The post-booking phase till the possession is the most critical phase of the relationship between the builder where all the agreed terms & conditions set out in the Booking Form are carried forward & documented in SALE/CONSTRUCTION AGREEMENTS. This phase defines how the builder/developer actually honors his commitments undertaken in the agreements and how the buyer honors his commitments with respect to release of payments to the builder as per payment schedule etc
Let us discuss some of the best practices we can adopt during this relationship lifecycle. There are separate teams in the Developers office, popularly known as CRM (Customer Relationship Management), who hand-hold the buyer, right from booking to handover/possession of the home upon completion & registration processes. Let us discuss some the best practices to ensure a seamless, hassle-free journey from booking to actual possession of your home.
A. Setting the rules of engagement
Establish clearly-defined Communication Channels – Between buyer & Builder, between buyer’s legal advisor & Builder’s Legal team, between buyer’s Banker & the builder’s representative. Its’ always good to get a designated SPOC (Single Point of Contact) CRM professional, who can be a single source of exchanging information through all channels of communication.
B. The legal scrutiny
The immediate task on part of the buyer is to satisfy himself about the legal viability of the project in terms of the property ownership, approvals, developmental plans etc. It is very critical that the legal evaluation is completed within a time-frame as it is linked to the execution of the SALE & CONSTRUCTION AGREEMENT & initiating the loan process, if any. The buyer has a primary responsibility to have an introductory interaction with the legal team of the builder & establish clear communication channels between his lawyer & the builder’s legal teams so that all queries, necessary documents are exchanged in a professional way & a legal opinion is obtained with the set deadlines.
C. Sale Agreement & Construction Agreement
This is one of the most important milestone in a home buying transaction wherein the buyer pays up a reasonable portion of the purchase price & setting the conditions for terms & conditions to complete the construction/development & the execution of the sale deed
This is the most important legally enforceable document wherein you are supposed to pay minimum of 20% of the purchase value from your own funds or as agreed as per booking form. It is usually executed between 15 to 30 days from the day of booking/allotment
Salient features:
- Describes the participants to the agreement.
- Describes the project& the unit/plot the buyer has booked.
- Describes the title flow.
- Describes the payments made.
- Describes the construction/development schedule.
- Describes the payment schedule.
- Describes the specifications/materials to be used in construction.
- Describes the amenities that will be provided with timelines.
- Describes the obligations of the builder/developer.
- Describes the obligations of the buyer.
- Describes the penalties associated with dishonouring the obligations by the developer of the buyer.
- Describes the judicial/arbitration mechanism to address grievances between the buyer & the developer
Sample Sale Agreement & Construction agreements are attached in Annexure.
D. Payment Schedule & Distributed payments
Distributed payments are payments to be made in case the builder & buyer agrees on a construction-linked payment plan in SALE/CONSTRUCTION agreement
In this case, every time a milestone is completed, the builder raises a DEMAND NOTE, asking the buyer to make the concerned payment as per payment schedule.
The buyer then informs the banker (in case of loan funding) who initiates technical inspection & upon satisfaction the banker releases the payment to the builder accordingly.
The most common process with respect to the sample payment schedule discussed can be summarized in below flow chart:
If the buyer is not availing the loan, he will process the payment once he receives the Demand Note from the Builder.
E. Change/Modification Management:
In many scenarios, the buyer would like to make some changes to his home during the construction stage. These may include minor changes like changing a tap in a bathroom to a major change like altering the layout of rooms.
It is very essential that all the modifications or changes the buyer wants to be included in the construction of their home have to be separately documented & signed by both the buyer & the builder. The buyer can also insist this document to be included as an ‘ADENDUM’ to the construction agreement.
Any changes or modifications will attract additional expenses depending upon the nature of the work to be undertaken. Every builder has a standard format with them that documents the work estimates & costs associated with them. The final agreed estimate is countersigned by the buyer & the builder.
A sample process work flow chart can be as below:
F. The pre-hand over Process:
Once the development/construction is completed, the builder will initiate the handover process as well as complete the registration process to transfer the title in favor of the buyer. Before handing over the property, the builder/developer has to obtain certain permissions/approvals from concerned authorities in order to complete the hand over. Below is a brief description of documents/approvals a builder/developer needs to have in order to kick-start the hand-over process.
In case of plotted development:
- Layout Map – Approved by the concerned Planning Authority
- Release Order – The Planning authority issues a release order detailing the dimension of plots, size of the plots, the permission to issue individual Kathas and the permission for registering the plots in favour of the buyer.
- Kathas (an account in the tax/revenue department of the local administration like the panchayat, municipal, or development authority) for individual plots.
In case of apartments:
- Completion certificate
- Occupancy certificate
- Electricity, sewage, water connection permissions/NOCs
The above list is not conclusive & can the final list depend on the jurisdictional statutory authorities.
Pre-hand over/Possession Inspection:
This is also a critical step before the builder. The builder schedules a joint pre-handover inspection with buyer. The builder’s team is usually represented by its CRM & construction team. The inspection is conducted as per pre-determined check list w.r.t. changes agreed to viz. civil, plumbing, electrical, finishing etc as well as any modifications/changes required as per modification document.
The pre-hand over inspection is completed & signed off by both the parties & the buyer explicitly accepts that the construction has been completed to his satisfaction & has no claims on the builder.
Once the buyer also acknowledges the completion of changes/modifications, the builder raises the required DEBIT NOTE. If there are any agreed discrepancies and if the buyer raises any financial claim on the builder, the builder raises a CREDIT NOTE in favour of the buyer & the accounts are reconciled accordingly.
G. PROPERTY REGISTRATION:
Once all the statutory approvals are in place for the possession & clearing of all dues by the buyer as per the payment schedule in addition to any DEBIT NOTE or CREDIT NOTE reconciliation, the next logical step would be the registration your home in your favor.
The builder then raises a final Demand Note on the buyer for the outstanding amount payable towards the sale consideration as per the SALE/CONSTRUCTION agreement.
The buyer proceeds to inform the banker to release the outstanding amount & informs the banker about the schedule of the registration process so that the banker visits the concerned SUB-REGISTRAR office with the payment instrument issued in favour of the builder/developer.
In most of the cases, the buyer has to bear all the statutory taxes, registration fees, stamping fees etc. required to get the property registered. The buyer has to take out the necessary Demand Drafts/Banker’s cheques payable in favor of SUB-REGISTRAR to execute the sale deed.
On the appointed date & time, the buyer/s, the builder/developer and the banker, if any, visits the concerned SUB-REGISTRAR office & an ABSOLUTE SALE DEED is executed by all the concerned parties.
The registered SALE DEED is then collected by the banker if any & a certified copy is issued to the buyer for his/her records. At the same time, the property is mortgaged in favor of the Banker through MOTD (Mortgage of Title Deed)
H. POST-REGISTRATION ACTIVITIES:
Post registration, it becomes imperative on the buyer to change the ownership in his favor in all statutory legal documents viz. Katha, Electricity, Sanitary Board etc.
To do this, he can check with the builder on the list of agencies he has to interact with & do the necessary changes. The best practice would be to hire a legal consultant who has expertise in undertaking these tasks.