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Karnataka homebuyers owed Rs 245 crore in refunds from builders

Homebuyers in the state have received barely 10 percent of the amount payable by builders as refunds or compensation on account of delays.

The Karnataka Revenue Department has recovered only about Rs 26 crore from builders in the state as compensation or refunds to homebuyers for delayed delivery of apartments and an amount of more than Rs 245 crore is still pending.

Of 683 recovery orders passed by the Karnataka Real Estate Regulatory Authority (KRERA), money has been collected from builders in only 84 cases, according to a document issued by the undersecretary of the regulator that Moneycontrol reviewed.

According to the Real Estate (Regulation and Development) Act, 2016, which is aimed at protecting homebuyers and attracting real estate investments, if a builder fails to pay compensation or refund money to homebuyers, the regulatory authority can issue a revenue recovery certificate (RRC) directing the state revenue department to initiate a recovery from the builders that have failed to deliver apartments to the buyers.

“After KRERA issues the RRC, the deputy commissioner’s office will send notices to the builder and recover the money. It is collected as revenue from land arrears. If the builder fails to reply, the DC office can actually go ahead and take over the property,” said Vittal BR, an advocate at the High Court of Karnataka.

According to the document, the KRERA had issued 683 orders for the recovery of about Rs 272 crore from builders as of July. However, only Rs 26 crore – barely 10 percent – has been recovered and over Rs 245 crore remains outstanding.

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Long wait for dues

KRERA officials can issue a recovery certificate if the builder fails to reimburse or compensate homebuyers within 60 days of the order. Deputy commissioners (DCs) have four months to collect the dues.

The KRERA undersecretary is yet to respond to queries from Moneycontrol on the matter. The deputy commissioner of Bangalore Urban could not immediately be reached for comment.

Sudhakar Lakshman had invested Rs 78 lakh to buy an apartment in Bengaluru. He applied for a refund after waiting for more than three years past the promised delivery date.

“Our RRC order was passed in October 2021. However, to date, I am waiting for my recovery money,” he said. “Despite multiple emails and letters to the revenue minister, KRERA and the Prime Minister’s Office, we did not get any respite.”

Raghava Raju, another homebuyer, said, “If I leave my job and go to KRERA office or DC office, probably then I will be able to get some solution within next 11 months.”

Why the delay?

One reason for the delay in recoveries is because the money to be collected from builders is categorized as revenue from land arrears. Vittal said there is no time limit for the recovery of money in the case of land arrears.

Real estate experts also alleged that the lack of coordination between the KRERA and the revenue department has led to the piling up of recovery cases.

“The recovery is done as land revenue,” said Anil Kalagi, founder of the Bangalore City Flat Owners’ Association. “DC is also empowered and is a coordinating authority for several districts for all local authorities. However, in Karnataka, we find the DCs are not acting on the orders promptly. In such cases, KRERA can initiate action against the DC office. However, as of now, we did not see such measures.”

Kalagi said in states including Maharashtra and Uttar Pradesh, the RERA has taken suo moto action in recovery cases several times. However, in Karnataka, no such measures have been implemented since 2016.

“RERA orders are there. However, they remain on paper with little execution. This unnecessarily burdens the other courts in the state,” he said.

“They can not only attach properties, but also take criminal action,” said Chaitanya MG, another advocate. “KRERA cannot attach properties or issue non-bailable warrants, making it a toothless tiger.”

Dhananjaya Padmanabhachar, director of the Karnataka Home Buyers Forum, said the revenue department is not doing its job to help homebuyers due to a lack of will and the absence of a timeline for recovery. The state government must bring this process from the RERA and the revenue department time-bound, he added.

Chaitanya said DCs are empowered to attach the apartments of builders and auction them after they fail to respond to notices.

“However, the apartments in this matter are either delayed or still under construction. Who will buy such an apartment at the auction?" he asked.

Kalagi said, “In two such incidents last year, two properties had gone for auction. However, nobody came forward and bought the assets.”

Vittal said in one such case he had handled last year, the builder had moved the high court appealing against the attachment of assets.

Advocates suggested that homebuyers should file a writ petition in the Karnataka high court and seek directions from the judiciary.

“Though this will again overburden the courts, as of now, this is the only solution,” Vittal said.
Souptik Datta Sub Editor at Moneycontrol
first published: Sep 20, 2022 01:41 pm
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