Avoid spending on projects involving EMIs

Are you among the people who have been waiting to get the key of their houses from past couple of years? Well Sachin Kala is indeed one such man waiting to start staying in the flat which he had booked nearly 4 years back. According to his builders, he was supposed to get his flat back in December 2013 however looks like the wait might be for more long time. He has already paid about 80% value for worth of the property and this property is nowhere close to completion. The only solace for his is that he is not the only one who is going through this. Most of buyers are going through the same problem across the country. With the builders facing financial problems, properties are not being completed on time leading to huge delay in the completion of the projects. Being cash strapped is causing problems in completing the projects. As per the review of the real estate analytics firm PropEquity, between the years 2011-2014, 3,753 projects were offered for possession in the Mumbai Metropolitan Region and out of these projects nearly 45% of them are still under construction. This problem is severe in the NCR region wherein 856 projects were up for possession and out of these projects, 78% are still incomplete and running behind the deadline. The company saw similar patterns in some of the other cities like Chennai, Bengaluru, Pune, Hyderabad, and Kolkata among others.

Reasons for the delay:

There are many reasons, which can be attributed to the delay in the completion of the housing projects. The reason being, there has been a considerable amount of decline in the demand for residential housing due to constant increasing prices of the property. During the boom period, the developers and builders have highlights so many new launches that they are now facing difficulty to complete these projects. Most of the developers are under financial problems as they have used all the money collected from the new projects towards the projects that are still not completed.

The new hope:

From the buyers’ perspective, they have a new hope in the form of the Real Estate Regulatory Bill. The bill has been targeted towards bringing out balance in the currently chaotic real estate industry and has many clauses favorable to the buyers. For example, the bill has proposed that builders and developers are required to deposit around 50% of the amount that they receive from the customer in a very different escrow account. By this way, they will be able to stop diversion of some of the funds. According to this bill, the buyer will have the complete control over their funds as they will be able to ask the developers to return the complete amount in case of the property not being completed in the promised time. At present approval has been given to the bill and it is ready to be presented in the Parliament.

Influences of delayed projects:

When it comes to a first time property buyer, any kind of delay in the completion of the project and them taking over the flat can cause them to undergo serious financial problems. Most of the times buyers will atleast anticipate a delay of about 10-12 months in the completion of the project however, none would have expected the same to go beyond 2 years. According to the reports on PropEquity, the Mumbai Metropolitan Region has seen an average delay of 25 months in the completion of the projects. The average delay in the NCR region is about 33 months. In simple, the bigger a residential project is, the buyer can anticipate a longer delay in possessing the property. Buyers who took loans to pay for the property and expected the EMIs paid to the bank to replace their monthly rents have now landed into a situation, that requires them to pay all these amounts. According to one of resident from Ghaziabad, it is very difficult to pay both the EMIs as well as monthly rental but they are left with no choice. When it comes to a double-income family, the problem remains the same. The same problem is also for the investors especially the ones who have put money towards their second or third houses. For them investment was about earning through the monthly rentals that would have easily covered up the EMIs they need to pay to the bank. Potential delay in the completion of the project can completely make the entire calculations go downslide. Even though everybody is paying EMIs to the bank, there is no sign on earning the monthly rentals.

Loss of tax benefits:

Any delay in the completion of the project means that you will not be able to avail any tax deductions until the project has been completed. Buyers look of tax deduction of about Rs1.5 lakh, which is towards the principal repayment, and a further saving of tax deduction of Rs2 lakh meant for interest on the payment. However, it is important for the buyers to have the possession on the property within 3 years of taking loan to avail benefits under Section 24. In case the buyer is unable to do the same in the span of 3 years they will end up paying tax for about Rs30,000 a year. The buyers however have one option; they can sell out the delayed property and always invest in ready to move in properties. However, they still have the roadblocks in terms of transfer fees and registration charges. People who have taken the property with the intend of renting it out have benefits as the complete interest is tax free even if the project has not been completed in the 3 years of time.

Avoid delayed projects:

Always have enough information pertaining to the construction project as well as the developers. This will avoid any problems later on. Attentiveness among the customers is the key to avoid many problems in the future. Customers can protect themselves from fraud developers and projects. Keeping a track on the record of accomplishment of the developers also avoid lots of problem in these kind of projects. Referring to online forums will help to learn about these developers and it is important to avoid investing and dealing with new groups and developers.

It is important to ensure that the developers have valid license and government’s approval to run the project. There are many instances where in developers have tried to sell out property even before they have ownership of the land. It is important to ensure that the payment of construction is linked with the stages of project completion. Customers need to ensure that they have clauses of delay in the contract and ensure that the developers do not hike the price of the property.  Never fall prey to lure or other offers which talks about big properties for lesser price.  Carefulness is everything today and especially when there is lot of money involved.

New Real Estate Regulatory Bill have reasons to enjoy end users and investors

Now with new Real Estate Regulatory Bill, which is supposed to approve in current meetings by the Union Cabinet, end users and investors have several reasons to enjoy and feel confident about property investment matters, when it comes to concern on change in project layout and delay in delivery layout among others. Real estate developers are also expected to cash the benefit with this well improved accountability and transparency as it will help them to flow the institutional funds into real estate sector.

It is expected that the number of issues between real estate developers and home buyers because of delay in project will come down as this Real Estate Regulatory Bill making it mandatory for all the real estate builders to maintain more than 50 per cent of customer advances in an account which will be known as escrow account within the 15 days of time, once they will receive the money from home buyers. However some of the real estate experts are viewing the minimum balance to maintain the proper balance in an escrow account to reduce by 50 per cent.

As per the statement Chairman & Country Head of JLL India ; Anuj Puri, “The 50 per cent mandate will be able to put the enough restriction on real estate developers to divert different funds to ensure the better completion records, whereas; the funds diversion is not only reason for delay in any real estate project completion and apart from that Real Estate Regulatory Bill need to cover the civic authorities and government bodies too. Puri more added that, this new amended Bill will have very positive affect for introducing the better governance, timely management and transparency, but non-inclusion of government authorities are the major contributors to slow down the approval processes, however they remain issue need to be addressed.
All consumers need to remember that the entire regulator will take at-least one year to turn it into reality. On Wednesday, the Union Cabinet had clear the bill, and it will become an Act once it will get tabled and approved in the current season of Parliament. For more transparency and better governance, state need to set-up the regulatory bodies with new bill while setting up a web-based online registration facility for the period of one year to set-up the governing bodies. Real estate developers are agree with current bill as it is introduced to help the transparency and better governance in real estate sector.

After that regulator will provide a log-in ID for every project, without which builder will not be able to sale the flats of apartments in the project. However the regulator should have to scrutinize all the legal documents for project, so that it can cancel the registration if they will find that project documents are not in the proper order.

Better transparency, government policy and accountability will provide the fair opportunity to home buyers and developers both and it will also help the real estate developers to gain the access to collect the funds however it will also help to lower down the property prices till certain extent. As per the statement of Shishir Baijal who is CMD of Knight Frank India, it is expected that it will enhance the credibility in real estate sector and developers as most of the developers will be in situation to borrow funds at better interest rate, which will help them to rationalize property prices in coming months.

The penal of provisions has proposed law, which will add the payment of 10 per cent of project cost for non-registration as well as payment of additional 10 per cent of project cost which will be complied for the duration of three to four years. If the disclosure of information will be wrong or it will not in the complying with the disclosures and other essential requirements and payment of 5 per cent of project cost will be imposed. The Real Estate Regulatory Bill provides the regulatory authorities to come in power so that they can cancel the project registration in certain cases of persistent violations and they will also have a power to decide on further course of action in reference to the completion of all real estate projects.

Manoj Gaur – elected president of CREDAI-NCR

In New Delhi, the CREDAI, an apex body of real estate developers elected Manoj Gaur, as President of the Delhi-NCR region; he is the Managing Director of Gaursons. As per reports, this new leadership team will consist of 19 members of executive committee on the board and it will also include the Rajeev Talwar, who is Group Executive Director in DLF constructions.

As per the official statement of newly elected Manoj Gaur, “Now our main focus will be towards the transparency in real estate market however we will also put our efforts to change the perception of the real estate industry for better growth”. The more he added that CREDAI will work closely with the state and central government departments to shape the future of real estate market in Delhi/NCR region. However in discussion he welcomed the real estate regulatory bill and stated that the main purpose of real estate regulatory bill is to bring the transparency in the real estate sector and restrict non-serious and non-ethical players of real estate market.

After the selection of Gaur, CREDAI said now our major concern is to address the need of real estate industry for the growth of real estate market. However the Gaur, stated that now onwards our association will put more efforts on skill development¸ ethical policies, labour welfare as well as transparency. Getamber Anand, the National President of CREDAI, stated that association is going to set-up a fund of Rs 25 crore so that we can meet the education cost of those students who are bright but they are under-privileged. In addition Getamber Anand, stated that CREDAI will make its own internal consumer grievance to address the complaint the consumers.

It is well known fact that currently, CREDAI (Confederation of Real Estate Developers’ Association of India) has more than 11,500 members in all over the country.