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Though apartment culture
has picked up in most of the metros and a large number of people live in
apartments, if option is given to the people while investing their money on
residential property, a large number of people prefer to purchase plots and get
the house constructed according to their taste and style instead of buying an
apartment or ready built house.
However, it would be a
difficult task for the owner to get his house constructed from a contractor
unless every minute care is taken by him to protect his interest. The deed of
construction should be a well thought over document and should contain all the
terms and conditions explicitly stated. The following are the some general
guidelines which may be of some help while entering into a construction
contract.
Before undertaking
construction of a house, the property owner has to plan out his requirements
and the method he has to adopt for successful completion of construction after
taking into consideration the various options available for him. He has to
select a building contractor after market survey, enter into a written
construction contract putting forth all the terms and conditions in an
unambiguous manner which shall be signed by both the owner and the contractor.
To avoid disputes and misunderstandings, doubts and confusion, the terms and
conditions should be clearly mentioned in simple language in the deed of
contract.The contract should be drawn up with the minute details and should be
to the point.
Basically, the terms of the
contract should contain details of the parties involved, quality of the
materials to be used, time frame within which the different phases of construction of the house are to be completed, schedule and mode of payment,
escalation clauses, penalty terms, liability of the parties, authority for
appointment of sub-contractors, if any, source of supply of construction
materials, specifications of fixtures and fittings to be provided in the house,
provision for inspection by the owner or his agent or representative of the
progress of construction and the quality of materials used, authority who shall
decide the quality of the material used, compensation, if any to be paid for
the loss of life and for the body injury for the labor force while at work,
arbitration clause etc.
It is the normal practice
that the contractor shall submit his quotation after he goes through the
specifications and the quality of materials required for construction. The
quotation should clearly mention the make, brand and other particular specifications
of the materials to be used. The owner should make sure that the base rates for
the tiles utilized, granite, marble, lights, tubes, glass, pipes, windows,
grills, basins etc are mentioned separately. It may be kept in mind that the
cost of construction is normally quoted on square foot basis and the structural
and working drawings prepared by the architect will be the basis of the
contractor's quotations. It is better to get the quotation on item rate basis
for the fittings, fixtures and furnishings.
Broadly, there are two ways
of awarding the construction contract - Construction on a turn key basis and
construction on the basis of a labor contract.
For construction under
turnkey method, the entire construction work is assigned to the contractor /builder, including providing of fittings and fixtures and the building so
constructed would be delivered by the contractor / builder to the owner only
upon the total work is executed and the house is ready for occupation. The
contractor / builder shall be collecting the agreed sum from the owner as per
the terms of agreement at different intervals as and when the work progresses
and the final installment due shall be collected at the time of handing over of
the house or after a lapse of certain period after handing over of the building
to the owner. Under this type of contracts, a two part contract is referable.
The first part pertains to the type and quality of structure that is to be
built while the second part relates to the type and quality of fittings,
fixtures and furnishings to be provided by the contractor.
There is, however, an
option available to the owner to purchase the type and quality of material of
his choice than agreed upon while entering into a construction contract. For
example, as far as flooring is concerned, it could be granite, marble or tiles
and the owner is entitled to reduction from the total contracted sum payable to
the builder for the materials supplied by him. For instance, if the base rate
quoted for the marble is Rs.150 per sq.ft for a 600 sq ft area, and the owner
desires to choose better quality marble or wood flooring he can purchase it and
then get reduction from the sum due to the contractor. He can apply a similar
strategy for other items such as fittings, fixtures and furnishings.
Labor contract method
For construction under
labor contract method, a labor contract agreement is entered into between the
owner and the contractor. Under this system, the property owner shall make
arrangements for regular and systematic supply of all the materials required by
the contractor at different stages of construction while the contractor shall
utilize the material so supplied for construction of the house through his labor.
This method would be preferable where high quality of construction is expected
since the property owner shall take minute care to select the material of his
choice for being used in the construction. Under this method, the owner will be
able to get his house constructed keeping in mind his budget, needs, resources
and tastes. In both the methods of contract, the property owner should be vigilant
and should visit the construction site as frequently as possible to set right
the deficiency if any the progress of construction.
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