False Promises of Property Developers Every Buyer Should Know
Hear it from those who have already purchased a property. Buying a property is a nightmare and nothing less than that. When it comes to buying a property, the developer or the property builder definitely becomes the focal point of a buyer’s life. Almost 24×7, the developer and his words keep the mind busy. Why like that? Needless to say, property developers are not really honest people. They love to rip off buyers. They are true capitalists and they do not think of the pain a buyer goes through. As a matter of fact, they take advantage of the ignorance of the buyers and keep harassing the buyers in one form or other.
This is why, you will barely come across buyers who will report that their dealings with a property developer have been a smooth one and that they are happy about their purchases. Almost 95% of the cases (that is buyers) will report that something or the other went wrong – terribly wrong.
Well, it will be really dishonest to say that no property developer is honest and that everyone indulges in false promises. As a matter of fact, there are several developers who have built reputation that they prefer to stand up to and hence, they stay honest. Still, they can, at times do a few things wrong. How can I say that? From experience – not as a buyer but as an employee of a property developer firm whose net worth today is 1500 crores! Well, I will not take the developer’s name because it will be a direct assault on the firm’s reputation but as a part of the company’s marketing team, I have seen buyers getting harassed at the hands of the sales and legal teams of the company.
So, if you are a buyer, I will advise you to watch out for some of the fake promises that property developers make from time to time. Here in this article we will take a look at 5 such false promises that every buyer should know about. Remember, knowledge is power and once you possess this knowledge, you will be able to safeguard yourself against such false promises and ensure that you do not get into trouble.
Here are those 5 false promises:
False Promise #1: Your Money Is Totally Safe with the Developer and You Can Get It Back Whenever You Want
You will not really come across any buyer who will say that the developer they dealt with actually kept this promise once the buyer decided to cancel the transaction. There is no nice way of putting this. Once you pay money to a property developer and then you cancel the deal of purchasing a property, the developer will never ever give you back 100% of the money you gave to the developer. The developer will come up with a whole book of reasons and will show you one reason or the other why the whole money cannot be returned. As a matter of fact, the developer will simply state that it is your fault. My sister tried to purchase a property and she lost about 20% of the money she gave to a developer after she cancel the purchase.
What normally happens is that a property developer will not give / share the booking form with the buyer until and unless the buyer pays the booking amount. If the buyer cancels the booking after making such payment, developer will keep about 10 to 20% of the total booking amount that he received from the buyer and then return the remaining amount. This is cheating. Well, cheating can take epic forms when a developer actually mentions that certain percentage of the property value has to be paid to the developer in the event of a cancellation. This really happens and it turns out that the buyer not only ends up losing the amount that he or she gave for booking but also has to pay additional amount of money for canceling the deal. If the buyer declines to give, the developer may simply threaten a court action because the booking form stated that certain percentage of the property value needs to be paid in the event of cancellation.
Yet another problem that buyers often face is that no money receipt is given against the booking amount and the booking amount is actually received in cash. Such circumstances are even worse where the developer gets the leeway of simply declining any agreement with the buyer as the buyer has no money receipt to show. Hence, it is advised that buyers should do these two:
- Demand a copy of the booking form before handing over the booking amount.
- Demand a payment receipt copy from the developer and never pay in cash.
In reality, the developer is bound to give both and the payment receipt should have proper stamp from the business entity.
False Promise #2: Agreement can be changed anytime to suit your requirements
Don’t fall for this please! This is a big time lie. Trust me. Once you are into an agreement, the developer will not change the agreement as per your requirements. There are hundreds and thousands of cases where the buyers want to rush with the purchase and do not go through the agreement properly. Sometimes they do go through the agreement but do not properly understand the terminology or jargon used. Still, they kind of agree. Later however, the buyers get to know the real meaning of such jargon or sometimes consult with others and find that few clauses in the agreement do not really agree with the requirements they have.
It is always advised that the buyer takes his or her time to go through the agreement thoroughly and if necessary, take some legal advice from an independent property lawyer to properly understand the agreement. If hiring a property lawyer is not an option, he or she should consult with various people, preferably experience buyers to understand everything clearly.
There was one instance where a buyer didn’t like something in the agreement and then asked the property developer to agree for changes. One mistake he did was that he communicated with a sales representative and upon some insisting, the sales rep ended up sending a mail accepting all the changes requested by the buyer. Later, when time came to sign the agreement, the buyer asked for the necessary changes but the company simply refused stating that the sales rep was fired because of making such false promises that were not authorized by the company heads. The buyer eventually had to agree to the existing agreement and was left unsatisfied with the deal.
You need to make sure that you understand the agreement properly and in case you are not comfortable with the agreement, you can ask for changes. If the property developer agrees to make such changes, ensure that the promise of making such changes actually come from the legal department of the company in a proper company letterhead and that the letterhead should have sign of the directors of the company. If you fail to do so, the company can simply deny that such promises were ever made.
Again, there is a problem. Just issuing a letterhead is not everything. A completely new agreement has to be created with the promised changes. If the letterhead and the agreement contradict each other, the agreement always takes precedence and trumps the letterhead. So, if the company is stating that making changes to the agreement is not possible but promises to give a letterhead which will state that the necessary changes you asked for has been approved and accepted by the company, do not fall for the same. Ask for a properly articulated agreement with the stated changes explicitly mentioned in the new agreement. Else, if the letterhead is all that the company is offering, it should have signature from the directors of the company – we mean, all directors!
False Promise #3: Development will be completed earlier that what is mentioned in the agreement
There are many developers who will come up stating that the completion date for the project which has been mentioned in the agreement is just a formality. In reality the property will be developed way sooner. Okay, if that is true then why on earth is the developer not putting the original completion date on the agreement? If the developer is so confident that the property will be completed sooner as verbally promised, the developer should not have any problem putting the same on paper with ink! Don’t fall for such verbal promises. If a developer is putting a later date on agreement and making a verbal promise of earlier completion, remember that the developer is lying and that the possibility of the developer not completing the property even by the completion date explicitly mentioned in the agreement is very high. Do not get into an agreement with that developer. You will have to suffer.
False Promise #4: The developer is giving you the best possible price. No other developer and no other property will have that price and that the developer will pay twice the difference in price if you can find one property that is of lower price.
You have a brain for a reason. It is capable of logical reasoning unless of course you are totally dumb with no logical reasoning ability. This is a promise that every developer in the country will give you. Will that mean that every developer is actually giving the best possible price? If so, then all properties in a particular city or a state should have identical price. Why is that the prices differ?
The answer to this question is simple. The prices quoted by the developer in their price chart have been inflated incorrectly. On top of that, they actually go for incorrect comparison. What they will do is that they will compare a smaller flat against a bigger flat of a different project and actually quote the prices in terms of price per square feet. So, if you actually compare the price of a 3 BHK flat of 1200 square feet with a 3 BHK flat of 1500 square feet in a different project, and end up looking at the gross price, you will definitely get a price difference and that is what the developers want to show you.
You will be surprised to know that the developers will never agree to the following points:
- Price correction: If you ask for price correction, no developer will agree. They will give you a price chart that is inflated, incorrectly shown and unclear. They will confuse you and you will be duped into believing that you are receiving the lowest possible price. In reality, there is a possibility of price correction within a range of 30 to 40 percent.
- The developer will show you the total price and will not disclose the price per square feet. They will never disclose that the prices in comparison are for different projects. They will not tell you that the price that they are showing is basically a base price and that an additional 10 to 15 lakhs can be quickly added on the base price. They will simply overcharge you for a property which actually costs less.
So, to avoid this problem, you should consider buying a resale under-construction property. This is a best way to avoid paying unnecessarily higher price for a property.
False Promise #5: You will pay and get exactly what we have promised and committed to give
Did you come across a developer who shows you a sample flat before selling a property to you? The likelihood of that happening is 100% because every developer shows a sample flat. The problem is that the sales folks are asked to show a sample flat to the potential buyers but the actual flats those are sold actually differ in dimensions and specifications. On top of that, what comes as a double whammy is a host of charges which can be, in a single word, termed as fancy charges. In 99% of the cases, these fancy charges are totally illegal but they are shown in a way that they are legal. Some of such charges include double meter installation charge, metro cess, labor cess etc. A developer cannot charge those things and if you actually ask for a clarification, you will be looked upon as a criminal by the developer. And guess what, there is service tax and VAT as well. The rule is that developers should charge these taxes in a prospective way but they actually charge them retrospectively. As a result, the buyers end up paying more tax and the developers enjoy a heavier wallet at the cost of the buyer.
Summary of what we have discussed so far:
|Money is safe||Once you give a booking money and then cancel a booking, you will never get 100% of the money back. Get a booking form in advance from the developer and get a money receipt for the booking advance you pay.|
|Agreement will be changed||The developer will never do that even if they promise. The promise needs to come in the company letterhead which has to be signed by the directors of the company and then a new agreement should be created.|
|Completion date on agreement is formality||The developer will promise verbally to complete the project ahead of the date mentioned in the agreement. If that is true, ask the developer to put the actual completion date on the agreement. Do not fall for the verbal promise.|
|Best possible price||Not possible. You are actually paying premium for a standard property. Go for price comparison in terms of price per square feet and not in terms of total price and also ensure that the price comparison is for similar projects and also for same flat size.|
|Various hidden charges||There will be various hidden charges. 99% of the times, those charges are illegal. As for an explanation from the developer. If the developer is not providing an explanation, it is better to avoid that developer.|
If there is an agreement, it has to be written down and has to have a legal binding. No verbal promise should be entertained because once you agree, you will become a prey of the developer and you will be exploited till the developer manages to squeeze out the last penny from your pocket. Understand the false promises and avoid them so that your property buying experience runs smooth. We will not say that such an experience will be flawless but your knowledge and your vigilance will reduce the degree or intensity of the nightmares you will have for some time.