Will the warranty clause bring relief to homebuyers?

Peeling plaster, cracks in walls and ceiling, leakage, seepage — these are just a few of the nightmares that become a bitter reality formany a new home buyer   often. Shoddy and sub-standard construction and a huge gap in the quality of “show home” and the real apartment often leave buyers fuming and fretting after having spent lakhs of rupees on a new home.  Till now the only solution available to such buyers was to serve a legal notice leading to protracted legal battles, with builders refusing to accept any fault or take steps to rectify construction defects.

In view of this, the provision for a defect liability clause, or put simply, a warranty, in the Real Estate Act, could bring cheer to homebuyers. The Real Estate Act provides a defect liability (warranty) clause of five years. 

Under the Real Estate Bill's Clause 14 (3), the defect liability period has been set at five years. Aggrieved buyers welcome the provision, maintaining that the law itself should serve as a deterrent for anyone who tries to get away with default or defect. Home buyers are now asking, whether this clause actually translates into a warranty.

Developers are also not complaining about the clause. They feel that this provision will be a market differentiator, in a business where the non-serious players outnumber the branded developers. Customers will be happy to have a warranty, as it assures them of the product’s quality and that the developer will fix problems, if any arise, they explain.

In international markets, such warranties boost developers’ reputation for transparency and adherence to best practices and hence, they should work equally well in India. In the international context, the defect liability period varies from country to country. It is as high as 10 years, in countries where the contractor liability and legal dispute redressals are efficient and robust. In India, with warranties in place, developers are likely to improve their construction quality, to avoid higher cost overruns that additional repairs at a later stage would entail.

In the past, when the real estate sector was unorganised, the defect liability period varied from region to region and from one developer to another. The Real Estate (Regulation and Development) Bill, 2016, now eliminates this anomaly and offers a fixed liability period of five years, with Clause 14(3) acting as a warranty. It will now be mandatory for developers to rectify construction defects, even after possession has been given.

This also raises a question, as to whether buyers will be willing to pay a premium on properties that come with stronger warranties. 

Analysts believe that once systems and processes that boost home buyers’ trust are put in place, then, buyers will not mind paying a premium for properties with warranties. In the absence of warranties, buyers have been the victims so far, forced to undertake repairs at their own cost in case of any defect in construction.

However, the moot question for homebuyers now is: Will this mean better quality of construction or merely result in higher prices?

— Inputs from Housing.com/News