Things to remember before signing the MOU with a Builder:

After all the running around you have finally made up your mind and chosen your dream home. Do you think it is the end of your worries and it’s just a matter of time and you’ll soon sign the ‘sales agreement’ to become a proud home owner?

In reality post-selection procedure is more crucial than the selection procedure. Are you are wondering why and how? This is the stage where one actually has to pay for a home from his life’s savings.

Rather than reading and analyzing the impact of each and every clause in the agreement or consulting a property lawyer, most of the times buyers simply sign it. They usually think it’s too long or they simply ignore it as the language is too technical or at times they are overwhelmed about owning a house and hence, fall in the trap. Developers take advantage of the buyers’ ignorance and draft agreements which are highly biased towards the developers.

It’s not that you need to be careful only when dealing with grade B or C developers. As a matter of fact most of the well known develops in India, including the likes of DLF and BPTP have also been questioned and penalized by CCI in the recent times for taking buyers for a ride.

Here is a list of checkpoints that a buyer must keep a check on before signing the sales agreement with the developer:

1. Firstly a sales agreement is a legal document that lists the terms and conditions of the transaction. These are agreed upon by the parties involved and bind the parties to fulfill their part of the commitment.

2. Most of the contracts have a clause stating that the given plans are tentative and therefore, there can be alterations in the final product. Also, the final price of the house is adjusted accordingly. There should always be a mention of the permissible extent of such changes.

3. Usually the builders sell on super built up area which includes the actual area of the house along with an unaccountable addition for common spaces. One should be careful and should make the developer include the details of carpet area and super area in the agreement.

This also gives the buyer an account of the extra charges demanded with respect to alterations in the plans at a later stage.

4. Details of all the charges starting from the basic cost of the house to all the extra charges the buyer has to bear should be clearly mentioned. All the levied charges like utility charges, maintenance fees, club house membership charges, parking charges should be included in the agreement.

There have been cases especially in Mumbai where developers have sold the parking to external parties even when as per the contract they belong to a resident of the society.

5. Details of the payment plan for disbursement of future payments must be included.

6. The person responsible for paying the government taxes like Municipal Tax, Sales Tax should be included.

7. Delay in delivery of the project is not uncommon today. A developer knows beforehand that in most of the cases he would not be able to stick to the execution plan. They promise a petty amount as a delay fees say Rs 10 psft per month. But on the other hand almost all the possible delay clauses are covered in the agreement leaving the buyer with heavy EMIs but no house to live in.

Rather than accepting figures like 2 years from starting of the project one should insist on the exact date to be stated in the agreement.

8. Unlike the tiny delay fees, the penalty charged for delay in payment from the buyer is hefty say Rs 50 psft or even Rs 250 psft or Rs 500 psft. A developer can charge anything for a tiny mistake or delay on buyers end.

9. There are times when the government alters the building norms. To density the developed city areas they increase the FAR (Floor Area Ratio). It should be clearly stated who owns and gets the benefit out it.

10. Another critical and must do point is registering the sales agreement to avoid litigation at a later stage. Being a legal document it helps in case of a fraud and creates a public record of your property.

In case of any discrepancy a buyer should always go to the consumer court as they favor buyers. Also, buyers facing similar problems should collectively work on the issue to build up pressure on the developer and other concerned parties. Consumer forums and other social networking mediums are also strong in today’s time.

In the end, with absence of any regulation defining real estate practices in India, it is a buyers’ duty to check the agreement before signing it. It is advisable to consult a lawyer and demand alterations in the agreement if required before formally signing it. It’s always best to do a check on builders’ track record.