat costs 25 lacs (770sqft). But I could get the other one 22 lacs only.

    I think in a different way and go for the 25 lacs one. I am middle class man, like many choosing the lowest price is a common factor. But in case of buying a home, I think security and other factors are first priority than money. Your 4 lacs extra investment will definitely be worth for future.

    Kindly provide your valuable comment, whether you agree or not. Based on your feedback I will share my experience of purchasing a flat in my blog
    Thanks Manish, for creating such a nice blog.

    1. Yes Santanu

      I think you did correct . The additional 3 lacs you paid was kind of an insurance , which made sure that things will not get messed up . It might happen that the 22 lacs flat also does not much issue in coming years ,but you just ruled out even a slight possibility of suffering . Good one !

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