The Dangers of Redevelopment with No-Reputation Builders in Mumbai
In the bustling city of Mumbai, the real estate market is a complex and often risky environment, especially when it comes to redevelopment. A few weeks back, a worried resident of one of Mumbai’s most affluent suburbs found himself in a difficult situation. His building had been selected for redevelopment a couple of years ago, and a small-time builder had won the project. The old building was demolished, and construction of the new tower was underway. However, the residents were taken aback when the builder suddenly demanded that the ground floor of the new tower include shops, which he could sell to make additional profit. If the residents refused to agree to this revised plan, the builder threatened to halt construction and even stop rental payments.
The residents, feeling cornered, eventually succumbed to the builder’s ruthless blackmail. This scenario is not unique. In redevelopment, the balance of power shifts dramatically once the old building is demolished. The residents’ homes no longer exist, and their new homes are yet to be built. They find themselves in a precarious interim period where their net worth is at risk. The builder, now holding all the cards, can either restore their status as high-net-worth individuals or reduce them to lower middle-class families.
Builders are well aware of this dynamic. Until the agreement is signed, they are on their best behavior, promising the moon and the stars. However, once the building is demolished, their true colors often show. The situation is not much different for home buyers. Once a home is booked with a significant investment, especially in an under-construction project, the power shifts from the buyer to the builder. The buyer’s lifetime savings are tied up in the project, and they often have no Plan B. Their Plan A must succeed.
The most dangerous developers are not just those without a reputation but those who are not even interested in building one. These builders have no code of conduct, no regard for compliance, and a thrill in manipulating rules. They enjoy court battles and have a secret superpower: no reputation at all. Over the years, I have interacted with numerous such developers, and my simple reading of these complex characters is straightforward: they don’t change, even if they claim to have done so. They create fishy circumstances and then claim to be victims. They adopt new identities to hide their notorious past and introduce their well-educated sons into the business to portray a transformation while ensuring the sons remain disempowered.
Once you get involved with these builders—whether as a buyer, vendor, redevelopment allottee, or lender—there is no happy ending. When things go awry, the collateral damage is invariably you. If you take the legal route, you find that they have a larger legal team than a construction team. Publicizing their fraud in the media, hoping it will bother them, is often futile.
The ideal builders are those who have a reputation and are committed to protecting it. For them, their reputation is their code of conduct. They have a vested interest in maintaining their integrity because betrayal in one case can jeopardize their future opportunities. The best builders to work with are those who operate only in one market. Their entire existence depends on their performance and image in that market. These builders don’t have a Plan B, so their Plan A must succeed.
In real estate, as in life, always choose a player who understands that abandoning you means abandoning their own future. There should be no Plan B.
