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Homebuyers have a right to seek refund if delivery of unit unreasonably delayed: SC

A buyer cannot be forced to take possession if the project in incomplete, the unit has been handed over only for the sake of meeting the deadline, amenities are not in place and the unit does not meet specifications as promised

Vandana Ramnani @vandanaramnani1

If there is unreasonable delay in delivering a real estate unit to the homebuyer, it is entirely up to the buyer if he wishes to take possession of the unit or seek refund with appropriate compensation, the Supreme Court has ordered.

A similar order has been passed by the National Consumer Disputes Redressal Commission (NCDRC) recently, saying that a flat purchaser cannot be compelled to accept possession of his house 'whenever it is offered by the builder'.

The first case filed before the Supreme Court bench involved a project in Gurugram where a builder had sold a villa to Shrihari Gokhale in July 2012 and the possession date that was promised was December 31, 2014. The homebuyer had filed a complaint with the NCDRC in 2016 seeking a refund of Rs 13.24 crore.


The builder had challenged the NCDRC order in the SC to refund the principal amount of Rs 8.14 crore, with 10 percent annual interest to the buyer. The apex court observed that there was complete failure on the part of the real estate developer, deficiency in rendering services and directed that the builder cannot sell the villa booked by Gokhale nor create any third-party rights till the order was executed.

“The facts on record clearly indicates that as against the total consideration of Rs.8.31 crore, the respondents had paid Rs 8.14 crore by November 2013. Though the appellants had undertaken to complete the villa by December 31, 2014, they failed to discharge the obligation. As late as on May 28, 2014, the revised construction schedule had shown the date of delivery of possession to be October, 2014. There was, thus, total failure on part of the appellants and deficient in rendering service in terms of the obligations that they had undertaken,” the Supreme Court order said.

“Even assuming that the villa is now ready for occupation (as asserted by the appellants), the delay of almost five years is a crucial factor and the bargain cannot now be imposed upon respondents. The latter were, therefore, justified in seeking refund of the amounts that they had deposited with reasonable interest on the said deposited amount,” the SC bench comprising Justices UU Lalit and Vineet Saran said in the order.

In the NCDRC matter, a bench of justice VK Jain directed a Delhi-based builder Pioneer Urban Land and Infrastructure to refund Rs 4.43 crore to a homebuyer who had invested the money in 2012 for a flat in Gurugram.

The said flat was to be delivered in 2015, but the builder failed to fulfil its promise and the buyer approached NCDRC in 2018 for refund of the amount. Although the builder had constructed the flat and received the occupation certificate from concerned authority just a fortnight before the homebuyer filed the complaint, the commission directed the builder to refund the money as there was delay of more than two years.

“The respondent flat purchaser has made out a clear case of deficiency of service on the part of the appellant builder. The respondent flat purchaser was justified in terminating the apartment buyer agreement by filing the consumer complaint, and cannot be compelled to accept the possession whenever it is offered by the builder. The respondent purchaser was legally entitled to seek refund of the money deposited by him along with appropriate compensation,” the NCDRC order said.

Under what circumstances can a homebuyer refuse possession?

Both orders offer hope to homebuyers, who have been suffering at the hands of their builders who despite delaying the project for a considerable time, coerce buyers into taking possession without giving them an option to exit. These orders have categorically stated that buyers have the option to exit projects and the builder would have to refund the amount with interest.

These orders will act as a deterrent to builders who do not utilise the amount collected from homebuyers for completing the project on time. Further, the court has also observed that the allegation that the units had been purchased for speculative purpose is not tenable, said Aditya Parolia, a Supreme Court advocate.

The circumstances under which homebuyers cannot be forced to seek possession of their flat include: 1) The project has been delayed beyond a reasonable period; 2) The project in incomplete; 3) The unit has been handed over only for the sake of meeting the deadline; 4) Amenities are not in place as promised by the builder; and 5) The unit does not meet the specifications.

Denial of refund against Section 18 of RERA

Section 18 of The Real Estate (Regulation and Development) Act, 2016 clearly lays down that if the promoter fails to complete or is unable to grant possession of an apartment, plot or building: a) in accordance with the terms of the agreement for sale or duly completed by the date specified therein; or b) due to discontinuance of his business as a developer on account of suspension or revocation of the registration under this Act; or c) in case the allottee wishes to withdraw from the project. In such cases, the builder has to return the amount received along with interest and compensation as provided under this Act

The buyer is also eligible to payment of interest for every month of delay, till the handing over of the possession, at the prescribed rate.

The promoter should compensate allottees in case of any loss caused to him due to defective title of the land. Also, the claim for compensation under this sub-section cannot be barred by limitation provided under any law for the time being in force.

“We have been saying that denying refund to homebuyers by RERA regulators is against the express provisions of Section 18 of RERA and is arbitrary and not legally tenable. NCDRC has passed several orders for refund and these have been upheld by the Supreme Court. This vindicates the homebuyers’ stance that they are eligible for refund in case of unreasonable delay in handover of the unit. It is clear that RERA regulators across the country cannot overlook section 18 of RERA and hope that they will take a cue from such orders and undertake course correction,” said Abhay Upadhyay, President, Forum for People's Collective Efforts; and member, Central Advisory Council, RERA, Ministry of Housing & Urban Affairs.

In July, the NCDRC came down heavily on a real estate developer for ‘deficiency in service’ and ‘unfair trade practice’ and not handing over housing units within the stipulated time frame. It ordered the builder to refund the money for the delayed project with interest and pay compensation and litigation cost to homebuyers who had sought a refund. The commission was hearing the plea of 20 homebuyers who had invested Rs 10 crore in 2012 in Wave Garden housing project located in Mohali. Despite promising to deliver the units within three years, the developer had failed to complete construction even after seven years.

In January, MahaRERA had set aside the plea of over 10 flat buyers who had wanted to exit from a project in Mumbai, stating that bulk withdrawal from the project may mean ‘jeopardising completion of the project’ and impact the remaining 500 homebuyers. The 13-odd buyers had booked units worth Rs 7.5 crore each in the 65-storey Island City Centre project in Dadar constructed Bombay Realty, an arm of The Bombay Dyeing & Manufacturing Company, way back in 2012. They had alleged that the builder had made ‘false assurances regarding amenities and made changes to the carpet area and overall layout of the project’.

In October 2018, the Haryana Real Estate Regulatory Authority (HRERA) had directed Supertech to refund the amount taken from the buyers of a housing project for the buyers by accepting pre-launch booking before obtaining licences and not handing over possession of units on time. The HRERA bench had ordered that the funds received by the respondent from the complainant by way of advance be refunded along with interest at the rate 10.45 percent per annum as 'he has cheated/defrauded the innocent buyers'.

Builders say refunds can make projects unviable

While homebuyers are of the view that they are not responsible for pledging their money with the developer 'indefinitely' and have every right to seek a refund if the project has been ‘unreasonably’ delayed, builders are of the opinion that refund should not be ‘allowed’ to a few buyers, especially if construction is on, as that would harm the interests of other buyers and make the project ‘unviable’.

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First Published on Aug 5, 2019 02:45 pm
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