It has been over six years since the Real Estate (Regulation and Development) Act, 2016 (RERA) has been implemented. It has established a robust framework for safeguarding the rights of homebuyers. However, there are key aspects which remain ambiguous. One such is the structural defect liability of the promoter
As per RERA, a promoter is responsible for rectification of a structural defect or any other defect in workmanship, quality or provision of services in the project for five years from the date of handing over possession, without further charge. In case the promoter fails to rectify the defects within the stipulated time, the aggrieved homebuyers are entitled to receive compensation.
Although this right granted to the homebuyers is one of the cornerstones of RERA, the following key aspects relating to this obligation remain unaddressed or vary across States.
Definition and scope
While RERA itself does not provide for a definition of ‘structural defect’, certain States such as Haryana, Telangana and Tamil Nadu provide for inclusions and instances of ‘structural defects’ under their RERA rules. For example, the rules issued by Haryana include defects due to faulty workmanship or defects due to materials used in RCC or MS work, and the rules issued in Telangana exclude fittings which are subject to natural wear and tear.
That said, most of the States including Karnataka, Punjab and Delhi do not provide a definition for the term or instances of what may be considered as structural defect in a project. In such States, a defect in structure could be understood to be of wide purport, depending on the view taken by the State RERA authority concerned.
As more than five years have elapsed since the implementation of RERA, certain projects, under the ambit of RERA right at their inception, are in the completed stage and rights and liabilities regarding structural defect liability are being discussed and disputed amongst the promoters and homebuyers.
To address the same, certain RERA authorities have clarified what may be considered as ‘structural defect’. In one such case, the RERA authority in Maharashtra directed a promoter of a real estate project to rectify defects such as leakages, cracked external plastered surface leading to leakage/seepage inside flats.
In another case before the RERA authority in Bihar, a homebuyer claimed that facilities such as swimming pool, gym and community hall and fire safety arrangements were not constructed as per the agreement executed with the promoter and that the project was incomplete. The RERA authority observed that the promoter was bound to perform his duties as per RERA.
The structural defect liability period, as per RERA, is linked to the date of hand over of possession of each unit, that is a period of five years from the date of handing over possession.
While RERA provides for computation of the defect liability period from the handover of the unit, a promoter may want it to be five years from the receipt of occupation/completion certificate for the project. However, so far neither the courts nor State RERA authorities have clarified on any other mechanism for computation of the defect liability period in such a case. In fact, in certain orders RERA authorities have reiterated that the period starts from the date of handing over of the unit to the homebuyer.
In the absence of any jurisprudence to the contrary, the defect liability period of five years begins for each unit from the date of handing over of the possession of such unit.
Clarity on on the issue has become more pressing now, as it is almost six years since RERA has come into force in its entirety and, consequently, the promoters of new and ongoing projects are now starting to face claims for structural defect liability.
Shrutikirti is Partner, and Karuna is Senior Associate, Shardul Amarchand Mangaldas & Co.