House in Mumbai

Amid higher costs, slow demand and regulatory hurdles, many builders in the country’s hottest property market-Mumbai, are inserting new clauses to palm off some of the uncertainties to buyers. The allotment letters given to home buyers contain clauses like provisions for cost escalation, project abandonment, inability to commence construction, and also eventuality of non-disbursal of loan from banks. However, some of these clauses are not allowed under The Maharashtra Ownership Flats Act 1963 (MOFA).

Developers may include any clause they wish. But if they are contrary to MOFA model agreement, then it will be ultra-vires and the contract cannot be enforced legally as the provisions of law are statutory in nature and they will supersede contractual obligations,” said Vinod Sampat, advocate and President, Co-operative Societies’ Residents, Users and Welfare Association.

Under cost escalation clause, developers are seeking to recover hike in input costs above 10% from buyer on prorata basis.

In another clause governing possibility of abandoning the project, the developer shall be liable to refund the amount paid by the buyer without any interest or compensation within 12 to 24 months from the date of such event.

“In case the project is abandoned for any reason other than force majeure or on failure to give possession, the developer is expected to refund the amount paid by the customer with 9% interest under MOFA,” said another legal expert.

More News:  http://www.commonfloor.com/stories/mumbai-realtors-insert-new-clauses-in-allotment-letters-3650