Investment: How to avoid stalled project risk and evaluate the financial health of a developer’s project?

Despite India’s property sector being subjected to delayed and stalled housing projects, home buyers are in the need of checking the financial health of a builder, so as to prevent any uncertainty about its completion.

“To avoid risks later it is extremely important for a buyer to verify a project’s financial health. See the company that builds the project, since the constructor can build several projects by various companies. Once the name of the company has been known, you can search online and search for information to understand that company fundamental,” said Sanjeev Chandiramani, Knight Frank India’s national director of capital markets & head west of corporate finance.

You can check the website of the Central Registry of Securitisation Asset Reconstruction and Security interest of India (CERSAI) for information about whether the property is mortgaged from a bank or housing finance company. This was incorporated by the Financial Services division within the finance ministry, which keeps track of all properties for loans.

“Buyers can review documentation sent to the Ministry of Corporate Affairs by a company. Those records can be viewed publicly on the MCA website. Apart from that RERA databases are provided with details concerning the funding of a specific project that a buyer can verify. The third thing is that a customer can search online and access information which the consumers would find useful to the community,” says Abhilash Pillai, Partner, Cyril Amarchand Mangaldas.

RERA portals will also give full details on the real estate project, the developer, the officer, the project plan, properties, the contractor’s name, the name of the architect, the design engineer, the details of the project banks, the land/plot details, the developer’s document uploaded and the four-monthly report. These details can be checked online and accessed via RERA authorities in order to assess the current situation of your project.

Chandiramani stated, “Review the title of the estate with the help of a local lawyer.” He can also verify the land records as buyers usually can not verify. A buyer must take proper due diligence online and offline to figure out whether the developer or plan that he invests in is in any risk or not.