Ashish Gupta explains how this contract works for those looking at getting a house built
Constructing a house is a long process. One option is to get the construction done on a turnkey basis. In this case, the owner and a builder enter into a contract where the contractor completes the entire construction along with fixtures and fittings, and hands over the keys to the owner on completion. The owner has to make the payment and occupy the house on completion of the construction.
The other option is to enter into a labour contract only. In this case, the owner enters into a labour contract with the contractor. The material is purchased by the owner himself. Only the labour is supplied by the contractor. It is essential to formalise the arrangement first. It is important to enter into a contract with the contractor.
The mutually-agreed terms should be put down in black and white. The terms and conditions should be written down and signed by both the parties. In case of a construction contract, it is better to have a two-part contract. The first part of the contract should relate to the structure to be built.
The second part should relate to the fixtures, fittings and furnishings to be fitted in the house. The contract should specifically cover the terms.
Parties involved Terms related to quality of material to be used Timeframe for completion of various phases Payment terms Schedule of payments to be made Cost escalation clauses Penalty terms Liabilities of parties Authority to sub-contract work Responsibility to provide materials Specifications and brands of fittings to be used Timelines for inspection The contract should be drafted in as much detail as possible, should be specific and unambiguous. A careful drafting of the contract will prevent disputes and confusion at a later stage.
Usually, construction costs are quoted on a per square foot basis. You may have the structure built on a per square foot basis. The contractor will quote on the basis of the structural and working drawings prepared by the architect.
For the part related to fittings, fixtures and furnishings, you should get quotes for work on an item rate basis. The contractor will give a quote after going through the specifications and quantities. In any case, all specifications regarding the make, brand and size should be mentioned specifically.
It should be ensured that the base rates for the tiles, granite, marble, glass, lights, tubes, pipes, windows, grills, basins etc are mentioned separately. This gives you the flexibility to build according to your budget, resources, requirements and taste.
Further, you can safeguard your interests too. You can buy any quality of flooring - granite, marble or tiles - and then adjust the difference from the payment to be made to the contractor. For example, if the quoted base rate of the marble is Rs 100 per square feet for 250 square feet area, but you decide to have a better marble or wood flooring, you may go ahead and purchase it and then minus the amount from the payment to be made to the contractor at the base rate of Rs 100 per square feet for 250 square feet.
- IT IS BETTER TO HAVE A TWO-PART CONTRACT.
- THE FIRST PART OF THE CONTRACT SHOULD RELATE TO THE STRUCTURE TO BE BUILT.
- THE SECOND PART SHOULD RELATE TO THE FIXTURES, FITTINGS AND FURNISHINGS TO BE FITTED IN THE HOUSE
Source: TimesProperty Dt:17-9-10