COURT JUDGEMENTS TO QUOTE - Delays by builders

Courts and consumer commissions have ruled in favour of the buyer in many disputes with developers.Go through the list to figure out where your case fits in.It is easier to convince a court or commission if you can cite a precedence.

SUPREME COURT



1.Housing construction is a service under the Consumer Protection Act.

In 1993,the Supreme Court ruled in favour of MK Gupta in his case against the Lucknow Development Authority for not delivering his flat on time.This landmark judgement brought housing construction under the purview of the Consumer Protection Act,1986.The court observed: When a statutory authority develops land or allots a site,or constructs a house for the benefit of a common man,it is service by a builder or contractor... When possession of the property is not delivered within the stipulated period,the delay so caused is denial of service.Such disputes or claims are not with respect to the immovable property but deficiency in rendering of service of a particular standard,quality or grade A person who applies for allotment of a building site or for a flat constructed by the Development Authority or enters into an agreement with a builder or a contractor,is a potential user and the nature of construction is covered under the expression service of any description.

2.Interest has to be paid for delay.

In the Ghaziabad Development Authority vs Balbir Singh,2005 CTJ 124,the apex court,observed: Normally,a case of delivery of possession,though belatedly,stands on a different footing from non-delivery of possession because in case of delivery of possession,though belatedly,the allottee also enjoys the benefit of a plot/flat.Generally,in such a situation,the rate of interest should not exceed 12%.However,no hard and fast rules can be laid down.In a specific case,where it is found that the delay was culpable and there is no contributory negligence by the allottee resulting in harassment/injury,both mental and physical,the forum would not be precluded from making an award in excess of 12% interest per annum.

NATIONAL CONSUMER COMMISSION



1.Buyer is entitled to opt out of a project if there is a delay in delivery.

A buyer is entitled to opt out of a housing project if there is delay in delivery of possession of the house by the real estate developers,the commission has held.It has also said that the buyer is entitled to a refund of the entire money with reasonable interest and any deduction on the said amount is unjustified.The commission passed the order on a petition of an Agra resident,Indira Gupta,seeking the quashing of UP State Commissions direction to deduct 20% from the amount to be refunded to the complainant.

2.Buyer is entitled to withhold payment if the construction does not proceed with payment.

In the Ansal Housing vs Renu Mahendr case (revision petition 1218 of 2006),the commission has held: If company has not apprised the respondent about the status of the project,which was associated with payments,the respondent withholding the payment was not at fault.The company,while making these communications,had been insisting on the respondent to release the payment,and did not adhere to the terms of the allotment letter,letting the respondent know about the progress of the construction.

3.A buyer is not constrained by the agreement for a court of his choice.

In the Neha Singhal vs Unitech case (first appeal no.426 of 2010),the commission has held: To emphasise,the clause relating to jurisdiction of courts in the agreement between the parties cannot by itself over-ride the statutory right of the appellant / complainant conferred by the abovementioned provision of the Act.That would defeat the purpose and object of the Act.This view is also in accordance with the provisions of Section 28 of the Indian Contract Act,1872 (as amended with effect from 8th January 1997).

4.Bank should call for original papers before sanctioning the loan.

In the revision petition 753 of 2006: Jagmohan Lal Mohan vs ICICI Home Finance,NCDRC observed: The bank should have called the original papers before sanctioning the loan,but once the loan had been sanctioned,the queries raised by the respondent bank have become irrelevant.In the present case,we find that the petitioner has been unduly harassed.The loan,after having been sanctioned,was not disbursed,which forced the petitioner to approach another bank to get the loan and incur additional expenses.Accordingly,in order to compensate the petitioner,we direct the respondents to pay,in addition to what has been awarded,a sum of 30,000 by way of compensation for mental agony and harassment caused to him.

5.It is the banks job to satisfy itself about the borrower before taking over the loan from another bank.

In the HSBC Limited vs Sridhar Gajula case (revision petition no.1383 of 2009),the NCDRC observed: When the petitionerbank had got the loan sanctioned by another bank transferred in its favour,it must have satisfied itself that all the requisite documents and securities were intact.Therefore,to ask for any further document was only an excuse not to release the sanctioned loan amount.

Before signing a contract with the developer...

... make sure to scan it for all costs,charges and penalties you are likely to incur and the final product you will receive.

When you buy property,you will be required to sign a legal contract with the real estate developer.This forms the basis of the agreement between you and the developer and outlines the rights and obligations of both the parties.
Given that most of these contracts are skewed in favour of the developer and you have very little bargaining power to change it,make sure that you read the contract carefully.Ask the developer for a sample contract much before you make the booking and check for the following:

PAYMENT:

Ensure that the contract you sign is with the same entity in whose name you are writing the cheques and giving the follow-on instalments.If not,then get a clear documentation trail to establish the relationship between these two entities.

EARNEST MONEY:

If the project is cancelled or the developer backs out due to some financial difficulty,find out how much of your earnest money will be refunded.Also check whether you will be entitled to any interest payment on the money that you have paid the developer.

ESCALATION COST:

Confirm that the cost of the apartment is escalation-free.This ensures that any increase in the cost of raw materials does not impact you and the costs are absorbed by the developer.

TRANSFER CHARGES:

Find out about the charges that will be levied if you transfer the property in someone elses name.Note that any change in name under which the booking is made,even if the transfer is to a family member,is treated as a transfer.

COMPENSATION AND PENALTY:

If there is a delay in construction,are you entitled to some compensation In case of delay in payment of instalments by you,what will be the rate of interest charged by the developer This can be as high as 18% per annum.Understand whether this penal interest will be on the outstanding amount or full instalment.

AMENITIES:

Check the amenities that are included in the project (club house,swimming pool,common rooms,tennis courts,etc).These should be clearly mentioned in the contract.

SUPER AREA:

The total area of the unit being bought should be clearly mentioned in the contract.Also understand whether this is super area or carpet area.Usually,its the super area that is mentioned in the contract.

CHANGES IN PLAN:

Be clear about the maximum deviation that is allowed in the super area.Sometimes the contractor or the architect make some last-minute changes to the floor plan during construction,which results in an adjustment in the final area you get in your apartment.Its common for contracts to specify a 10% deviation.In case the change is more than 10%,the buyer should have an option to back out of the project and claim a refund of the amount paid so far (with interest,if possible).In case of a reduction in the area,the excess amount paid to the builder should be refunded with interest.

FLOOR PLAN:

Ensure that you sign on the floor plan layout,specification details and payment schedule.The sections should be part of the contract as annexures.If possible,get the site plan layout signed as part of this legal contract.
Finally,it is your responsibility to know what you are signing.In case of a dispute,you will not be able to use the defence that you didnt read the contract and signed where you were asked to.

You can exchange your property with another property owner

If you want a bigger house to accommodate your growing family, while your aging neighbours do not need all that space, you can actually exchange your property with your neighbours. In fact, exchange of property need not be in the neighbourhood alone, but in any part of the country.

 

What is exchange of property?

 

As per section 118 of the Transfer of Property Act, 1882, when two people mutually transfer the ownership of one immovable property for the ownership of another, without the involvement of sale through money, it is called an exchange.

 

How is it done?

Before getting into an agreement for exchange, both parties involved in the exchange need to frame a deed of exchange. This deed is very similar to a sale deed. Besides the normal details of a sale deed, an exchange deed also mentions the provisions of penalty against any fraud and the date of exchange. The exchange can be implemented by either one deed/document for both properties or by execution of two separate documents for the properties. However, the former practice of making a single document is more common.

 

How is the difference in price sorted out?

In general, no two properties can have the saame market rate. Therefore, the value of each property is mentioned in the deed of exchange at the time of signing. At the time of exchange, the owner of the property that has lower value pays the difference to the owner of the property with the hgiher market value. This difference is also mentioned in the document. However, there is room for negotiation in such deals too.

 

The final transfer

The deed of exchange is registered under the Indian Registration Act, 1908, after payment of the stamp duty on the transfer, as per the applicable rates. Once the deed is executed, the rights over the property and its title also gets transferred to the respective parties. The rights & liabilities of the parties in an exchange are the same as those of sellers and buyers of immovable properties.

 

Steer clear of frauds

It has been seen in the past that fraudulent deals are common in the exchange deeds. And perhaps that is why there is a provision for cases of fraud in exchange deeds. To safegaurd your interests, section 119 of the Transfer of Property Act, 1882 holds the person involved in the exchange or the person claiming to be the owner responsible for the loss that you may have suffered in the exchange. If you get into a fraudulent exchange deal, you have two remedies – either seek damages for the loss caused, or claim the return of the property transferred.

Viewing DP accounts on CDSL & NSDL

It is possible to view your account status (shares / mutual funds) etc on NSDL & CDSL.

 

ICICI (my Depository Participant-DP) has opened a demat account for me in NSDL. So, all my shares come to NDSL

 

Process of trade:

* I have a trading account with ICICIdirect & a demat account with NSDL. ICICI apparently has its demat accounts on NSDL

* I place a trade in icicidirect. The money is taken from the account and cleared by the clearing corporation.

* The shares then come to the broker account.

* ICICI then transfers the shares to my demat account from the broker account.

 

I can see my holding on NSDL through a concept called IDEAS. I have to register with NSDL for that and submit the registration form to the DP. I will then get a user name and password. The flip side is that if that happens, then the DP will not send periodic statements to you the way he does nowadays. One can also trade directly through NSDL through a concept called e-Speed. Here too, a registration form has to be filled in and submitted to the DP to get a username & password

 

Anand Rathi has its DP account with CDSL. This comes into play for my NSEL (National Spot Exchange Ltd) transactions in e-Gold & e-Silver. The procedure of getting user name & password in CDSL is similar. I have to fill up a registration form and submit it to Anand Rathi and then, subsequently I can view my holdings directly on CDSL.

 

 

Monthly Income Plans

Source: ET Wealth: 14Feb2011: Six Smart Things to Know

 

Monthly Income Plans

 

1) MIPs are schemes created by mutual funds that seek to generate regular income. There is no guaranteed rate of return.
2) MIPs invest primarily in debt instruments, but hold a small portion in equity (between 5 and 35%), to enable growth in investments.
3) Investors can choose from growth and dividend options in an MIP, depending on their need and tax status.
4) Investors choosing a growth option can redeem a part of their units regularly using a systematic withdrawal plan to generate regular income.
5) Withdrawals are subject to capital gains tax, but an investor who falls in the tax-free or low-tax category, can use it to reduce his tax outgo.
6) The dividend distributed by an MIP is tax-free in the hands of the investor, but is given after a dividend distribution tax has been paid directly by fund

 

10 investing thumb rules

Source: ET wealth: 14 feb 2011

 

Rule of 72: This tells you in how much time your money will double. Divide 72 by the interest rate you are compounding your money with and you will arrive at the number of years it will take to double in value.
If the interest rate is 9%, then your money will double in:
(72/9=8) 8 years

Rule of 114: Use this to estimate how long it will take to triple your money. It works the same way as the rule of 72.
Divide 114 by the interest rate to know in how many years Rs 10,000 will become Rs 30,000.

Rule of 144: Similarly, this tells you in how much time your investment will quadruple in value.
For instance, if the interest rate is 12%, Rs 10,000 becomes Rs 40,000 in 12 years

Rule of 70: This is a useful rule for predicting your future buying power. Divide 70 by the current inflation to know how fast the value of your investment will get reduced to half its present value.
This is especially useful for retirement planning, as it affects the way you set up your monthly withdrawals. However, do remember that inflation varies from time to time.
Inflation of 7% will reduce the value of your money to half in
(70/7 = 10) 10 years

The 10, 5, 3 Rule: This is a neat little rule that states that you can expect returns of 10% from equities, 5% from bonds and 3% on liquid cash and cash-like accounts.

Pay yourself first rule: Right from your first salary, put away a little for your retirement. Experts say 10% of your income should go into this. It is important to increase the amount as your income rises over the years. If every month you invest Rs 5,000 in a plan that grows 8.5% annually and increase your investment by 10% every year, after 30 years, you will have Rs 2.5 crore.

100 minus your age rule: This rule is used for asset allocation. Subtract your age from 100 to find out how much of your portfolio should be allocated to equities.

The emergency fund rule: Put away at least 3-6 months' worth of expenses in a liquid savings account to ensure it is available at a short notice.

4% withdrawal rule: How much should I withdraw during retirement? We often use the 4% rule to protect the principle and determine how much one can take from the retirement savings.
If every month you withdraw, Rs 50,000, you need a corpus of Rs 1 crore to sustain monthly withdrawals for the next 25 years if the corpus earns 9% and inflation is 6%.

Investment: L& T and infra stocks

Source: ET Wealth: 31Jan2011: Good time to buy infra stocks, not funds

Get the best deal for used wheels

Source: ET-Wealth-24Jan2011: Get the best deal for used wheels

Aakash Salgaonkar owned two hatchbacks, but still longed for a sedan. A budget of Rs 5 lakh was not helping till he stumbled on a steal: A three-year-old black Chevrolet Optra that had run 28,940 km for Rs 3 lakh. A new model would have cost Rs 8 lakh. Salgaonkar bought the car for Rs 2.7 lakh in early 2010. A year later, the finance executive from Mumbai is still smiling. “With second-hand cars, you can get a model in good condition for sometimes half the price,” says Sandeep Kapoor of Relioquick India , which organises automobile shows. Used cars are perennial suspects for performance, mileage and maintenance costs. But these factors pale before cheap prices. Say, you want a sedan. A new Honda City in Mumbai costs more than Rs 10 lakh. You could get a used model for half that price if you can live with its two-year-old tag. A year-old hatchback could be cheaper by up to Rs 1.5 lakh. The prices vary across cities. Used wheels are an answer to people against loans or accumulating finances. Still, buyers are intimidated by the prospect of future costs. Even if a car costs 50% of its original price, there are doubts on fuel and maintenance expenses. This leads to what is called the ‘lemon and cherry’ problem. This theory discovered by economist George Akelorf is characteristic of the second-hand car market. A buyer usually assumes that what is being passed is a lemon (bad car) and refuses the right price. A seller who is refused the right price even for a cherry (good car) will not part with it. So well-maintained used cars are hard to find.

A buying guide

A car that rolls out of a showroom is considered used. The price wanes as kilometers multiply. Used cars are up to 70% cheaper. Experts say owners these days ditch vehicles after 2-3 years. It could be as early as three months. The chances of getting a relatively new car have risen as a result. Age should not be the only decisive factor. “The parameters that determine the price are its condition, features, ownership and demand,” says Jagdish Khattar of Carnation Auto. Bargaining is fine, but look for the not-so-obvious signs. For instance, dealers say if the paint is fresh, it could be an attempt to mask an accident. Enquire about the ownership and history of a car. To check if a vehicle is worthy of purchase, experts advise on a correlation between the distance run and the years a customer plans to retain it. Banwari Lal Sharma of Carwale, an online portal for cars, says a car must not have run beyond 50,000 kms if a customer is looking to own it for 3-5 years. If the expected ownership is 1-2 years, 60,000-70,000 kms is alright, he says. Sharma is against buying a car beyond 1 lakh km unless you are an expert. Test drive a car accompanied by a mechanic. And drive it on all terrains. Check for its history on defects. Before possession, one should obtain the following documents: RC book, insurance copy, tax receipts, warranty documents, service and maintenance records and a set of car sale documents available with RTO agents and signed by the seller

Where to buy?

The usual stop for a used car is the neighbourhood mechanic. Carmakers such as Maruti Suzuki, Tata Motors and General Motors too have launched pre-owned cars. These companies buy back and renovate models. Dealers charge a commission of up to 2% from buyers and sellers. To check prices, turn to portals such as carwale and gaadi. Dealers often name a price, but they do not offer the best price as they eventually look to sell. It is better to sell to an individual through a dealer. Such deals can return up to 25% more. Abdul Majeed of Pricewaterhouse Coopers recommends reputed dealers. “They do the first level screening,” he says. A mechanic’s price could be up to Rs 25,000 cheaper than a dealer but the amount may not cover servicing and repair charges. The advantage with big garages is that the car will be serviced. Company showrooms can be more expensive by nearly 15% but could be value for money. The car is likely to be in good condition. There is warranty and free service of up to 3 times.

The right price

Used cars are cheaper but securing the right price based on performance and age can be tricky. “You should ideally not pay more than 50% of the original value if the car is 3-4 years old. This 50% should include the 5-10% that you may need on renovation,” says Majeed.

Things to look out for in a used car

Bonnet: Check if the vehicle has been painted fresh.

Engine: A well-maintained engine would not produce unusual noise.
Documents: Check if engine no. and chasis number are matching with the numbers in the registration papers.

Odometer: Do the math on the reading and year of manufacture. A 3-5 year old car that has travelled 14,000 to 18,000 km a year is a good buy.

Leaks: After a test-drive, park the car on clean ground and look for oil leaks from engine or gearbox.

Brakes: Apply brakes at the speed of 30-50 km to check that the car stops in a straight line.

Tyre: Look for wear and tear and also the alignment. If tyres are not in good condition, there is a chance of bargaining for up to Rs 1,000.

Exhaust: Blue smoke during start indicates engine trouble. It means the engine consumes too much fuel, a possible problem with fuel injection.

Bidding for a house

Source: ET Wealth-10Jan 2011
Auction Facts
why?
Property cheaper by 15-20% than market price
How?
* Banks advertise in local dailies with property details, date and place of auction
* Bidders can visit the property
* Submit expression of interest by specified date
* Submit earnest money
* Attend the auction
* Banks also give home loans for auctioned property
Watch Out
* Bank may ask for part of reserve value immediately after the bid
* Buyer has to bear all outstanding dues on the property
Further,
1. Buyer should check important documents such as possession record in title before bidding. The title of the property can be verified at registry offices.
2. An investor should also verify municipal records to find out whether any tax is outstanding
3. An investor should check with the society for any outstanding maintenance or electricity dues.