Developer cannot claim pending dues, delay interest from buyer without valid documents: Karnataka RERA

KRERA said it was just and fair for the homebuyer to complete pending dues only after the developer provided her with valid documents.

The Karnataka Real Estate Regulatory Authority (KRERA) has held, for a Bengaluru-based project, that developers cannot claim delay interest from homebuyers for non-payment of dues until they have furnished valid documents like building plans and project clearances.

Passing an order in favour of a homebuyer at Provident Park Square 5, being developed by Puravankara Limited, the Authority found that most of the documents provided by the developer, including the Bengaluru Development Authority (BDA) modification plan and elevation plan, are either expired or invalid.

"The developer is directed to provide necessary documents and not to collect delayed interest for non-payment of dues until handing over of the documents," the order dated September 12 said.

In this case, the homebuyer, Mary Joghul, booked an apartment in the ongoing project by paying Rs 10.35 lakh in November 2019 with a handover date of December 2024.

However, after the developer failed to provide her with the updated documents, the homebuyer stopped paying the balance amount post-2022. She further approached the Authority asking for relief that the developer should not demand more money until the document is furnished and also seeking a waiver of the delayed interest.

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The case

Among the documents, KRERA noted that the floor plan and elevation plan were valid till 2018 and the developer had to obtain a revised plan if the project did not commence within the validity period. Additionally, the modified BDA plan issued in 2017 was valid till 2019.

The advocate for the homebuyer Gautam Basu claimed that the developer had provided the necessary documents of Provident Park Square Phase 1 before collecting the advance money to book an apartment in Phase 5.

In a written statement to the Authority, the homebuyer said, "The developer has obtained a commencement certificate from BDA in 2022 that states that the developer has collected advance money as booking of the flat without valid commencement certificate for the project."

The developer, however, denied all allegations and said that the project is still ongoing and does not come under delayed compensation or any other clauses under the RERA Act.

"With regards to the order of the Authority, we have already filed a compliance report submitting details of all valid documents as mentioned by RERA. The same set of documents was also shared with the customer in a compact disc (CD) earlier", Abhishek Kapoor, Group CEO of Puravankara Limited said.

"In response to the Authority's order on not collecting interest, we will go for appeal in this case. As per the sale agreement, a developer is fully entitled to demand and collect all amounts due from the purchaser," he added.

Puravankara said the development plan and building plan approvals are prerequisites for RERA registrations and agreements for sale. A commencement certificate is only an operational document required to begin construction and has a validity of two years.

The company added that it is not mandatory to have a commencement certificate at the time of signing the sale agreement since approvals for all plans have already been obtained from the Authorities, including RERA.

It also said that commencement certificates for the phases of the project have been obtained and submitted to the Authority.

KRERA finding

After scrutinizing the documents, the Authority said most of the documents, including the building plan, floor plan, elevation plan, and BDA modified plan expired in 2018 as the developer failed to obtain a commencement certificate before that.

"It is crystal clear that at the time of signing the agreement in 2019, entire documents given by the developer were expired. The promoter must provide the documents after extending its validity," KRERA said.

KRERA said it was just and fair for the homebuyer to complete pending dues only after the developer provided her with valid documents.

"The developer is ordered to provide the valid documents and the homebuyer must pay the dues after receiving the same. The developer is also prevented from collecting delayed interest from the homebuyer until the documents are handed over," KRERA said.

This story has been updated with developer's comments.