It is crucial to pay close attention to the construction agreement

While the Real Estate Regulatory Act (RERA) is expected to provide more clarity to apartment buyers, it is important that you be wary of the following clauses in a construction agreement:

Penalty clauses

In case of any payment defaults by the buyer, the agreement usually states a penalty between 18 and 24 per cent per annum. However, should there be a delay from the builder’s side, the liability would be mentioned only as 2 per cent per annum.

In certain agreements, the non-availability of raw materials like cement, steel etc., also get included as a force majeure clause (an ‘act of God’). This should not be accepted. Also, ensure that payments made to the builder are always linked to the construction work in progress.

Terrace rights

The right to the terrace of the building always vests with the buyer and the common resident association. Any clauses to then contrary should be avoided in the construction agreement.

Club house membership

In certain multi-storied buildings, club house facilities are provided by the builder and a fixed sum for access to this gets in the Agreement. This agreement, however, usually remains ambiguous about annual usage fees and other miscellaneous charges to the club.

It also sometimes does not mention details regarding refunds in case someone wishes to surrender their membership rights. Transfer of life membership rights to a new buyer at a later date might also not be highlighted.

Annual maintenance

Many builders ensure that they maintain the constructed building for the first few years. They also ensure that the annual maintenance fees for 1-3 years (depending upon their maintenance period) get paid in full before the handing over of the unit. However, it should be clearly mentioned in the Agreement that the builder should produce the books of accounts to the apartment residents association as and when demanded, and should also transfer all the excess amount (after meeting out all the expenses) to the association formed at the end of the maintenance period.

Undivided share of land

The Undivided Share (UDS) of land in any project should be conveyed in full to all the buyers in proportion to their extent of their apartment. This should be clearly mentioned in the agreement. Certain builders, however, claim that UDS is only the foot rest of the building/tower constructed. This is a wrong method of conveying UDS and many buyers and bankers are ignorant about the calculation method.

Tamil Nadu, Gujarat ,and Maharashtra follow the concept of Floor Space index (FSI) and many other States follow the concept of Floor Area Ratio (FAR) for building construction. The normal permitted FSI in Tamil Nadu for buildings is 1.5. This means that for every 2,400 sq.ft. of land area, up to 3,600 sq.ft. of plinth area can be constructed (car parking area is separate).

The approved building plan drawings (with seal) will clearly reflect the extent of permitted FSI for that property. If a builder intends to construct 1,000 sq.ft. of plinth area of an apartment with an FSI of say 1.4, then the proportionate UDS to be conveyed shall be 1000/1.4 which is equal to 714 sq.ft. of UDS. For a premium FSI building, special building, and multi-storey building, the extent of UDS would vary depending upon the extent of FSI achieved.

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