What Mumbai Home Buyers Think About Builders?

This article from The Economic Times discusses the shift in power in India’s real estate market, where Mumbai Home Buyers are increasingly winning legal battles against builders. The National Consumer Disputes Redressal Commission’s favorable rulings for buyers and the recent Real Estate (Regulation and Development) Act, 2016 (RERA), are highlighted as key factors contributing to this change. This article explores all the legal avenues that homebuyers can seek, what problems builders are facing post RERA, and whether the new law will transform the industry or not. It provides opinions from lawyers, builders, and experts in the field to form a holistic picture of things. The article highlights more protection for the home buyers and possible greater transparency and accountability in the sector.

The sources Moneycontrol video mention that home buyers find it difficult to trust builders because of issues such as delays in possession, faulty construction, and hidden charges. The video in Hindi emphasizes this sentiment of distrust, suggesting that homebuyers view builders with suspicion and consider them untrustworthy.

The sources indicate the increasing support of the judicial system in favor of the homebuyer against the builders. Cases of complaints registered by the homebuyers against the builders are on a rise and have been largely decided in favor of the buyers. The Real Estate (Regulation and Development) Act, 2016 (RERA) would further enhance the position of homebuyers as it intends to introduce transparency and accountability in the real estate business.

Although RERA looks to add confidence among consumers and thus help the industry, for some builders, the compliance standards it sets appear quite stringent and complex. Experts in the industry still hold that while the increased transparency provided by RERA would add to less trusty, it can only pave a way towards a much more sustainable future for real estate.

Overall, the sources indicate that a changed power game exists within the real estate industry; more assertive and empowered homebuyers are challenging builders on the terms of dealing with them. This move toward transparency and legal protection for the homebuyer is going to help in the creation of a more balanced and trust-based relationship between the parties in the future.

The sources draw a complex picture of builder trustworthiness in the Mumbai real estate market, characterised by growing distrust from homebuyers.

Homebuyers often view builders with skepticism due to issues such as:

• Delays in handing over possession.
• Faulty construction.
• Discrepancies in the calculation of super area or common area leading to unfair pricing.
• The use of one-sided agreements that favor builders.
• Demands for additional cash payments for parking spaces.
• Delays in property registration.
• Unreasonable maintenance charges.

These issues are further exacerbated by the practices of some builders who:

• Use various excuses to delay projects, such as stoppages due to lack of approvals, economic downturns, labor shortages, buyer payment holdups, and legal issues.
• Employ legal tactics to prolong cases and challenge homebuyers.
• Divert funds from one project to another, leading to delays in completion.
• Engage in ambiguous practices regarding built-up, super built-up, and carpet area to charge consumers unfairly.
• Demand additional payments from buyers citing increased labor and material costs.

This lack of transparency and accountability has eroded the trust between homebuyers and builders.

However, the sources also point to a potential shift toward greater builder accountability and transparency driven by:

• The increasing number of rulings in favor of home buyers by consumer courts like the NCDRC. This legal recourse empowers homebuyers to challenge unfair practices and holds builders responsible for their commitments.
• The implementation of the Real Estate (Regulation and Development) Act, 2016 (RERA). RERA is designed to:
  • Increase transparency by mandating builders to register projects and provide detailed information about plans, approvals, and land clearances.
  • Prevent fund diversion by requiring developers to deposit 70% of project funds in dedicated bank accounts.
  • Protect buyers from arbitrary price increases by requiring written consent for any master plan alterations.
  • Penalize builders for delays in project completion by requiring them to pay the same interest rate on delayed possession as buyers pay on their EMIs.
  • Hold builders accountable for structural damages for five years after possession handover.

Though some builders express concern at RERA’s strict norms of compliance, experts see the ultimate gain for the sector at the hands of boosting consumer confidence and creating a more sustainable real estate market.

This all will depend on the builder’s willingness to embrace transparency and accountability. The growing legal protection for homebuyers, as well as the enactment of laws such as RERA, will contribute to a more balanced and trusting relationship between builders and homebuyers in the real estate market in Mumbai.

Project timelines in the Mumbai real estate market are a significant point of contention between homebuyers and builders, often leading to distrust and legal disputes. The sources highlight the prevalence of project delays, which can range from 1-1.6 years in Mumbai to 2-2.6 years in the NCR region, with extreme cases extending to 6-8 years.

Several factors contribute to these delays:

• Lengthy Approval Processes: Construction approvals in India can involve numerous bureaucratic hurdles, varying from state to state. Obtaining these approvals can take anywhere from 6 to 16 months, significantly impacting project timelines.
• Builder Excuses: Builders often cite reasons like stoppage of work due to lack of local body approvals, economic downturns, labor shortages, holdups in buyer payments, legal issues with the National Green Tribunal, and shortages of construction materials.
• Fund Diversion: Some builders divert funds from one project to another, causing delays in the original project’s completion. RERA aims to address this issue by mandating developers to park 70% of project funds in a dedicated bank account.

The consequences of these delays are severe for homebuyers:

• Financial Strain: Homebuyers face the burden of paying both rent for their current accommodation and EMIs on home loans for delayed projects. This financial strain can cause significant stress and hardship.
• Erosion of Trust: Persistent delays foster distrust between homebuyers and builders, making it difficult to establish a transparent and reliable relationship.

Potential Solutions and Emerging Trends:

• RERA’s Impact: RERA aims to improve project timelines by holding builders accountable for delays. Developers are now liable to pay the same interest rate on delayed possession as buyers pay on their EMIs, incentivizing timely completion.
• Streamlining Approvals: Industry experts advocate for streamlining construction approval processes through online platforms and fixed timeframes. This would expedite project commencement and reduce delays.
• Shift in Booking Practices: Some experts suggest allowing homebuyers to book only after the building’s shell is constructed, ensuring greater certainty about project completion and reducing risks for buyers.
• Increased Institutional Funding: Encouraging institutional funding for real estate projects could reduce the reliance on homebuyer funds for initial project phases, potentially mitigating delays caused by fund diversion.

While RERA and other measures hold the promise of better project timelines, the effectiveness of the same will be tested over time. The successful implementation of these regulations along with a commitment to transparency and accountability on the part of the builders will be critical in more reliable project timelines and building trust in the Mumbai real estate market.

The sources primarily focus on issues of trust, timelines, and legal aspects of the Mumbai real estate market, with lesser direct discussion about product quality. However, faulty construction is mentioned as a recurrent problem leading to disputes between homebuyers and builders. This suggests that product quality, specifically the quality of construction, is a great concern for homebuyers.

While the particular construction defects are not indicated, the fact that defective construction is included in the list along with issues such as delay in possession and unfair pricing points to its relevance in the overall perception of builder trustworthiness.

RERA’s Introduction of Accountability:

The Real Estate (Regulation and Development) Act, 2016 (RERA) brings a crucial element of accountability to the issue of product quality. Under RERA, developers are held liable for structural damages for a period of five years from the date of handing over possession. This provision aims to:

• Incentivize builders to prioritize construction quality: Knowing they are legally responsible for any structural defects for five years encourages a focus on using quality materials and construction practices.
• Provide recourse for homebuyers: Homebuyers now have legal protection against substandard construction and can hold builders accountable for repairs or compensation.

Potential Impact on Future Construction Quality:

The implementation of RERA and its emphasis on builder accountability is likely to drive improvements in product quality. While it’s too early to definitively assess the long-term impact, the following trends may emerge:

• Increased Transparency and Standardization: The need to adhere to RERA’s regulations may encourage builders to adopt more transparent and standardized construction practices to minimize the risk of defects.
• Shift in Focus Towards Quality: With increased scrutiny on construction quality, builders might prioritize quality as a key selling point to attract homebuyers and maintain a positive reputation.
• Empowered Homebuyers: The knowledge that they have legal recourse against faulty construction empowers homebuyers to demand better quality and hold builders accountable.

In summary, although the information sources do not elaborate highly on specific product quality problems but do suggest that this issue is a valid concern that homebuyers have over Mumbai, the advent of RERA, with focus on builder accountability for structural flaws, may be the wake-up call for better-quality construction and consumer protection issues in the real estate field.

The sources provide insights into the evolving dynamics of the Indian home market, particularly in Mumbai, where a shift in power from builders to home buyers is underway. This shift is driven by:

• Growing Distrust Towards Builders: A history of questionable practices by some builders, including project delays, faulty construction, hidden charges, and the use of one-sided agreements, has eroded homebuyer trust.
• Rise of Consumer Activism: Homebuyers are increasingly resorting to legal action to address grievances, leading to a rise in complaints filed with consumer courts like the NCDRC. Several rulings in favor of buyers signal a growing recognition of consumer rights within the legal system.
• Implementation of RERA: The Real Estate (Regulation and Development) Act, 2016 (RERA), marks a significant step towards regulating the sector and protecting homebuyer interests. RERA aims to promote transparency, accountability, and timely project completion, potentially reshaping the home market landscape.

Key Aspects of the Indian Home Market Highlighted in the Sources:

• Project Delays: Delays are a chronic issue, with average delays ranging from 1-1.6 years in Mumbai to 2-2.6 years in the NCR region, sometimes stretching to 6-8 years. This causes financial strain for homebuyers and fuels distrust towards builders. RERA attempts to address this by penalizing builders for delays.
• Construction Quality Concerns: While not extensively discussed, faulty construction is mentioned as a recurring problem, indicating concerns about product quality. RERA’s provision holding builders liable for structural defects for five years after possession aims to incentivize better construction practices.
• Shifting Power Dynamics: RERA empowers homebuyers by providing legal recourse, ensuring greater transparency in project details, and promoting financial accountability from builders. This empowers buyers to make informed decisions and hold builders responsible for their commitments.
• Evolving Builder Strategies: RERA’s implementation necessitates changes in builder strategies. The need to adhere to regulations, maintain dedicated project accounts, and face penalties for delays may lead to a shift towards greater transparency and a focus on quality to regain buyer trust.

Challenges and Future Outlook:

• Effective Implementation of RERA: RERA’s success hinges on effective implementation and enforcement by state governments. Delays in setting up regulatory mechanisms or inconsistent enforcement could hinder its intended impact.
• Addressing Existing Issues: The market needs to address existing issues like lengthy approval processes, which contribute to project delays. Streamlining these processes through online platforms and fixed timeframes is crucial.
• Rebuilding Trust: Rebuilding trust between homebuyers and builders is essential for the long-term health of the market. Transparency, accountability, and a commitment to delivering quality products and timely completion are crucial to achieve this.

Overall, the Indian home market is passing through a transition. Rising assertiveness of homebuyers, implementation of RERA, and increasing importance to consumer protection indicate transparency, accountability, and quality will play a more pronounced role in the future. Whether this will lead to a more balanced and trustworthy market time only will tell, but the sources suggest a positive movement in the right direction.

Disclaimer: This analysis is based on the provided sources and may not reflect the entire spectrum of views within the Mumbai real estate market.