What buyers should do if their housing projects are stalled or delayed

It is a telling story in India about the sheer number of housing units that are stalled or delayed.

Heavily delayed – and even worse, completely stalled – housing projects (launched in 2014 or before) continue to plague the Indian residential sector, according to data from ANAROCK Property Consultants released last year.

Stalled projects are those with absolutely no construction activity, while delayed projects are those with minimal progress.

The overall value of the 174,000 homes that are stalled across the top seven cities currently exceeds Rs 1,40,613 crore. Over 65 percent of these units fall in the price bracket of under Rs 80 lakh. The maximum number of stalled units is in the National Capital Region (113,860), followed by the Mumbai Metropolitan Region (41,720).

Homebuyers stuck with delayed projects have limited options, if insolvency proceedings haven’t already been initiated against the builder. Here’s what homebuyers can do:

Complain to the real estate regulator

The first option is to file a consumer complaint with the Real Estate (Regulation and Development) Authority (RERA) for delayed projects.

“It will either assist them in obtaining a refund or will put pressure on the builder to expedite the project. It is fairly common for builders to delay projects for various reasons such as financial strain, labour challenges, and so on, all of which result in hardships for homeowners as they all pay EMI on the loan, ” said Sonam Chandwani, managing partner at KS Legal & Associates.

Homebuyers are also entitled to payments against delays. They are entitled to interest for every month of delay until possession at a rate prescribed under RERA.

The Real Estate Appellate Tribunal (REAT) has been set up to hear appeals against orders passed by the RERA. The REAT can examine the legality of orders passed by the RERA and decide whether to uphold or overturn them. Orders passed by REAT can be contested in the high court.

Also read: How real-estate regulator RERA failed to help homebuyers stuck in bad housing projects

The legal route

If homebuyers want to pursue the legal route, they can opt for a preferred hearing body or court.

The Supreme Court of India clarified that although Section 79 of RERA bars the jurisdiction of civil courts, the National Consumer Disputes Redressal Commission, a quasi-judicial commission set up in 1988 under the Consumer Protection Act, 1986, is a valid forum for aggrieved homebuyers to file a case against builders.

Major cities in India have city-level forums. But every state in India has a state-level forum. These forums act as consumer courts, where a homebuyer can register a complaint against the developer and seek a refund if possession of the house or flat is delayed beyond one year.

Depending on the value of the property, buyers can approach the NCDRC in the following courts: For properties worth up to Rs 20 lakh, complaints should be filed with the District Commission; for properties valued between Rs 20 lakh and Rs 1 crore, grievances should be listed with the State Commission; and for claims exceeding Rs 1 crore, a homebuyer should approach the National Commission, which is at the central level.

“Accordingly, it could be said from the court’s ruling that this judgment had clarified the legal position of the option of choosing a forum for starting grievances against the builder must lie with the homebuyers and they must be at liberty in order to select between both RERA and/or the consumer forum,” said Aditya Chopra, managing partner of Victoriam Legalis, a law firm.

“However, approaching the authorities under RERA may be more expeditious and can grant comprehensive relief, according to specific situations,” said Mitali Naik, associate partner at DSK Legal.

Should one sell the property and move on?

In general, the challenge that comes with delayed projects is the loss of money. Hence, seeking an exit may make sense. However, finding a buyer is not easy.

“This is because the property’s value is often compromised due to delay. Most delayed projects have gone slow on other basic infrastructure too. Delayed projects have other problems. For instance, such projects have incomplete buildings within a large housing complex, which becomes a cause of worry for residents and also other prospective buyers,” said Pradeep Mishra, founder of Homents, a New Delhi-based real estate brokerage firm.

Continue paying EMIs

In a recent order, the Delhi High Court directed banks to ask the Credit Information Bureau (India) to restore the creditworthiness of homebuyers who stopped paying equated monthly instalments (EMIs) for incomplete or delayed projects. The court, in this particular case, came to the rescue of about 1,200 homebuyers stuck with delayed or incomplete projects.

However, experts warn homebuyers in stalled projects not to stop paying their EMIs.

“Even if the possession is delayed, the purchaser will have to pay the EMI to the bank/financial institution, failing which the bank/financial institution shall have the right to proceed against the purchaser, including charging penal interest to the purchaser,” said Naik of DSK Legal.

What do buyers lose? 

In cases of delayed projects, homebuyers miss the time and opportunity that will otherwise be spent in reaching project completion.

In addition to this, they also have to shell out money to cover lawyers’ fees.

To ensure no further losses, homebuyers need to be vigilant. If a project is delayed, they must act immediately and seek construction updates from the developer.

Homebuyers need to track the daily progress of construction and monitor the financial arrangements for the project. If the developer avoids sharing these details, it may be a clear indication that it’s time to seek the authority’s help or take a legal route. It may help to form a group of fellow-homebuyers to take up a case against the developer.