Now that I have your attention let me say that I really do not have any investment advice. This is a story of our (my wife and me) run-in with ill intentioned and incompetent real estate developers and the long wait for justice and the subsequent relief and joy on getting it. It is also about not losing our faith in institutions in India.
So what happened?
In 2006 after being in Bangalore for a couple of years we decided to buy an apartment and booked one with a builder. This was our first real estate transaction and we were really sloppy. We trusted the builder and the bank we took a loan from( or more like trusted the bank's franchise who sold us the loan). We did not go through the sale agreement in detail and did not put it through a lawyer nor did we believe we could alter it as we were told it is all 'standard'. We expected the bank to make sure that the agreement was a standard one. Nothing absolves us of that mistake but I am simply stating our though process. It turned out that we had signed a time bound payment schedule rather than a progress linked payment schedule. Any late payments would attract 24% interest. The sale agreement was completely lop sided. Delays from the builder's end would give us some notional rent of three or four thousand per month. The delivery date was pushed out after a few days of signing the agreement by 6 months. Again sloppiness ruled and we did not pay visits to the site to monitor progress. Everytime a payment was due a more than helpful franchise representative would show up and get things signed and deliver the payment to the builder.
After a while though we got worried. Talk about litigation on the project land was heard. Construction had ground to a halt. Then 2008 and the credit crisis hit. After releasing about 80% of the amount we stopped payments to the builder. A group of us met the builder several times each time to be met with hollow promises. Actually let me just say lies.
Some of us decided to seek legal opinion. We met some real gems. A highly recommended lawyer called us to his house in Jayanagar, read our sale agreement scolded us for being sloppy, said nothing could be done and promptly asked 1000 Rs as his consultation fees. Cash. With no receipt. A few wrong numbers later it looked pretty gloomy.
Luckily we were among a bunch of people creating the most noise on the mailing list of all the project customers. Someone called us voluntarily and gave us a lawyer's contact. It was from a customer for the same project who had successfully gotten his money back after filing a case in the consumer forum.
This was completely out of the blue and I still remember that night sometime in the summer of 2009. Gloom was replaced by hope. We called the lawyer and went to meet him at his office.
We were surprised to find him in a small room in a rather old building :-) Full of files and legal books and a table with a computer and printer. Thankfully also an internet connection. We decided to get photographs of the semi-constructed project, the brochures the builder used when selling, agreements, bank loan statements etc. It was a painful process to deal with a lawyer who had an internet but was not very internet savvy and depended mostly on in-person time to work things out. e.g all the complaint drafts had to be worked out in-person when it could have been done on email. And he was quirky. But we did not lose patience and stuck with him. Eventually we filed a complaint in the Karnataka State Consumer Forum and it was admitted in September 2009. We requested the money paid by us be returned to us with 24% interest (the same interest rate the builder had on the sale agreement for delays in our payments) and compensation for house rent that we had to pay because of the delay.
Our lawyer for all his quirks had promised us one thing. That he would take care of all the court proceedings and our presence would not be required except when really needed. This turned out to be of great value as the case dragged till mid 2013. This was an essentially open and shut case given that the court had already resolved one similar case before with the same lawyer and the same builder. The saying कानून के पास अन्धेर तो नहीं लेकिन देर जरूर है! is very true. So it dragged along with all due process and the understaffed courts and their inefficiency. The builder's responses were amusing. We were accused of lying, being investors and not consumers and so the case should not be in the consumer court, that all the delays were because of things outside their control or as they say in legal terms force majeure.
Eventually two other similar cases against the builder being fought by the same lawyer were combined with our case and in the summer of 2013 the court finally reached a decision and decided in our favour. The builder was directed to hand over our apartments in 45 days or pay our money back with 18% interest and 15000 rent per month for every month from the day the case was filed to the day the payment was settled. And yes 5000 Rs towards legal expenses. Yes the court values lawyers at 5000 Rs :-)
We waited for 45 days. There was no communication from the builder for some time. Then just before the 45 day limit was about to expire we were offered to get our apartment registered. They had managed to restart construction sometime in 2012 and there was something there resembling an apartment. But it was far from completion with more land litigation being reported. Again I took photographs of he state of the construction and our lawyer responded asking for an occupancy certificate.
We then decided to file an execution petition with the court. This is something you do to request the court to take punitive action when the opposite party refuses to comply with the court's order. Again we were accused of only being interested in the money and not the apartment. Once again sense prevailed and the court would have none of it.
Eventually the builder started paying us from mid February 2014. We received all our money in three separate installments. We closed our bank loan and were also able to pay off other debts.
The sweet deal is that all the awarded damages seem to be tax free. I still need to file taxes so I ll keep my fingers crossed :-) So that is it. Annual returns of 18% and some more. So best investment ever if only in hindsight.
So next time some builder gives you or your friends the run around you know what to do. And yes be careful what you sign if you don't want to get into this in the first place. No one can take your money unless you give it so negotiate on the agreement before signing.
Thanks are due to the courts and our lawyer and most of all to the person who let us know there was a way out.
So what happened?
In 2006 after being in Bangalore for a couple of years we decided to buy an apartment and booked one with a builder. This was our first real estate transaction and we were really sloppy. We trusted the builder and the bank we took a loan from( or more like trusted the bank's franchise who sold us the loan). We did not go through the sale agreement in detail and did not put it through a lawyer nor did we believe we could alter it as we were told it is all 'standard'. We expected the bank to make sure that the agreement was a standard one. Nothing absolves us of that mistake but I am simply stating our though process. It turned out that we had signed a time bound payment schedule rather than a progress linked payment schedule. Any late payments would attract 24% interest. The sale agreement was completely lop sided. Delays from the builder's end would give us some notional rent of three or four thousand per month. The delivery date was pushed out after a few days of signing the agreement by 6 months. Again sloppiness ruled and we did not pay visits to the site to monitor progress. Everytime a payment was due a more than helpful franchise representative would show up and get things signed and deliver the payment to the builder.
After a while though we got worried. Talk about litigation on the project land was heard. Construction had ground to a halt. Then 2008 and the credit crisis hit. After releasing about 80% of the amount we stopped payments to the builder. A group of us met the builder several times each time to be met with hollow promises. Actually let me just say lies.
Some of us decided to seek legal opinion. We met some real gems. A highly recommended lawyer called us to his house in Jayanagar, read our sale agreement scolded us for being sloppy, said nothing could be done and promptly asked 1000 Rs as his consultation fees. Cash. With no receipt. A few wrong numbers later it looked pretty gloomy.
Luckily we were among a bunch of people creating the most noise on the mailing list of all the project customers. Someone called us voluntarily and gave us a lawyer's contact. It was from a customer for the same project who had successfully gotten his money back after filing a case in the consumer forum.
This was completely out of the blue and I still remember that night sometime in the summer of 2009. Gloom was replaced by hope. We called the lawyer and went to meet him at his office.
We were surprised to find him in a small room in a rather old building :-) Full of files and legal books and a table with a computer and printer. Thankfully also an internet connection. We decided to get photographs of the semi-constructed project, the brochures the builder used when selling, agreements, bank loan statements etc. It was a painful process to deal with a lawyer who had an internet but was not very internet savvy and depended mostly on in-person time to work things out. e.g all the complaint drafts had to be worked out in-person when it could have been done on email. And he was quirky. But we did not lose patience and stuck with him. Eventually we filed a complaint in the Karnataka State Consumer Forum and it was admitted in September 2009. We requested the money paid by us be returned to us with 24% interest (the same interest rate the builder had on the sale agreement for delays in our payments) and compensation for house rent that we had to pay because of the delay.
Our lawyer for all his quirks had promised us one thing. That he would take care of all the court proceedings and our presence would not be required except when really needed. This turned out to be of great value as the case dragged till mid 2013. This was an essentially open and shut case given that the court had already resolved one similar case before with the same lawyer and the same builder. The saying कानून के पास अन्धेर तो नहीं लेकिन देर जरूर है! is very true. So it dragged along with all due process and the understaffed courts and their inefficiency. The builder's responses were amusing. We were accused of lying, being investors and not consumers and so the case should not be in the consumer court, that all the delays were because of things outside their control or as they say in legal terms force majeure.
Eventually two other similar cases against the builder being fought by the same lawyer were combined with our case and in the summer of 2013 the court finally reached a decision and decided in our favour. The builder was directed to hand over our apartments in 45 days or pay our money back with 18% interest and 15000 rent per month for every month from the day the case was filed to the day the payment was settled. And yes 5000 Rs towards legal expenses. Yes the court values lawyers at 5000 Rs :-)
We waited for 45 days. There was no communication from the builder for some time. Then just before the 45 day limit was about to expire we were offered to get our apartment registered. They had managed to restart construction sometime in 2012 and there was something there resembling an apartment. But it was far from completion with more land litigation being reported. Again I took photographs of he state of the construction and our lawyer responded asking for an occupancy certificate.
We then decided to file an execution petition with the court. This is something you do to request the court to take punitive action when the opposite party refuses to comply with the court's order. Again we were accused of only being interested in the money and not the apartment. Once again sense prevailed and the court would have none of it.
Eventually the builder started paying us from mid February 2014. We received all our money in three separate installments. We closed our bank loan and were also able to pay off other debts.
The sweet deal is that all the awarded damages seem to be tax free. I still need to file taxes so I ll keep my fingers crossed :-) So that is it. Annual returns of 18% and some more. So best investment ever if only in hindsight.
So next time some builder gives you or your friends the run around you know what to do. And yes be careful what you sign if you don't want to get into this in the first place. No one can take your money unless you give it so negotiate on the agreement before signing.
Thanks are due to the courts and our lawyer and most of all to the person who let us know there was a way out.
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