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LEGAL FRAMEWORK FOR RIGHTS OF HOME-BUYERS

The Real Estate Industry in India has been booming at a rapid pace and continues to be a major accelerator of market-forces and economic g...


The Real Estate Industry in India has been booming at a rapid pace and continues to be a major accelerator of market-forces and economic growth. Therefore, the legal framework has largely been pro-real estate, leaving innocent home-buyers in dark. However, as the purchasing power and urban housing industry is growing, so have the buyers. In consonance with this growth, the government has become more vigilant towards ensuring protection to homebuyers. The Homebuyers in the real-estate industry are protected under an array of laws such as the Consumer Protection Act, 1986 (2019); Real Estate (Regulation and Development) Act, 2016 (RERA) as well as the Insolvency and Bankruptcy Code, 2016 (IBC). While the Consumer Protection Act provided efficient redressal but the growth of the real-estate industry where the 'developers' abandoned projects or eloped with the buyers money without delivering promised houses necessitated a more specific redressal mechanism. The Real Estate (Regulation and Development) Act, 2016 (RERA) takes care of the same, along with the Insolvency and Bankruptcy Code, 2016 (IBC).

A homebuyer may issue such as non-delivery of flat possession, non-refund of money (such as that paid on default of the builder), unreasonable delay or non-payment of compensation in lieu of delay, undue changes in the project without soliciting of the buyer's consent (No alterations can be made without the prior consent and knowledge of the buyer. This includes changes in the blueprint, design, number of floors etc.) Such a homebuyer can seek remedial action under the RERA act. In such a scenario, the terms and conditions of the Agreement come into play. The New Consumer Protection Act of 2019 allows District Commission to declare any unreasonable and exploitative terms and conditions as invalid. This is a welcome move. It is important to note that w.r.t. RERA and its application, local State laws may also be applicable, over and above the Central Act.

With Respect to IBC, the 2018 amendment now considers a homebuyer as a "financial creditor". In event of a conflict between the two acts, IBC will prevail. A joint application by 100 (or at least 10% of the total buyers) homebuyers can be instituted in NCLT against a real estate enterprise.

A common mistake made by homebuyers is the default in payments to the developer or the Builder. Default in payment (as per the terms of the agreement) leads to a default cancellation of any claim.

It is important to note that in case of delay in delivery of possession due to unforeseen circumstances (force majeure), such as the present COVID-19 pandemic, it is possible that a reasonable delay may be caused. In such a scenario, no complaint can be instituted against the buyer. Under the RERA Act, it is mandatory for all builders/developers to register their projects with the Regulatory Authority established under the RERA Act. The details of same must be published on the website and made available in the public domain. The Buyers are also allowed to withdraw from the project in case the delivery of possession (as per the agreement) is not made on time. For this purpose, the buyer can send a simple notice to the developer over email or by post. The Developer/Builder is obligated to make the requisite compensation. The Act also provides for compensation with interest to those buyers who do not withdraw from the project which is already past its stipulated deadline. In case of refusal or delaying tactics to make the payment, the homebuyer can institute a complaint against the developer/builder at RERA. The officer so receiving the complaint is bound to dispose of the complaint within 60 days.

Apart from RERA Act, the homebuyers can also approach the court through various other channels. This includes filing complaints under the Consumer Protection Act, 2019; Civil Suit (in cases where a requisite RERA body has not been established); Criminal case for breach of trust, cheating, etc. However, in such scenarios, the remedy is criminal and not monetary. Therefore, it is advisable that the homebuyer seek monetary remedies in order to make good his loss. The court will order a full refund where the developer is seriously lacking behind the stipulated schedule so that the buyer can invest in another property. Similarly, the court can also order the builder to complete the project as promised and deliver possession as soon as possible. Remedies such as damages may be subject to the agreement between the parties.

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