Homebuilder website & brochure info should be treated as ads: FPCE to Consumer Affairs Secy

New Delhi: Homebuyers' association FPCE has written to the Consumer Affairs Ministry to frame specific guidelines for the Indian real estate sector to curb unfair trade practices and protect consumers' interests.

Forum For People's Collective Efforts (FPCE) President Abhay Upadhyay has written a letter to Consumer Affairs Secretary Nidhi Khare, requesting her to issue "real estate sector-specific guidelines under the Consumer Protection Act 2019 to curb the malpractices prevalent in the sector and to save the consumers of the sector from being duped and cheated by developers."  

The association pointed out that the consumer forums constituted under the Consumer Protection Act 2019 comprise about 10% of their complaints from the consumers of the real estate sector.

As per the government statement in the Lok Sabha, more than 50,000 such complaints are pending before consumer forums as of July 31, 2024.

In terms of the value of such cases, it will be more than 10% since transactions in the real estate sector are of very high value.

 "We are writing to bring to your kind notice that real estate developers are continuing with their malpractices, which are in blatant violation of the provisions of the Consumer Protection Act 2019. We are highlighting some of the malpractices which need to be eradicated at all costs to save the homebuyers," Upadhyay said.

Listing out some of the malpractices in the realty sector, Upadhyay said there are a lot of misleading advertisements to lure customers.

"They (developers) come out with such an attractive pictorial representation of their projects, which in reality bears no resemblance to the actual project," he said.

In advertisements, builders promise many facilities and amenities in their projects. However, in many cases, homebuyers do not find those amenities while taking possession of their properties, the association said.

"It is also to be noted with due concern that the project completion deadline is not adhered to and is infinitely extended at the cost of the homebuyers," Upadhyay said.

The information that a homebuyer gets from the website of the builder or from the brochure downloaded from the website of the builder should be considered an advertisement and a mere disclaimer at the bottom of the brochure/website stating that they do not form part of the sale documents have to be outrightly rejected, the president suggested.

The association also pointed out unfair contracts in the real estate sector. "The prevalent practice where homebuyers normally pay 10 per cent of the total consideration amount as booking amount just on the basis of advertisement/brochure/website, without knowing what will be the terms of the contract that he will be asked to sign going forward, is grossly unfair," Upadhyay said.

Homebuyers should be given a copy of the draft agreement for sale at the time of booking so that they know the terms under which they will be buying their apartment, Upadhyay said.

Further, he said there is no exit clause presently provided for homebuyers and hence the builder forfeits the entire booking amount if later the booking is cancelled.

 "We suggest an exit clause be provided at the time of booking itself...," he said.

The association said that the exit clause should mention that if cancellation is done within 3 months, the developer should refund the entire money within 15 days of receiving such a request.

"However, if the cancellation is done after 3 months, the developer should refund the amount paid by the homebuyer, along with interest, within one month.

 "Presently, builders are inserting many one-sided and restrictive clauses in the agreement for sale that are highly oppressive, grossly unfair, very unreasonable and also illegal under the provisions of the Consumer Protection Act 2019," he said.

The association asserted that it is necessary to restrict builders from extorting extra money from homebuyers on some pretext or other.

Citing some examples, the association said builders take full consideration at the time of giving possession without completing common areas, facilities and amenities.

 "Your ministry should lay down clear guidelines in this regard to ensure that homebuyers should not pay more than 80% of the total consideration at the time of handover and balance can only be demanded by the builder at the time of handover of already and complete common areas with all the facilities and amenities in ready-to-use condition to the resident welfare associations," Upadhyay said.

"If the total area of the flat is found to be short, then homebuyers should pay proportionately less amount.

"However, if the area is increased, the homebuyer cannot be charged with any extra amount as the increase was not on demand or with the consent of the homebuyer.

The FPCE said that the issues raised in the letter are just some of the malpractices prevalent in the sector and it's not an exhaustive list.

"We are sorry to say that RERA, in the last seven years since it became fully functional, has not been able to achieve its desired objective," Upadhyay said.

The stake of the consumers in the real estate sector is much higher than the stake of the consumers in any other sector, he said, urging the ministry to protect the interests of consumers in the real estate sector.

The association also sought a meeting with the consumer affairs secretary to explain issues in a little more detail and with live examples from the sector.