7 Things you Need to Know About Developer
7 Things you Need to Know About Developer
Here’s what you need to find out about your developer before you invest your hard-earned money in a project.
7 Check you should do on your developer
- Is he on the pre-approved list of at least 3-4 Major Banks
- What is his track record of project delivery
- Visit the developer’s previous projects
- Check his financial status & speak to people he deals with brokers, contractors, vendors etc.
- Ensure that developer owns the land which is used for constructing the project
- Check all the necessary approvals for the project are in place
- Go online and read up about the developer on websites and forums
The right builder will certainly ensure a hassle-free process of buying an apartment. Here’s how you can go about making the right decision.
Banks’ pre-approved list
Choose a developer who is on the pre-approved list of at least three to four major banks. Banks conduct a fair degree of due diligence before they lend to a builder or to the buyers in his projects. If several major banks endorse the same builder, you have less to worry about.
Track record of delivery
Invest your hard-earned money with a developer who has completed and delivered several projects in the past. Completing a project requires getting several approvals. The developer will then possess the project management skills required to ensure timely construction. Avoid buying from a new developer, even if he is offering lower prices. Besides experience, he may also lack the financial strength required to withstand a market downturn.
Akhilesh Gupta, a Delhi-based real estate broker said, “A buyer should look at developer’s previous projects. He should analyse project deliveries and performance of the developer in the past and go through the level and quality of developments. If the developer has done only large scale township projects and has delivered them on time, you should consider buying into his project.”
Visit previous projects
Visit the developer’s old projects and speak to the owners there. They will be able to tell you about the quality of construction, and whether he delivered on the facilities and specifications that were promised. A builder who has cut corners once, is likely to do it again.
“The builder may have constructed a clubhouse in the space that was meant to be a park,” cautions Rajan Ahuja, director, Realty & Verticals, a Gurgaon-based consultancy. “He may have built 10 floors in a project that was only meant to have six. People in older projects will be able to tell you about such transgressions.”
Enquire whether the builder had delivered the project on time. In case of a delay, did he honour the commitment to pay a penalty? The builder-buyer agreement has a clause wherein, the developer offers to compensate buyers if the project gets delayed beyond six months. However, many builders use the ‘reasons beyond control’ clause, as a valid reason. Since this clause is rather open-ended, developers avoid paying the penalty on flimsy grounds such as increase in the price of building material, labour shortage, adverse weather conditions, etc.
Check financial status
With the slowdown in real estate sales, builders are facing financial distress. In case of listed developers, the task is made easy since their balance sheets are public domain. With their unlisted counterparts, you may have to dig deeper. Speak to people who deal with the developer, such as brokers, contractors, vendors, etc. If the builder’s finances are stressed, it will reflect in his dealings with these people.
Ensure that the developer owns the land which is used for constructing the project. If needed, hire a lawyer to do the title search. Also, make sure the developer has purchased all the land that he needs. There could be some parcels that he still needs to buy. This could lead to a court case which could drag on for years. In the eventuality, your apartment is located on such a portion of land embroiled in dispute, you may not get possession even if the rest of the project gets completed.
According to Ahuja, “It can be a riskier situation when a developer has entered into a collaboration with a land-owner instead of owning the land entirely.”
Approvals in place
All the necessary approvals must be in place. Watch out for license to build, environment clearance and so on.
Many real estate websites have discussion forums where builders and their projects are discussed. You will be able dig up information on builders or specific projects.
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