It is a tough time to be in real estate. No one knows if prices are going to rise and when sales will pick up again. While several of you might be stuck with investments you need to liquidate, selling your apartment or unit may not be as easy as you think. We are witnessing a rising number of complaints about developers using restrictive practices to delay the sale of your home.

Take the case of real estate investor, Ashish Ojha. In 2010, he invested in a project by a reputed builder in Thane with the intention of selling it once prices appreciated. Luckily for him, prices did rise and even better, he managed to find a buyer who was ready to pay 30% more than Ashish had paid for his flat. However, just as the process was coming to an end, the builder threw a spanner in the works. “He showed me a big sheet with a lot of costs and he said these are the things due to which you will have to pay an X amount of transfer charges. I was very surprised as nothing had been mentioned in the agreement. It has been 3 years since I purchased the flat and if I am making a profit of let’s say Rs 10 as an example, why should I give up Rs 3 out of it for the builder?” Legal experts say that transfer charges are illegal once an agreement has been registered. Yet, developers routinely demand this when a buyer is selling a flat. What’s worse? There is no fixed amount and charges can range anywhere between Rs 400 to Rs 1500 per sq. ft and sometimes even higher. If you refuse to pay, the developer plays hardball and won’t give the No-Objection Certificate or NOC which is essential to sell the flat. You could choose to fight it out in the courts, but most owners end up paying the money to avoid a long-drawn legal process.

That’s not the only thing to worry about. Developers also routinely include lock-in periods in the sales agreement which mandate that a buyer wait a specific period of time before selling the purchased unit. However, Indu Sadh who is the Director of New Homes & Investments at Mumbai Property Exchange claims the vague wording of this particular provision leaves it open for misuse by developers. “An agreement might state a lock-in period for 3 years right up to possession. But more often than not this means that if a buyer has made the purchase in the pre-launch stage, he may have to wait for 5 to 6 years before he can sell off his apartment, which is unfair and very one sided. In other cases, the lock-in period could be 3 years, but there is no clarity whether it is 3 years from the date of booking or 3 years from the date of allotment and this could add another year to the lock-in period” she says.

So why are developers so determined to make it difficult for you to sell your house? Many investors are scared that the markets will fall further and are desperately trying to sell their flats, often at a discount. This means there will be new supply in an area at prices lower than the prevailing market rate and this is bad news for developers who usually have unsold inventory in the project or area. That is why they use lock-in periods to delay the sale until their own units are sold. Transfer charges are then used to ensure that prices remain at the levels they desire, preventing home owners from selling below market rates. Unfortunately, home buyers cannot do much about this apart from fighting it out in the courts. This is why legal experts say it is better to ensure you are not bound by these conditions when entering into an agreement. “It is a buyer’s market. The intelligent purchaser should resist such conditions in his letter of allotment and contract. He must tell his builder that he cannot agree to sell or not to sell as this will be casting an unnecessary restriction or limitation on his right to deal with property. In most cases if the purchaser insists on this, such kind of conditions can be averted as the developer knows the buyer has other options apart from his project” says Parimal Shroff, Solicitor and Founder of Parimal K. Shroff & Co.

While no one is denying developers the chance to sell their own units first, the extremes to which tactics like lock-in periods and transfer charges are being misused must be stopped. The developer community cannot complain that no one trusts them when they are using such one-sided agreements to hold a home owner hostage to the developer’s own profits. Potential home buyers should explicitly avoid such restrictive provisions and refuse to indulge developers who try to get away with such practices.

Nikhil Narayan Sivadas, Assistant Editor, NDTV