Checked-in? Now be careful that your ‘First-Class’ township doesn’t become ‘Economy’

Modern village complex for young families. Picture: ShutterStock

If one buys a First-Class airline ticket but mid-way in the air is shifted to the Economy section – is it a violation for the traveler by the airline? The answer is obvious and simple: Yes. It certainly is a violation. After all, when one pays a steep premium for a first-class ticket, he is sold a faster check-in at the airport, a comfortable lounge, superior quality and space with seats, no long queues outside the bathroom in the aircraft etc.

In the Economy section the traveler will probably have a long wait at the check-in counter, no suave lounge, crunched and uncomfortable seats in the aircraft and almost certainly long queues outside the bathroom.

When the answer is so definitive in the airline business, I have often wondered why the same principle with the same vehemence does not apply to the housing industry in India – especially in township projects?

Here a home-buyer is shown a well-packaged apartment along with vast amount of open-space and luxurious amenities. He pays a premium for this anticipated lifestyle. The well-packaged apartment may or may not remain, but gradually the open space or garden gets replaced with additional buildings as the developer gains permission (FSI) to construct more in the same project.

The Downgrade

The gym, swimming pool, squash or tennis courts that were appropriate for a certain number of residents become crowded as more residents utilize the same set of amenities. Long queues start forming outside the tennis and squash courts. In short - the home-buyer gets demoted from First-Class to Economy.

While it is no secret that deception is common at every stage of the home-buyer cycle, in my view it is this stage where the biggest deception has been perpetrated. And ironically in the circular of real estate fraud, it is the least mentioned.

For a variety of reasons – this breach of trust on the home buyer is not considered a major scandal. Make no mistake - it is a scam. Once a developer has sold on the premise of a project having a certain number of buildings, flats, amenities or open-space – any deviation in the plan without consent from the home-buyers is a gross violation.

Despite rampant violations, especially by allegedly branded developers, why then has there traditionally not been as much litigation by home-buyers on this front?

The Reasons

There are several reasons. One reason is that in several cases most home-buyers are not united enough to take on a developer. The other reason is that the effort and expense involved in litigation is a big deterrent. The third is that property agreements traditionally have been so one-sided in favour of the developer that buyers perceive that they don’t stand a chance in court. The fourth reason is that buyers in India have been forced to have such terrible expectations that mere delivery of an apartment is often considered satisfactory.

With this backdrop I am delighted to witness a wave of buyer activism that is finally willing to stand up for their rights rather than lay down in self-pity. Developers are responding with the expected aggression towards the complainants.

I take no sides in any dispute without all facts at my disposal, but I am wary of developers who treat their customers with disdain. And in this wave of activism, it is becoming clearer who are the developers yet operating in the old legacy mindset that will in all certainty not thrive going forward.

In fairness the activism is also a consequence of regulatory support. The introduction of the Real Estate Regulatory Act has radically altered the rules of the game and one such aspect is in the adherence to the sanctioned plans and project specifications.

Section 14 of RERA makes deviation away from the sanctioned plan not easy. Any major alterations or additions in the plan need the written consent of at least two-third of the allottees. Nimish Gupta of Qonquests Technical Solutions believes that “implementation of Section 14 has made developers responsible and focus on getting necessary approvals and planning done beforehand.”

Will this lead to a sustained upgrade from the industry? It is tempting to make that inference. But historical evidence suggests that there will be a pushback with newer tricks being adopted by the industry to bypass this stringency. My forecast is that, eventually, a practice will emerge where developers will offer compensation to the aggrieved home buyers for their consent.

Until then the only way to avoid this scenario for buyers is to do a thorough due diligence before embarking on a purchase – including viewing the sanctioned plan. And thereafter keeping a watchful eye on all developments in the project. Fortunately for home buyers, no government administration in recent decades has had the resolve to tame the real estate sector like the current Central Government.

Prime Minister Narendra Modi should sustain the vigilance on the sector. The battle is not yet won.