Paying the price of facility management

Ravi Sinha

So you reluctantly paid the hidden charges to developers to get the possession of your house and thought the ordeal was over? Think again! As the developer can continue to exploit you financially post possession as well. Some smart developers have devised ways and means to extract money from the homebuyers. Brand reputation for such developers takes a back seat as money  drives their business philosophy. 

Some homebuyers in Noida recently took to streets against, what they termed as high handedness on part of the developer’s facility management. Their grouse was that the amount charged by the developer in the name of Common Area Maintenance (CAM) was way too high, keeping in view the available facilities. With not even a club or swimming pool being ready the homebuyers demanded the cost break-up of the charges collected in the name of facility management by the developer.

The developer, however,  refused to give the details of the expenses. Instead of addressing the legitimate concern of the homebuyers the developer disconnected the electricity of those who refused to pay the arbitrary expenses. This brought the residents out on the streets in protest.

“We have already moved  court against the developer’s undue demands. And he has responded by disconnecting the electricity connection to harass the litigants,” says Gaurav Gupta, who owns a home in the  society. 

This raises a fundamental question as to whether the developers can charge the buyers in the name of facility management after handing over possessions. More importantly, whether the facility management expenses are also a type of hidden charge? If the developer finds the facility not making any business sense then who stops him from handing its management over to the residents?

Developers’ defence

Vineet Relia, Managing Director, SARE Homes defends the sector saying that when people shift from old residences lacking such facilities and where their monthly maintenance costs were low, it creates a misperception that their present developer is overcharging because the maintenance costs are higher. According to him, there are predetermined charges for specific services. For example, in the case of electricity and power backup charges, although the rates per unit are fixed, each flat owner will end up paying different amounts every month. The monthly charges only vary due to the different usage patterns of each flat owner. But the maintenance charge for flats with identical areas will be the same since these are calculated on a per-square-foot basis.

But the question that still remains is that in the event of lack of trust should the builder not include the homebuyers into property management right from the very beginning?

“Right from the very beginning is quite an open-ended term. Besides, it should be kept in mind that different people may become owners of a flat at different points in time. Homebuyers only come into the picture vis-à-vis the maintenance and facility charges when they are formally offered possession of the flat via a possession letter. This is standard industry practice and the best method so that homebuyers are not saddled with an extra burden even before taking possession of their flat,” says Relia.

Buyers’ involvement necessary

Having said that, the responsibility of acquainting the buyers with the pre and post facility management cost is one key responsibility vested in the hands of the developers. A ballpark figure specified at the time of booking varies from the actual figure by 15–20 per cent at the time of possession because of the escalating inflation.

It is true that the cost of maintenance can change from time to time based on several variable factors like manpower, inflation, service providers, changes in government regulations, etc. But the developers’ high handedness in the functioning with ownership mindset to the extent of not having an honest dialogue with the homebuyers escalates the suspicion. 

It is always the legal right of the homebuyers and the developer is duty-bound to share the actual expenses and overhead costs which are ultimately being borne by the homebuyers.

A handful of developers who involve the homebuyers find them as a support at odd times. Sadly, there are only a handful of developers who do so. For the larger universe of the real estate developers, facility management is the cow to milch till the time a proper RWA (Resident Welfare Association) is formed and the developer is forced to leave.

That also is tricky as many developers deliberately delay the last phase of the large projects to make sure that technically the project is not completed. This makes them continue to be in charge of facility management. Who cares for the brand integrity when there is money that does all the talking? 

In the name of transparency

Harjith D Bubber, MD & CEO, Rivali Park says that all charges are stated upfront to a buyer and hence there cannot be any ‘hidden charges’ and those charges cannot be change d arbitrarily at a later date. As regards facility management, the developer states at the time of selling an apartment that the charges that they intend collecting are estimated charges for a year/ two years / three years.

“It is impossible for a developer to forecast / estimate the exact charges at the time of launch. It is difficult to standardise the rate for facility management as each developer for each project has a different price point and level of differentiation for the project. If I have promised concierge services for a particular project, the costs are bound to be higher. Likewise the swimming pool / clubhouse could be of a different size and scale from the immediate neighbouring already occupied project. In that case too, the costs will differ and hence these cannot be quoted as a benchmark,” says Bubber.

Atithi Patel, Executive Director, Ariisto Realtors, however, points out that more or less all reputed builders disclose the possession and post-delivery charges on the day of booking itself except a few wherein the maintenance and the property taxes are not mentioned as they are variable cost and can be calculated only once the property is ready and occupied.

“By keeping them updated on a daily basis as and when there are changes in the charges help in bringing in transparency in the customer-realtor alliance. 

The increase in cost overhead can be affected due to changes in government norms and regulations and tax structure. They are entitled to be aware of every minute update or information and it is the moral responsibility of the developer to keep them acquainted with every transition occurring due to a change or elevation in government policies or anything pertaining to pricing,” says Patel.

 Beyond the usual defence of the sector in its collective spirit, the fact lies that the dispute is today not an exception but a common  market reality due to the lack of trust. 

The developers on their part have rarely been forthcoming in clearing the air over these charges. Homebuyers, too, are sometimes unaware of the upgradation and revised policies leading to higher outlays.

— The writer is CEO, Track2Realty