Complaints about violation of housing contracts increase

Despite being one of the fastest growing activities in the Dominican economy, many complaints are made in the construction sector in the country, ranging from the use of inappropriate materials, leaks and violation of the contract, the latter described as an “attack” by the executive director of the National Institute for the Protection of Consumer Rights (Pro Consumidor), for its increase in recent months.

“In February 2019, I signed a contract in dollars or its equivalent in pesos. In the contract it is stipulated that when the dollar went up a point and one was going to pay they were going to review the rate, but the construction company (LVP) has made some readjustments that do not correspond to reality, from what I have seen in the obligation to go to Pro Consumidor because the company doesn’t want to see reason,” complains engineer José Medardo, who signed a contract to acquire an apartment in the Altos de la Colombia project.

Uncomfortable, Medardo assures that of the 4.1 million pesos that the property cost in February 2019, according to the contract, currently, with the readjustments made by the construction company LVP, it is around 4.7 million pesos.

Buyers contacted by Diario Libre assure that the prices agreed with said construction company have now varied between 10,000 and 15,000 dollars above what was signed.

“Two years ago I signed the contract. In January of this year, I call the construction company to find out what the project is up to. They never answer me, they never make an appointment for me; that do not allow visits to the project due to security controls. Then, about two weeks ago, they send me a statement that the project is stopped because there is a new price readjustment and a new delivery date,” says Ironelis Moreta, a pediatric perinatologist.

Recently, they sent you an email stating that you will have to pay an additional $5,800. “I am going to fight not to pay it, because they have been abusive with one, they do not show their faces. I have already paid more than 13,000 dollars and they don’t tell you how things are going. You can’t go to the project, because they don’t let you in, ”said Moreta, who became afflicted as she recounted her situation.

Jean Reyna, another of those affected in the Altos de la Colombia project, told Diario Libre that they invoiced in 2019 and the delivery promise was in 18 months until he completed the initial payment, but that the LVP construction company leveraged in the pandemic so as not to advance in the delivery of the property.

“From the moment we made the first initial payment, they took nine months to get their hands on the condominium. In other words, they already knew that they were going to be late in the delivery. After that we have all the emails that we delivered to them in such a date, that now its delivery date has been moved, and we are waiting. We acquired a model apartment, it is a penthouse. They call us for the pre-delivery of the apartment, when we go it is totally different from what we bought in the plans,” said the citizen.

Among the irregularities that Reyna denounces are: “the staircase was in an L shape and what they did was a spiral staircase, which does not cost more than 50,000 pesos in a model apartment of 4,100,000 pesos and we do not want to receive it that way. The laundry room It goes on the roof and when they did it in the kitchen part, it took away space for the stairs. They did what they wanted with the distribution of the apartment, which was not what we bought in plans and the straw that broke the camel’s back is that they are raising us 496,000 pesos in relation to an exchange rate that is not true either”.

He assures that he and his wife have gone through a real odyssey with the company and unfortunately, they recently realized that there are many more people who have problems with the construction company.

“They want to return pure and simple, the money to the people, money that you have been paying for two years and the money is devalued. What they want to do is a round business. That is, you give me the money to make a apartment that cost 4.2 million pesos three years ago and now costs 5.5 million pesos, I’ll give you back what you gave me devalued and I’ll sell it more expensive,” said the client, who came from Higüey to the city of Santo Domingo in search of better life.

He emphasizes that: “I work in microfinance, my wife is a professional and human management manager in a production company, we never imagined that after spending so much work together, life would punish us by falling into the clutches of the LVP construction company”.

And: “Our children, who are two, ask us daily. In fact, they have piggy banks, saving to buy things for their rooms, uff! Imagine yourself, I am a tough man, but in reality I have had to cry because of that situation, And believe me, I’m a tough man.”

Complaints rise in Pro Consumer

Like Medardo, Reyna and Moreta, there are also hundreds of people throughout the country who turn to Pro Consumidor for help.

“In the last four weeks we have been receiving many complaints regarding the increase in housing prices with previously signed contracts. In this particular, we have had to start developing criteria based on this onslaught that has been going on for four or five weeks from consumers who have been denouncing increases that they understand to be disproportionate, according to what was signed with builders or construction companies”, informed the executive director of Pro Consumidor, Eddy Alcántara.

He specified that, when a consumer goes to the institution to file a complaint, the inspectors visit the project to see its progress. He cited, for example, that if a block that cost 25 pesos, inflation shot it up to 30 pesos, inflation cannot be applied to the one that was already placed in the home.

“In the last month we received about 125 or 130 complaints, but we already came with other cases before this last week that were increasing, and we have been deciding based on the criteria that we have mentioned,” he said.

The official explained that the inflation that should be reflected in real estate prices is the one established by the Central Bank. “For these months it is 17 percent -he added-, then, an increase that exceeds that 17 percent cannot be translated to the consumer, but also that 17 percent must be in proportion, not in general.”

They project complaints will continue

For Eliseo Cristopher, president of the Dominican Confederation of Micro, Small and Medium Construction Companies (Copymecon), the complaints that have been registered in recent months in the country are going to continue due to the increases that construction materials are registering.

“This onslaught that we have with costs, we have to transmit part to the purchasers, and the purchasers, at the moment of receiving, find that the prices of the apartments have changed. (It is) a situation that is not the fault of the purchasers, but it is not the fault of the builders either”, argued the businessman.

He explained that the builders bought the rod 24 months ago for about 35,000 or 36,000 pesos a bundle and today they are buying it, in some hardware stores, at 85,000 pesos. “Approximately a month ago, we had it at 73,000 pesos, today it is at 85,000 pesos.”

Acoprovi

The Dominican Association of Home Builders and Promoters (Acoprovi) reported that, since mid-2020, Acoprovi has been promoting dialogue and calling for public-private synergy to address one of the main reasons for real estate inflation: the excessive increase in construction materials. And it is that, the increase in essential construction supplies, such as cement and steel, have a high impact on the cost per square meter of construction.

In fact, Acoprovi indicates that, when talking about increases, in the case of cement, it has risen more than 56% since the start of the pandemic and in the case of steel, about 74% in that period. To these are also added other products with significant increases, such as electrical materials and PVC, which have increased by more than 100% in this period.

“This is why, during the period March 2020-March 2022, the cost per square meter increased by about 29%, according to the housing cost index (ICDV), published by the National Statistics Office (ONE) month per month and that monitors the price of the square meter of housing construction, but in its report for the month of May it had an increase of about 8%, the highest in a single month in many years, due to recent increases in cement and steel that were more than 12% and the minimum rate of construction labor that was modified by 21%, “explains Acoprovi.

Acoprovi explained that the pandemic has been one of the causes that has affected the real estate market on the cost side due to various factors. One of them, the logistical disruption in maritime transport, the inflation generated since the start of the pandemic in March 2020, and the recent war between Russia and Ukraine, which have notably influenced the rise in construction materials.

However, thanks to the monetary and financial measures implemented by the authorities from 2020 – 2021, the construction sector managed to recover, becoming one of the protagonists of the reactivation of the Dominican economy. In addition, it indicates that one of the reasons for this growth is that interest rates for construction and mortgage loans reached historical lows, the sector grew by 23.4% in 2021.

As for the measures taken by the construction sector and the housing increases, Acoprovi points out that initially many housing developers assumed a large part of the increase. However, the rise in materials has become a great challenge for the sector, a reality that has led to the need to transfer a large part of the costs of the projects to the prices of the housing units.

Regarding recommendations for home purchase

According to the recommendations of the Dominican Association of Home Builders and Promoters (Acoprovi), the ideal is to contemplate the increase clause based on the Housing Cost Index, which is an official index, published and managed by the National Office of Statistics (ONE). It understands that its use allows the use of a fair parameter, both for the promoter and for the acquirer.

Regarding the increases, Acoprovi adds that it is important to promote a friendly and conciliatory dialogue. In these cases, the ideal is to sit down with the builder and look for alternatives, with a view to benefiting both parties, since sometimes the acquirer may be able to take on greater financing or the promoter assume part of the increase so that the acquirer can complete your purchase of the unit

Finally, Acoprovi points out that it must be taken into account that due to these increases, the value of the property in the market is higher and it could be worth making an effort to preserve it, since it is still one of the best investments at this time.

central bank

The Central Bank of the Dominican Republic recently reported that construction activity increased 3.2% in January-May 2022 in year-on-year terms, a result that was influenced by the considerable increase in the price of construction inputs and by the statistical effect of the base for comparison, since in the same period of 2021 this sector registered a significant expansion of 53.0%.