Home Warranty: Everything you should know

home warranty

A home warranty is a service contract that covers the repair or replacement of household appliances and mechanical systems. This is not your usual home insurance. Home warranties are specially designed to protect your home’s appliances and systems from breakdowns caused by normal wear and tear. This can include air conditioning, plumbing, refrigerators, dishwashers, and much more.

In case the real estate developer fails to rectify such defects within the specified time, a home buyer shall be entitled to receive compensation under the Act. Earlier, most of the real estate developers in their agreements used to keep the period for repairs to as low as two years.

What does a home warranty cover?

It usually covers structural defects that are caused due to deficiency in a building where the structure lacks performance in a way as intended by the homebuyer. It generally occurs due to a flaw in the design, construction quality, or material. Deficiency in the quality of raw material causes leakage and dampness while a fault in construction results in cracks in the foundation, plumbing issues, and electrical and mechanical problems. Under RERA’s home warranty clause, all these issues are covered. Moreover, to ensure that everything goes seamlessly, a developer will have to keep an eye on contractors who sub-contract the work to avoid any difficulty at a later stage.

How will the home warranty protect the interest of homebuyers?

Industry experts have welcomed the move and are feeling optimistic about it. In the international property market, such warranties have enhanced real estate developers’ reputation for transparency and following best practices. As far as safeguarding the interest of homebuyers is concerned, home warranties will surely offer a safe and secure environment to buyers and investors as it makes it mandatory for the developers to rectify any building and construction flaws that may be detected, even post the property ownership has been handed over. Such warranties will surely enhance the developers’ reputation for adhering to transparent, best, and credible practices.

Impact on real estate prices

The defect liability period in the international real estate market varies across countries, it is as high as 10 years in some countries where the builder liability and legal dispute redresses are in synchronization and strong. With a five-year warranty clause under RERA and to evade additional costs occurring from repairs at a later stage, the developers will without a doubt look to enhance their construction quality.

However, whether buyers will be keen to pay a premium on properties that come with stronger warranties is still to be seen. According to the experts, homebuyers would not mind paying a premium for properties that come attached with warranties especially, once the system enhances homebuyers’ trust is put in place. In case of lack of warranties, buyers will be forced to undertake upkeeps and repairs of any damage that is occurred due to a faulty construction at their own price.

The warranty provided by developers covers the appliances that come with a furnished flat and not the construction-related attributes of the building. Hence now, for the first time, developers are beginning to provide a warranty that protects the first as well as subsequent buyers of the home against structural defects in the project.

Homebuyers are now more cautious about the structural stability of projects. A construction warranty will help to build the much-needed confidence among homebuyers and is a mechanism to hold developers responsible for any mishaps due to structural defects.

The concept of a Home Warranty benefits both home buyers and sellers. From the seller’s perspective, home warranties boost sales and improve the company’s credibility.


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