How real estate firms use Pre-EMI scheme to lure in customers, delay projects

Hyderabad: M Krishna Kumar (name changed) paid a hefty booking amount for a flat in a posh residential apartment in Hafeezpet in 2018. But work on the project is still going on at a snail's pace. The builder is yet to hand over the flat to Krishna Kumar causing him severe inconvenience and mental agony.

Explaining the plight of his cousin, P Maheedhar Naidu, an advocate, told NewsMeter that Krishna Kumar is a techie and a resident of Begumpet. He is currently residing at Dallas in the US. In 2017, Krishna Kumar came across an advertisement regarding one of the ventures Aditya Capitol Heights at Survey No 78, Hafeezpet, Serilingampally, Ranga Reddy District. Thota Satyanarayana is the managing director of Aditya Construction Company Private Limited.

Aditya Constructions lured Krishna Kumar with a competitive price

“The marketing managers of the Aditya Constructions lured my cousin by promising him competitive price, amenities, construction quality, delivery time and with a new idea called ‘Pre-Emi Scheme’ until the ‘Intimation of Flat Completion’. Believing the same, he booked a flat on January 4, 2018, and paid Rs 1 lakh as the initial booking amount. The total sale consideration agreed for the flat is Rs 1,02,62,500,” the advocate said.

Krishna Kumar booked a flat under the pre-EMI scheme

Maheedhar said that the pre-EMI scheme is nothing but interest charged by the bank towards loan disbursed and this amount does not include the principal amount. The builder had entered into an Agreement of Sale on March 23, 2018, after my cousin paid 10 per cent of the total sale consideration which amounts to Rs 10,26,250, the advocate said.

“My cousin has booked his flat under the pre-EMI scheme and the balance sale consideration was paid by way of taking a loan amount from PNB Housing Finance, who is the approved project financing partner. As per the scheme, the builder promised to pay the EMI of the loan amount until the completion of the flat and my cousin must pay EMI’s from the date of intimation of flat completion,” he said.

Elaborating further, the advocate said that based on his cousin’s loan application and credit profile, PNB Housing Finance approved a housing loan to the tune of Rs 87,24,000 on February 20, 2018, even before executing the Agreement of Sale on March 23, 2018. The PNB Housing Finance has disbursed an amount of Rs 74,29,117 to Aditya Constructions company’s account as part of loan disbursement, he said.

Flat located in a prohibited area

Maheedhar said that the PNB Housing Finance Limited in collusion with Aditya Constructions had executed a Tripartite Agreement to disburse the loan amount for construction without mentioning any specific date of delivery.

He alleged that Aditya Constructions and PNB Housing finance have gone ahead with the above sale transaction being very well aware of the fact that Survey No 78, Hafeezpet in which my cousin's flat is located is on the prohibited list.

The above-mentioned survey number is a disputed land in a long pending litigation before the High Court of Telangana and such lands can be registered but the buyer would not have the right to sell it to another person, he added.

The advocate accused Aditya Constructions was aware of the disputed land and had sold the flat to him causing severe mental agony and financial hardship.

“My cousin has paid a total amount of Rs 85,55,367 towards the flat cost as per agreement of sale entered with the Aditya Constructions. So far, the builder has not taken any concrete steps to finish the construction and handover the possession of the flat to my cousin till date. The progress of construction is being carried out at a snail’s pace. The building permission issued by the GHMC for one of the blocks in the apartment had expired in March/May 2020,” he said.

Builder failed to pay EMI under pre-EMI scheme

Maheedhar also said that as per the initial pre-EMI scheme, the builder had to pay the EMIs to PNB Housing Finance, but the fact remains that he had not paid a single rupee as per the agreed scheme.

However, the project financer PNB Housing Finance is claiming an amount of Rs 74,000 every month from my cousin’s attached bank account, he said and added that whenever Krishna Kumar questioned the same through emails between May 2, 2018 and August 24, 2018, the builder gave an evasive reply that the same will be adjusted towards GST.

“My cousin has paid more than claimed GST to date in the name of pre-EMIs and the same amounts to Rs 24,62,436. There are no GST bills provided by the builder, whereas he had claimed that the GST from my cousin, which also amounts to an offence under the GST Act, 2017 and respective GST rules in force today. The builder promised to deliver the flat on multiple dates for two purchasers from the same block. My cousin has also recently come to know that the construction plan approved by GHMC has expired in the year 2019 and my client has no knowledge whatsoever regarding the extension of the approved plan by GHMC,” Maheedhar said.

The advocate also said that they would not hesitate to approach the TS-RERA authorities and put forward the fraudulent acts of Aditya Constructions.

“In spite of being prompt in payment of money as demanded by the builder, my cousin has suffered a lot mentally, physically apart from financial loss. Moreover, the builder is carrying on with the construction in a sub-standard manner and not in line with standards as promised in advertisements (YouTube videos), brochure and Agreement of Sale which amounts to cheating and deficiency in services,” he alleged.

Aditya Constructions failed to respond to legal notice

In September 2023, a legal notice was sent to Aditya Constructions and so far, there has been no response from them in this regard, the advocate said. Asked whether they approached the police, Maheedar said that he did not approach the police but other buyers who booked flats in the same venture had filed a complaint with Jubilee Hills police. A cheating case was registered against Aditya Construction, he added.

In response to a question about what they are expecting from the builder, Maheedar said that the builder should immediately register the flat with my cousin’s name without any further delay and complete the construction of the flat with a valid occupancy certificate and complete utilities issued from the municipality board.

Apart from that, the builder should pay an amount of Rs 24,62,436 which is calculated from April 2018 till November 2023 which is balanced under the pre-EMI scheme described in the Agreement of Sale. The builder should also pay an amount of Rs 9,00,000 for the delay in delivering the flat, waive off the late fees that were abruptly charged to my client despite releasing the funds and provide GST bills to Krishna Kumar and to adjust the difference in GST bills collected and paid to the authorities in the total agreed sale consideration flat cost.

“If the builder fails to honour the above said demands, we will approach the appropriate consumer forum, TS-RERA Authorities, file a criminal complaint with the concerned police for the above said acts and other forums available seeking justice,” the advocate said.