Booking a flat? Avoid those 'lucrative' finance schemes

Builders are resorting to attractive offers like low minimum down payment to attract potential home buyers, as they are facing a funds crunch themselves; no clarity on governmental policies could further delay under-construction projects

If you are investing in an apartment after seeing the lucrative schemes that builders are offering, like minimum down payment, you may not get the home that you are booking, on time. According to real estate industry experts, builders might re-route the funds they collect for booking an apartment to some other avenues, rather than use it for constructing the building for which you have paid.

There’s work in progress, but will your apartment be ready on time? File pic for representation
There’s work in progress, but will your apartment be ready on time? File pic for representation

Even top builders suggest some caution, but claim that the delay in construction of a particular project may not only be caused due to a paucity of funds, but also because of various issues which involve permissions from the government. And with no clarity on the Mumbai Development Plan (DP), builders claim delay in projects is imminent.

There are many schemes that builders have come up with; for example, a builder based in the western suburbs has launched a scheme where you pay just Rs 3 lakh for the project, and shell out the balance amount after a few years.

Not only this, there are schemes for flats in the central suburbs asking home buyers to pay only 20 per cent of the project cost at the time of booking, with the balance payable at the time of possession.

While these schemes may sound good to the pocket, the guarantee of the project being delivered on time actually doesn’t exist. Explaining the phenomenon, Dr Sanjay Chaturvedi, executive editor, of Accommodation Times, a real estate newspaper, told mid-day, “Over the past few years with the heavy slump in the industry builders have a lot of pending bills and they are desperate to generate money, so that they can pay up.

The fear is correct that if buyers pay up, will the builder use the funds for the project for which buyers have paid the money? There have been many cases in the past, where builders have taken money for a particular project from home buyers.

But after a gap of three to four years, when the builder’s need for money is over, he shelves the project and pays a minimal interest on the money and returns it to the home buyer. So before investing in property, the buyer should pay attention to these details.”

Property brokers and builders themselves suggest that home buyers should conduct a thorough check before investing in any property. Prakash Rohera, of Karma Realtors, said, “Do not fall for the marketing schemes that a builder is indulging in; see the documentation, consult your property lawyer and broker before investing in property.

Diverting money is an age-old trick. Hence, people should run a background checks on the builder to whom they are entrusting their money.”

Builder speak
Builders claim that delay in a project cannot be only attributed to paucity of funds; they claim that there could be other reasons for the same. Pravin Doshi, past president of the Maharashtra Chamber of Housing Industry (MCHI) and owner of Acme Realty, a real estate company, said, “A buyer should invest in reputed builders, because they have a lot at stake to complete and deliver the project.

However, a delay in a project could be for various reasons and not just because of the builder.” Rajesh Vardhan, MD of Vardhaman Developers, added, “It’s accepted that builders earlier used to divert funds from one project to another, but now the delay in handing over the possession of a project is something that is not in our hands.

Builders try their best, but then, look at the government the change in policies and getting approval is the reason why projects get delayed.” Another builder claimed, “For the past few months, projects aren’t moving. All of a sudden, if a road has come up in my project, how do I go ahead with its construction? The DP isn’t final; the BMC came up with new development control rules just two years back.

People always think the builder is at fault, but never see the real reasons behind the delay. Builders do transfer funds, but then we do not have many options with us and, hence, seek funds from home buyers.”According to Chaturvedi, builders are dependent on funds from home buyers and private lenders, as institutionalised funding isn’t available in the industry. Hence, builders are focussing more on raising money from buyers directly.

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