The National Consumer Disputes Redressal Commission (NCDRC) has held in its order for a delayed project in Bengaluru that the landowner, as well as the developer, is liable for any compensation that may be awarded.
In the case of the ND Laurel project in Varthur, promoted by ND Developers, the order states: "The other defendants are the landowners, who had offered the land to defendant no.1 (developer) for development and construction of the flats. All the defendants are parties to the agreement executed with the complainants, and therefore they, including the developer and the landowners, are jointly and severally liable for the numerous instances of unfair trade practices, restrictive trade practices, and deficiency in service."
Delayed by about nine years, the project was supposed to be handed over by December 2012, with a grace period of four months.
Through an email dated October 2016, the developer informed the homebuyers that it would hand over possession of the flats by the end of March 2017. The project would be complete in all aspects, including road work, sewage treatment plant (STP), lift, corridors, staircase, etc.
However, despite taking almost 95 percent of the money from the homebuyers, the apartments were not delivered.
About 500 homebuyers filed a case before the NCDRC in 2017, asking for a complete refund for delayed possession of the project.
In its order, the NCDRC has asked the defendants to refund the entire amount deposited by the respective homebuyers, along with interest at 9 percent per annum on the amount, within two months of the order.
For homebuyers who have taken possession of the apartments on paper, the NCDRC ordered the defendants to complete the construction within six months, as also pay compensation for the delay at 8 percent interest per annum. Additionally, the order said, "Any delay beyond two months will attract an interest of 12 percent per annum."
A list of questions have been sent to the developer, and Moneycontrol will update the story on receiving a response.
Homebuyers in limbo
After waiting for nine years, several homebuyers have taken possession of the apartments without an occupancy certificate (OC), despite several High Court orders deeming that illegal.
In 2013, Sourav (name changed on request) had invested about Rs 55 lakh for an apartment in the project. However, he moved in just last month as he was left with no choice. "I had to move in because I cannot buy another apartment right now. I was paying a rent of Rs 60,000 as also EMIs for the bank loan I had taken to buy the apartment," he said.
The impact
Advocate Chandrachur Bhattacharyya, who argued for the homebuyers in this matter, said, "In case of joint developments, every landowner is responsible for delayed projects in case the builder fails to honour the terms. For any joint development, along with the joint development agreement (JDA), the landowner has to execute a general power of attorney (GPA) in favour of the developer. This means, the landowner becomes the principal and the developer becomes the agent,’’ he added.
Under the Indian Contract Act of 1872, the principal is liable for any misconduct by the agent.
RTI activist and Bangalore City Flat Owners' Welfare Association (BCFOWA) President Anil Kalgi said that such provisions were available in the Karnataka Real Estate Regulatory Authority (KRERA), however, till date he had not seen such orders being passed.
Dhananjaya Padmanabhachar, Founder and Convenor of the Karnataka Home Buyers’ Forum, concurred. "Home buyers are not aware that `promoter’ refers not only to builders but also land owners. In fact, the responsibility should be more on landowners. Going forward, homebuyers need to make landowners party to KRERA complaints," he added.
A circular issued by KRERA in December 2019 had clarified that landowners with revenue share in real estate projects should be treated as promoters. "The developer shall register the project, including the revenue share of the land owner/promoter," the circular added.
Joint developments in 2022
Experts say that joint developments saw a major boost in 2022. Fresh lands being unlocked after Covid has opened opportunities for the real estate sector to expand across cities, often through joint development.
A report by Anarock property consultants said that the number of land deals between January-September 2022 across the top eight cities had more than tripled, to 68.
Hyderabad topped the charts with a 46 percent share, the National Capital Region (NCR) came second with a 14 percent share, and Bengaluru had a 13 percent share.
The NoBroker Real Estate Report, 2022, says: "Plots have suddenly gained traction across cities. Land price appreciation is the primary driver for this trend."
Bengaluru saw major deals in the latter part of 2022, including Shriram Properties acquiring three delayed projects in the city with a revenue potential of above Rs 400 crore.
Advocates say that with the increase in land deals across Bengaluru, landowners need to be aware of several legalities before signing agreements with developers.
"The landowners need to be careful as home buyers' money is involved. And they are also a part of the service rendering process as the title is transferred from them to the home buyers. They should check the history of the developer’s RERA compliances before getting into a JDA," Bhattacharyya said.
With watchdogs like RERA and consumer courts in place, a single mistake can cost landowners crores, he added.
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