Building flats on ‘shaky’ law

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If you are looking for an apartment, you certainly don’t want to fall victim to a scam.
Considering the scarcity of land in Kerala, people here are left with little option but to buy a flat, especially in Kochi, Thiruvananthapuram and Kozhikode.

But what if your builder fails to even lay the foundation stone for the project you have bought into and instead invests your hard-earned money in his next project? What if you get neither your home nor your money back?

Like the Apple-a-Day property scam, many more such scams have taken place with unscrupulous builders taking advantage of loopholes in the Kerala Apartment Owners Act 1983. The government has not heeded demands for modifications in the 29-year-old Act

“People take a gamble when they book a flat and pay for it. The Kerala Apartment Owners Act 1983 is impractical and invalid today. It was constituted when there were only a very few apartments here. Things have changed. The Act needs to be modified to protect buyers,” says Jacob Mathew Manalil, legal adviser to the All Kerala Apartment Owners (Apex) Associa-tion, which has been calling for changes in the law.

The realty boom in the state has encouraged unscrupulous elements with no track-record in the construction business to indulge in all kinds of property scams.
The apartment owners’ association cites the observation made by Justice K.T. Sankaran in a bail application (No. 6339 of 2011) bail application of a builder.

He had observed, “In the state of affairs existing in the state of Kerala, any adventurer can turn out to be a builder. He can earn much with the money of others. If the project fails he may not lose anything.” The judge had pointed out that “there is no law to regulate the construction of flats, collection of amounts

from customers at different stages of the construction, the progress to be achieved by the builder in proportion to the money collected as well as to ensure successful completion of the construc-
tion within the time agreed upon.”

It is easy to cheat buyers, the judge continued, because “there is no mechanism to ensure that the builder completes the project and fulfils the promise. There is no guarantee against cheating. Courts only interpret laws but do not make laws. Law-makers would be able to protect the interests of unorganised, uninformed and helpless customers who dream of their dream homes.”

The usual practice followed by builders in Kerala is to collect 50 per cent of the money from the buyers when they show them the plot and the plan.

The agreement will also be given at this point, while the rest of the money will be collected after handing over the house key.

The builder usually invests the advance money in a second project to buy another plot of land and the advance from that project is used to build the apartments in the first project.

A scam occurs when the builder fails to generate enough funds to build and thus the chain breaks.
What apartment owners are demanding is a change in this method of payment. They want to
follow a stepwise procedure until the full amount is paid, a system that is prevalent in Maharashtra.
A stricter law is also required to ensure that the builder does not route the money to other projects.
For all this to happen, the Kerala Apartment Owners Act needs to be amended, says V.K. Sankarankutty, president of the All-Kerala Apartment Owners (Apex) Association.

“In my own case, the builder left after taking our money. We had to approach the court against the builder. Fortunately, the court gave us a favourable order. And yet, we had to build the apartment ourselves,” Mr Sankarankutty said.

Scamsters take advantage of prospective buyers who are rendered vulnerable in their excitement and enthusiasm to buy their own home and tend to trust the builder more than they should.
Buyers may also need a flat at short notice, as in the case of a job relocation, and tend not to go into details too closely.

Even if the relevant Act is revised, the flat owners’ association advises buyers not to fall into the builder’s trap. Choose a credible builder with a solid track record rather than someone who offers a cheaper price and other inducements, the All-Kerala Apartment Owners association advises.

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