Projects with partial occupancy certificate not classified as ongoing: KRERA

The regulator’s decision came on a plea by a homebuyer who had purchased an apartment in Prestige White Meadows located in Whitefield in 2017.

Karnataka’s real estate regulator has held that homebuyers cannot claim compensation in delayed residential projects that have obtained partial occupancy certificates.

The Karnataka Real Estate Regulatory Authority (KRERA) dismissed a complaint filed by a homebuyer for delayed compensation in a Prestige Estates Projects property in Bengaluru. It also held that such properties, which obtained partial occupancy certificates before new real estate regulations came into force, cannot be registered with the regulatory body as ongoing projects.

“Properties for which applications have been filed seeking occupancy certificates, either partial or complete, need not be registered with RERA,” the regulator said in an order dated April 24.

The regulator’s decision came on a plea by a homebuyer who had purchased an apartment in Prestige White Meadows located in Whitefield in 2017. According to the sale deed signed in 2015, there was a delay of 18 months in handing over possession.

One-time settlement

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One person who bought an apartment in 2018 claimed the developer failed to register the second phase of the project, which is still under construction, with RERA. Another buyer, who was promised handover in 2014, said the developer failed to give possession until 2018 and sought compensation for the delay.

In all the cases, Prestige Estates told the KRERA court that the development of the entire project was completed by September 2016. The application for the occupancy certificate was submitted to the local corporation in October 2016 and received in 2017.

However, the developer confirmed to KRERA that there was a delay in obtaining the occupancy certificate for the second phase due to land litigation and other issues. According to the order, a partial occupancy certificate was granted up to floor 21 of Tower 4 in Phase 2.

The developer also told KRERA that it reached a one-time settlement with the aggrieved homebuyers.

The regulatory body found that the homebuyers are not entitled to claim delayed compensation and the project need not be registered with KRERA. The court noted that there was a delay in the handover of possession for some buyers.

The court also observed that several homebuyers were liable to pay interest on delayed instalments, totalling about Rs 32 lakh in some cases.

KRERA said complainants who accepted possession in 2018 with a one-time settlement from the developer cannot claim interest for the delay period.

For homebuyers where the delay was four years, the court said they received a one-time settlement of Rs 35 lakh in discounts and they cannot claim compensation.

The regulator noted that construction and development of Tower 4 or Phase B of the project was completed by September 2016, almost a year before KRERA came into existence in May 2017, and the partial occupancy certificate was approved in September that year.

The court referred to the Karnataka RERA Rules of 2017 and said a development will be considered complete even where a partial occupancy certificate has been issued by the competent authority.

The court also cited a Karnataka High Court order of 2022 in the Cambian Technologies vs KRERA case, which held that projects with an occupancy certificate, partial or complete, need not be registered with the RERA.

“Thus it is clear that the project does not come under the purview of Karnataka RERA as an ongoing project," it said in the order.

The discrepancies

Homebuyers and lawyers said the exception made for projects with partial occupancy certificates was a grey area and appeared to be inconsistent with the Real Estate (Regulation and Development) Act (RERA), which was passed by Parliament in 2016 and came into effect fully from May 1, 2017.

"KRERA introduced a partial occupancy certificate in the Karnataka RERA Rules, which does not exist in RERA Act 2016. We expect KRERA to make the required changes in the RERA rules in Karnataka to comply with the RERA Act concerning occupancy certificate," said Dhananjaya Padmanabhachar of the Karnataka Home Buyers’ Forum.

This has a significant impact on homebuyers as the National Consumer Disputes Redressal Commission clearly stated that no occupancy certificate means no maintenance needs to be paid, he added.

Advocate MD Rajkumar, who practices in the Karnataka High Court, said the solution lies in harmonising directions of the courts or municipal bodies in this regard.

"OC is a contract between the developer and the local body. Homebuyers do not have any role to play here. And in such a scenario, different local bodies, including the high court, have passed mixed orders on the issue that broadens the grey area in this matter," Rajkumar said.

A list of questions has been sent to Prestige Estates and Moneycontrol will update the story after getting a response.