1.         In my first article of this series (BYDH-2) I had discussed two main decision variables i.e. Budget vs Requirement and Under-construction vs Ready-to-Move-in which are crucial to a healthy start to any home-buying endure. Having taken a call on that, the next important thing that needs to be worked upon is the checking of the Promoter.

Promoter’s Background Check

2.         Although, the best bet, while deciding the Promoter, still remains that one should preferably go for established builders instead of those fly-by-night types, with a slew of scams unfolding in respect of big players and the cost differential between the established builders and the smaller ones make one consider the latter genre of builders.

3.         Antecedents & Track Record – Irrespective of the industry status or the size of the promoter’s company, every prospective home buyer must check its antecedents.

(a)        It is not uncommon that a project is advertised in the name of a big established brand whereas on the ground the actual promoter is one of the subsidiaries of the main corporate entity. The parent group would have a number of such subsidiaries incorporated for each of its projects. Two things are of importance here. The established name of the group is leveraged to sell while at the same time insulating the new project from the bad publicity of failure, delays or litigation being faced by the other subsidiaries of the Group.

(b)        An example of the same could be as follows:-

            ABC Real Estates (an imaginary name) is an established brand and has executed a number of projects across the country. They float a subsidiary named “ABC      Realtech” and launch a project named “ABC Dream Homes” through this company. On the other hand, one of their other companies named “ABC Infra” the promoter of “ABC Gold Homes” has already gone into insolvency and has abandoned the project putting hundreds of its buyers in fiscal jeopardy and mental trauma. Now the ground situation is:-

            “ABC Real Estates” – Parent Group (is a well known & established Group having a number of subsidiaries).

            “ABC Infra” – Subsidiary (one of the many subsidiaries and promoter of the failed project “Gold Homes”

            “ABC Realtech” – Subsidiary and the promoter of the project “ABC Dream Homes”

(c)        In such a scenario a prospective homebuyer must consider all the related aspects and take a decision to go with the project “ABC Dream Homes” with a view balanced between the reputation of the parent group and the reality of the failure of one of the projects. Remember, a home buyer would be signing the legal documents with “ABC Realtech” and not with the parent group i.e. “ABC Real Estates”

(d)       The next question is – how do we find out all this? The answer is not difficult in today’s world of technology. There are a number of online portals that provide reasonably authentic information on the corporate identity & credentials of every listed company.

4.         Real Feedback – In the last paragraph we talked about the failed projects and adverse delivery. Now knowing about the successfully completed projects can also be of great value. It would be wise to visit one or more of the earlier projects completed & delivered by the same builder. Interaction with the residents will provide two important details. First is the construction quality of the finished product and the related problems being faced by the residents. Second, the after-sale support being provided by the builder especially in matters like mutation of property record (Khata), transfer of ownership of the electric/water connection and registration of Owners’ Association, etc. A good builder will never leave its buyers high and dry once the sale deed is registered. Any indication to the contrary should work as a caution for the prospective buyer.

5.         Certification & Memberships – These provide further insight into the credentials of the promoter. Whereas some of the criteria like RERA Registration are a must-have, testimonials like ISO Certification and membership of the reputed professional bodies like CREDAI & different Chambers of Commerce, etc. provide some semblance of authentication though may not be the sole criteria by themselves.

6.         So, to sum up, the following should form a builder-background checklist:-

(a)Whether the Agreement for Sale is going to be signed in the name of the company being advertised or it is in some other name.

(b) Checking of legal Status of the actual promoter (whose name would appear in all legal documents), its parent/group/umbrella/partner company whose name is being used in the advertisements and all sister concerns.

(c) Track Record in terms of successful & failed/delayed projects.

(d) Details of litigation in respect of the actual promoter, parent company, and the sister concerns.

(e) Actual feedback from the owners/residents of past projects by the builder

(f) RERA registration and other credentials of the company.

7. What next – With this, we conclude the background check of the promoter. In the succeeding articles, we shall discuss the project checklist, documents to be checked before booking, and the commercial nuances.

Watch out this space…