UNITECH FALLOUT- Developers in the dock

UNITECH FALLOUT- Developers in the dock

Consumers empowerment & Courts activism to pave way for sustainable realty

The high-profile Unitech case in which the senior functionaries of the group ended up spending a night in Tihar Jail for non-compliance with consumer court orders and for not addressing the grievances of their customers, remained in spotlight this week. Though the developers had obtained a bail in the case and have since made amends to the complainants, the case has surely set a precedence in the real estate sector. While the buyers are upbeat, the developers’ lobby has been voicing dissent over the harsh sentences that ignore the problems faced by them in a market plagued by slowdown. Realtors’ apex body CREDAI has asked its member developers to give real time information to the buyers about the ongoing projects which are delayed and honour their commitments in order to prevent consumers from taking legal recourse.

Here’s what some experts have to say on this:

“We will tell our members to communicate with buyers and give them the real-time delivery status so that customers are not pushed into a situation that they have to take legal recourse,” CREDAI President Getamber Anand said, when asked about the impact of the Unitech case on the industry.

Unitech is not a member of CREDAI, which has about 10,000 members across the country.

Anand said many real estate projects had been delayed because of various reasons, including some unexpected ones such as green tribunal orders or litigations on land acquisitions.

“But where delays are because of reasons which are attributable to developers, then they should communicate to the customers. Builders should give a firm date of delivery of the delayed project and honour the commitment. Otherwise, consumers will take legal recourse and the law will take its course,” said Anand, also the CMD of realty firm ATS group.

Anand said the developers should focus on execution of ongoing projects and establish an effective communication system with their buyers. He ruled out that Unitech episode would instill fear among developers.

Santhosh Kumar, CEO(Operations), JLL India
The current situation in the unregulated real estate market where home buyers are increasingly involved in conflict with the developers, is the result of the failure of self regulation by the developers.When the things were going good, developers did not focus on adhering to regulations. They did not bother about project execution and timely delivery. Instead, they were focused on making money and building land banks. In short, they took customers for granted.

Having said that, I would say that all stakeholders are responsible for the present mess in the housing sector. The customers did not do due diligence of developers in terms of their financial and execution capability before investing, developers not fulfilling their promises of timely and quality construction and authorities delaying permissions and sanctions.

But as the current scenario is unfolding, going forward, with real estate regulator becoming a reality, customers will be more informed and empowered, there will be strict monitoring of developers to ensure that customers get a fair deal. And authorities will ensure faster approval mechanism, with single window process. And all this will be good for the sector.

Om Chowdhury, CEO, Fire Capital
It’s alright to blame the authorities for defaults in timely delivery, but largely the fault lies with many of those developers who have not been following industry ethics under self regulation. Clearly, if self regulation was there, things would not have come to such a pass. Earlier when there was supply constraint and prices were rising, the aggrieved buyers could not do much against the erring developers. But now that there is an over supply situation and prices are stagnant, customers whose life long savings are stuck due to long delays, are feeling the pinch. And as a result, they are more vocal and aggressive in expressing their ire against the defaulting builders.

Another major reason for the present mess is that many developers did not have the mindset to complete the development cycle. Nor did they have the expertise and capability to develop and execute the project. But now that the homebuyers are fighting for their rights and the courts are taking a serious note of the cases where consumers have got a raw deal. In such a scenario when the real estate regulatory Bill is also going to be passed soon, developers will have to walk the talk. And in the times to come, we will see good practices like developers getting all the requisite regulatory permissions and financial closure before marketing the project, paving way for the healthy development of residential real estate.

Sushil Mittal, Chairman ACRI & North India Head, NAREDCO
Now that the Real Estate Regulator is on the anvil, homebuyers are more motivated to take up cudgels against the erring builders. Earlier courts were also not taking matters so strongly but now they have become pro-active in safeguarding the interests of consumers.

Earlier, builders were taking consumers for granted. They were giving unrealistic delivery deadlines of 30-36 months simply to lure home buyers. But under the present circumstances, they have to now give realistic delivery schedules and treat homebuyers as stake holders and update them regularly and in time about the progress of the projects. The developers will now take delivery promises more seriously. There will be a check on them so that they do not divert the money collected from home buyers in activities like building their land bank. And with the practices like project-based escrow accounts being put in place, the road ahead for the real estate, particularly residential real estate, will be the one of healthy growth on the strength of fair and transparent transactions.

Ramesh Menon, Director, Certes Realty Limited
I think the present bad state of affairs in the real estate sector is due to lack of regulation. The developer bodies have not been successful in implementing self regulation in the absence of government regulation, due to lack of unanimity among individual developers on this issue.

It’s not that some kind of calamity has befallen on the sector. The mess has been created by some developers who with their punter-like activities like uncontrolled pricing and over leveraging, have got stuck and are crying for help.

In view of the growing conflict among developers and homebuyers and court judgements against builders, there is a positive impact. The consumer has become more informed and empowered. Earlier, it was the case of David vs Goliath . But now millions of Goliaths have woken up. And with RERA and single- window system coming up soon, developers will have to ride the model of profitability through cash flows and not on absolute basis which many of them have been doing so far, paving way for a sustainable real estate.

— With inputs from Vinod Behl

Source: The Tribune
Dated: 16th January 2016


Category : Blog

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