The Perils of Dealing with No-Reputation Builders in Mumbai's Real Estate
In redevelopment, once your building is demolished, the balance of power shifts completely to the developer. A few weeks back, a worried resident of Mumbai’s most wealthy suburb was in a dilemma. His building had gone into redevelopment a couple of years ago. A small-time builder had won the project. He had demolished the old building and had started construction of the new tower in its place. But the residents were taken aback when the builder made a sudden demand: The ground floor of the new tower had to now include shops, which he could sell and make money. If the residents refused to give their consent to the revised plan, he would stop the construction and even the rental payments.
The residents succumbed to the ruthless blackmail strategy of the builder. That’s not surprising. In redevelopment, once your building is demolished, the balance of power shifts completely to the builder. Your old home no longer exists while your new home is yet to be built. You have entered an interim period where your biggest source of net-worth is in danger. The builder is then the man who can re-instate your status as a high net-worth family or reduce it to just another lower middle-class family.
Builders, of course, know this reality. As most residents undertaking redevelopment would have learnt, the builder remains on his best behaviour until the agreement is signed. Thereafter, the colour changes once the building is demolished. The situation is not very different for home buyers. With them, the colour changes once a home is booked with a reasonable investment – especially when the project is at the under-construction stage. The power moves dramatically from the home buyer to the builder. For the buyer, his lifetime savings are invested in the project. He does not have a Plan B. His Plan A needs to succeed.
The most lethal developers are not just those without a reputation, but those who are not even keen to build one. They have no code of conduct. Compliance with the regulator is unnecessary, manipulation of rules is a thrill, while court battles are a source of enjoyment. They have a secret superpower: No reputation at all. Having interacted with numerous such actors over the years, my simple reading of these complex characters is straightforward: They don’t change even if they claim they have changed. Through their actions they create fishy circumstances and then claim to be victim of those circumstances. They come out with a new identity to hide their notorious past. They introduce their well-educated sons into the business to portray their transformation – while ensuring the sons remain disempowered.
Once you go into bed with them – be it as a buyer, vendor, redevelopment allottee, lender – there is no happy ending. When things don’t go as per plan, the collateral damage is you. If you take the legal route, you learn that they have a bigger legal team than a construction team. If you publicise their fraud in the media thinking it will bother them – it won’t. The ideal builders are the ones who have a reputation and want to protect it. The reputation is their code of conduct. They have skin in the game to that extent that betrayal in one case can jeopardise their opportunities in others. The best builders to engage with and who are on their best behaviour are the ones who operate only in one market. Their entire existence is dependent on their performance and image in that very market. These Builders don’t have a Plan B. Hence their Plan A needs to succeed.
In real estate, like in life, always choose a player who knows that abandoning you means abandoning their own future. There should be no Plan B.
