Pre-Sales And Soft Launches

Pre-sales and soft launches are now a common practice in the real estate industry in The MMR. Builders go for pre-sales to get immediate funds. In case of pre-sales, buyers or investors make a down payment, which could be just 20% to almost half the cost of the flat, in return for a discounted price offered by the developer.In some cases,by getting people to book flats by paying just 10% to 20% before the first brick is laid, developers have manage to sell 200 to 300 flats even before the project is publicly announced.

Many builders go for pre-sales the moment they buy the land and mortgage it to the bank. The BMC now charges builders who want to avail of extra construction rights, called fungible FSI, and transfer of development rights, a premium. Builders require funds to pay  this premium.Hence they start selling units even before a project begins. The  approvals can take over a year after pre-sales.

However many unscrupulous builders have gone for pre-sales when even land titles are not clear.The problem is rampant in Thane district.

The law is stringent about  pre-sales and soft-launches of flats. The Maharashtra Ownership of Flats Act says no flat can be sold unless building plans are submitted to the civic body and are approved.

Builders in the city sell flats at discounted rates before all clearances are in place.Without the municipal intimation of disapproval (IOD) and commencement certificate, a builder cannot advertise a project but if they invite close associates, friends and investors to book flats privately, it is not a problem.It is not  illegal if a developer offers an option to a person to book a flat and accepts a deposit at this stage despite an element of uncertainty.If the permissions don’t come through, the developer has to return the money with interest.However,  any sale agreement without a sanctioned building plan or commencement certificate is illegal.Pre-sales are an investment option only for sophisticated investors for there is a lot of risk in case the project is delayed or violations are later discovered by the authorities or the project fails to get clearance .

Ordinary buyers should avoid builders who flash brochures showing buildings and detailed floor plans when the land title itself is under dispute. The land could be reserved for a public amenity.Then there are developers who have clear land titles and IOD, but are awaiting the commencement certificate.But there are others whose  building plans may not even have been submitted to the municipal corporation or violations at the pre-plinth level means commencement-certificates will never be available.Its upto the investor to figure out which is the case.

Usually, buyers are helpless in the face of violations by builders.Builders usually enter into sale agreements based on initial permission required for any construction (even before the commencement certificate) from the civic authorities, and though the law mandates that further amendments may be made with approval from the buyers, the provision is routinely flouted.Recently, TOI exposed how rogue builders demand more money or coerce purchasers into cancelling bookings so that they can re-launch projects at a higher cost when property prices increase.Link