Why you should do background check for small real estate builders (2 real life experiences) : Jagoinvestor

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Why you should do background check for small real estate builders (2 real life experiences) Posted: 04 Nov 2012 07:20 PM PST Should you buy real estate properties from small builders ? While you keep hearing about big real estate projects, there are tons of buildings and buildings and apartments build by small builders also and they are quite high in number. Today I want to share 2 instances of dealing with small builders. Case 1 : Real life case of Real Estate Fraud One of the readers had invested in a property with a small size builder , but now he found out that the builder is arrested for fraud. He is now stuck with the investment and paying the EMI for the property whose future he is not sure about. Here is the full case In Jan 2011 i have booked,Registered and stamp duty paid property located at Navi Mumbai(CIDCO property)and all the required documents are submitted to HDFC for under construction property.After verification and search report the Loan sanctioned. The payments are made according to Demands and Work completion by developer on time to time basis.Till the 70% of work completion all the payments are made(April 2012),but after that 19th July 2012 the developer has arrested by local police for cheating and fruad registration(Double registration) on his running projects. In this issue he was arrested and the news spread across through all the media news papers that Customers are Cheated for Crores of rupees by Navi Mumbai Developer since May 2012.In this case on his arrest i have also made police complaint that, “The construction work has stopped since last two months and Developer has shut his office and mobile.According to media news i am also feeling that i was cheated and the home loan EMI are still there.”Now the developer and Police is also asking me to take back my complaint otherwise developer will sell that property to others and only give me the money which i have paid till the date. When i asked my bank about this to kinldy hold my EMI till the issue will solved.How do i pay EMI of the loan which i took for my Home and without getting home how do i proceed further for EMI?Bank said,”We have given a Loan to you not developer,even though all the documents are clear from Developer according to procedure.And my registration documents are Mortgage with the bank.So i have pay the EMI for the 70% Loan amount which i took from bank till the 70% work completion by developer.”Now i am paying EMI’s without getting Home. So guys pls think 100 of times before proceeding for Under-construction property.It doesnot matter whether it is a branded or Unbranded(Known/unknown Builder) Case 2 : Unathorised Floor in the Project One of the readers shared on our jagoinvestor forum that he has invested in a real estate project by a small builder, but the builder has violated rules and added another floor without approval. Now his money is stuck with the builder and he is not able to take any concrete decision Recently I have booked a flat in bangalore with a small time builder. The catch is he has got approval (BBMP approval) for G+4 floors but he built an extra floor (My flat is on 4th floor). Does SBI approves the loan for apartment in such project? The builder is saying that there are 20+ loan approved from SBI (total 120 flats in project) and he will get my loan approved as well. He is also saying this is quite common practice now a days in Bangalore and he will keep this floor for renting purpose only. Even if SBI approves my loan, should I buy this flat? What are the complications, I would face in future if selling off this flat (or will live in that flat). I have given 20% of the money as booking amount. What are your suggestions in my case? Background Check of Builders before you purchase Property It would not be fair to say that one should avoid small builders, but one has to be more cautious with the small builders compared to bigger ones. Here are the 5 things one should always check before they deal with a builder – small or big. This checklist will make sure that your pain is reduced later and the chances of getting in trouble will be minimised. 1. Enquire about their previously Completed Projects You should always ask them directly about the previous projects they have completed. Better visit them too, and ask the locals and people living there about delays if any and the issues they faced. You should also search about those projects on internet and watch out for any grievances and complaints. 2. Check if they are part of some builders association There are few associations and groups for builders community and there are codes of conduct defined for builders. Some of those associations are “Builders’ Association of India” (BAI) and “Confederation of Real Estate Developers Association of India” (CREDAI). Its always a good idea to watch out if the builder you are dealing with is a part of those associations or not. While you can’t say that not being a member is always a wrong thing, but you can always ask him why he is not a member. I would say a builder who is part of those association would be more serious and professional compared to other small time builder. 3. Check the rules incase of Delay or Cancellation of Project You should always ask for the rules and terms and condition which will apply incase of delay or cancellation of the project. Ask them for an agreement copy even before paying the booking amount. Do not get too impulsive with the project and hurry. Watch “Compensation clause” which talks about the compensation paid to the buyer in case of any issues. 4. Search on internet for his review and past Always do a thorough research about the builder and his quality of work on internet and different forums. While in general all the builders have some or the other bad reviews from someone, watch out that the internet should not be filled with bad reviews totally! In case you do not find any information or very little information about the builder, then you are mostly dealing with some new guy in town, who might be truly unprofessional. Avoid it. Do you know someone who had dealt with small builder and was stuck with the situation or faced any issue? This can even happen with big builders. Share your experiences in comments section…   Regards Peter Manoj