"It is an unfortunate situation in which buyers are going back on a signed contract,” a senior representative of the developers’ association said. If customers take unfair advantage of the market situation then they would have to face the consequences of the breach of contract"
If the market was still in the bullish phase, developers would care less and cancel lower priced bookings and resell at a higher price. We need a lawyer to clarify what is a breach of contract ? What happens if someone cannot make payments due to job loss ? The Hindu has to be commended for its quality reporting.
Bring down prices or else….’
A worrisome trend developers are facing is of buyers wanting to pull out of a contract after construction has started.
Breach of contract fears.
R. Balaji
“During two decades of our doing business in Chennai never have buyers wanted to cancel after a contract was finalised and construction started,” says Mr R.V. Shekar, Managing Director, Lancor Holdings.
A leading developer in Chennai , Lancor Holdings is among those feeling the heat of a slow market in the form of buyers trying to back out of a deal midway.
Earlier, the company has accommodated buyers who wanted to back out because of personal or professional problems. But now Mr Shekar says it is the ease with which customers are considering a `breach of contract.’ Their demand is: Bring down prices or else… they threaten to walk out and take others. And these are people who have signed on the dotted line and made more than one initial payment.
As of now it is not a major issue for Lancor but is certainly worrisome. Developers and buyers may end up spending time and money on litigation, says Mr Shekar.
For instance, at a Lancor project on NH 45 where over 230 of the 640 apartments planned have been sold, all the approvals are in place and work has started. Over 150 buyers have signed the agreement and the property has been registered for 58 more customers. But about 30 buyers want to back out even after making a firm commitment, he says.
The reason: if one developer cuts down on prices why cannot another?
Mr Shekar has explained to the customers the rationale behind the pricing — basic price of Rs 2,100 and an all-inclusive (covered car park, registration, club membership, taxes) price of Rs 2,640 but some are in no mood to listen.
When there is a proper contract in place and the company is keeping to its commitment, the law will have to take its course, he feels.
Lancor is among the victims of the fallout of DLF Homes’ controversy where a large group of buyers have come together to enforce a price cut. An unprecedented event in Chennai that has grabbed wide attention. Leading builders dismiss the DLF issue as an aberration. But if it sets off a trend then they would have to depend on the judicial system to come to their aid, they say.
According to representatives of the Confederation of Real Estate Developers Association of India-Tamil Nadu, developers are now keen on having an arbitrator in place. Next week the association hopes to empanel an independent body headed by a senior advocate to look into buyer-seller disputes. “It is an unfortunate situation in which buyers are going back on a signed contract,” a senior representative of the developers’ association said. If customers take unfair advantage of the market situation then they would have to face the consequences of the breach of contract.
According to Mr Chitty Babu, Chairman and Managing Director, Akshya Homes, a developer who has delivered over 600 apartments on the OMR , the problem is partly due to the delay in statutory approvals and due to builders and buyers transacting unapproved projects.
A major factor is the time delay when the customer makes the initial payment in an unapproved project. When there is a long wait customers develop cold feet. If approvals come on time, the banks clear the loan and start sanctioning funds and the customers will be fully committed. Fast approvals will save nearly a fifth of the project cost for the customer, he says.
A Bill Maher video on the how badly F**** the US economy is
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