Personal Finance

Key lessons for homebuyers from RERA judgments

Meera Siva | Updated on: Nov 27, 2021
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Various RERA verdicts illuminate the rights and limits of homebuyers

It has been over four years since the Real Estate (Regulation and Development) Act or RERA has been active. There continues to be new questions raised on the different aspects of the Act. For instance, recently the Supreme Court confirmed the retroactive applicability of the Act to projects that were underway when the Act was passed in 2016.

As of November 2021, 70,848 projects have been registered and 78,793 complaints have been disposed, based on data from the Ministry of Housing and Urban Affairs. These cases have helped to shed light on the nuances of the Act.

Affirmed rights

There are a few judgments that have strengthened the rights of homebuyers. One example is the one involving Emaar MGF on the channels available to a buyer for remedy. The verdict clarified that consumers have the option to approach RERA as well as Consumer Protection forum and not limit to just one.

Another case, involving Arkanade Realty, relates to buyers’ rights on parking. The developer had delivered the house but the parking space was being sold to others. The ruling confirmed the requirement under RERA that the developer is obligated to provide parking space to all buyers in a project and that the land cannot be sold to outsiders.

Buyers can also take comfort to note that they can get compensation not just for delays in hand-over but also for shortages in carpet area. In a case handled by the Maharahstra RERA authority, a buyer filed that there was a shortfall of 69 sq. ft. in the 806 sq. ft. carpet area promised. The builder was directed to reduce the cost of the flat for the shortfall in area.

The Maharashtra RERA has also made it mandatory that a society or similar legal entity should be formed by the developer after 51 percent of the flats have been booked. This is a shift from the earlier practice of forming one after the project receives completion certificate. The benefit of this decision is that home buyers can oversee the work and seek regular updates from the developer.

Besides private builders, RERA also applies to construction projects undertaken by the Government. So homebuyers in these projects can also take advantage of the redressal available for delays or other issues. Also, landowners will be liable as a builder if they take a share of revenue from the sale of the project and would be answerable to buyers.

Another important issue that was lingering related to precedence of RERA in situations when there are different Central and State government laws. In a case regarding the state of West Bengal, the Supreme Court noted that the State can legislate in spaces which are left out by RERA but in areas where there are overlaps, RERA has an over-riding effect over any conflicting State laws.

Also read: 'Real Estate Regulatory Authority can delegate its powers to hear complaints from homebuyers'

Few restrictions

There were also instances where the result was not favorable to buyers. One such is the judgment by National Company Law Appellate Tribunal (NCLAT) on the question of whether home buyers can be included under the ambit of financial creditor when the builder files for insolvency. While the buyers had already received an order for payment through RERA, the forum ruled that relief cannot be provided under the Insolvency and Bankruptcy Code to receive the amount awarded. On the question of whether redevelopment is covered, the Maharashtra RERA ruled in the negative. For these, the housing society members must approach a civil court.

Also, while a buyer can approach civil court and RERA, they cannot get double compensation. In a ruling, a plea for compensation and possession was dismissed because relief had already been granted by a civil court. The complainant was also charged INR 10,000, to cover the developer’s legal costs.

Lease transactions are also not in the purview of RERA as only allottees are covered and not lessees. In the case involving Lavasa’s project - which had been halted due to an order from the Ministry of Environment and Forests – the agreements were a 999-year lease and not of sale. The buyers were not deemed as allottees, but as lessees and hence cannot get relief for delays through RERA.

Some gaps

The question on whether a buyer can receive refund of their advance is still unclear. The Tamil Nadu RERA ruled that a buyer needs to approach the consumer forum for refund of the advance amount paid to book an apartment. However, the Maharashtra RERA ordered a refund when a buyer noted that there were discrepancies in the booking offer – such are regarding EMI payment terms. Given that the purview depends on the specific situation, buyers may keep their options open and approach both RERA and consumer forum for relief.

Also, data on follow-up to the verdict is a cause for concern – Karnataka RERA data from August 2021 showed that while 595 verdicts were delivered, only 14 cases had penalty amount paid. This is a mere ₹6.87 lakh paid out of ₹245.72 crore.

The author is an independent financial consultant

Published on November 27, 2021

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