Your builder has run out of money, would you help him in finishing the project by giving more money? Well, some builders think so.
Indian Real Estate market is in bad shape at present. Debt-laden developers in the country’s key property markets (Mumbai, Bengaluru, Chennai and the NCR) have been struggling with slow sales, high unsold inventory, delayed construction and stalled projects.
Developers in NCR are known for their misdeeds and it appears, now it is coming back to them. A lot of them have bitten more than they can chew. Project after project and a hurry to grab all the possible land bank was all on their mind until last year. No one looked back at the struggling projects or their unsold inventories.
However, as they saying goes, “what goes around comes around”. With sluggish market and no lenders, builders have now stooped to literally “Begging” from home buyers.
In a recent meeting with home buyers whose project has been delayed for over two years now, all that the builder could offer was “I am out of money, please give it to me”. This is when he has collected over 85% of the payment plan and project is far from completion. Where did the money go? Ofcourse in land grabbing, funding nonsense advertisement spree and Page 3 parties.
So what is the solution now? Well, this 5 years old developer with more than 10 projects across city comes up with this solution:
Give me remaining 20-30% of the installments upfront and I shall finish your project with that money.
They promises to keep this money in escrow account and the money to be used in finishing this project only. A promise of executing a buyer friendly agreement is also offered. This is not the only builder, many buyers from Noida and Gurgaon market have informed The Logical Buyer about it.
So, would you go for such an offer and help you struggling developer recover from the financial mess they are in? Would you trust the notorious builder who have siphoned off your money and launched new projects all across the city. All it takes for them is to change name or the city.
The Logical Buyer discussed this out of the box business plan of builder’s with some prominent lawyers in city and they warned us about the possible outcome of this.
“Sahil Sethi”, a determined lawyer fighting for rights of consumers says “This is an opportunity that should be used to negotiate better terms with the builder. The payments can be made subject to the builder paying 12% assured return on the same in the form of post dated cheques for the entire period, till possession is expected to be due. However if the existence of the builder is itself in question and you fear that the builder might run away with your money, then better not to exercise this option . It would be better if buyers organise themselves and negotiate with the builder as a group, giving them an advantage while negotiating terms“.
“Pradeep Kaushik” another experienced lawyer from Haryana says that “builder is looking for easy access to capital by fooling the buyers. Builder’s owe a lot of money to the investors and when it comes to their life, they do not hesitate to break any law to pay off the investors“.
We at The Logical Buyer are of the view that one should be careful before getting into this sort of agreement with the developer and the buyers group must discuss such offers with their lawyers. One should not get into such schemes even if developer offers them freebies or discounts.
You can never know if builders are collecting this money to honestly finish the project or just looking for easy money to pay their investors.
So, would you take the bold step and pay remaining money upfront? Please share your views in the comment section.