In a rare instance, the Karnakata Real Estate Regulatory Authority (KRERA) has held both the developer and real estate agent responsible for failing to refund the booking amount to a customer of a Bengaluru-based project.
Passing the order on January 17, KRERA said, "Both the developer and the real estate agent are liable to return the booking amount within 60 days of the order."
The case
In this case, the homebuyer, Ranjeeva Ranjan, had booked an apartment by paying an amount of Rs 98,256 in north Bengaluru's Damden Vivo developed by Damden Properties and brokered by Square Yards Pvt Ltd.
According to the clauses in the agreement, the booking amount was to be refunded in case of rejection of the housing loan application.
The homebuyer booked the apartment in January 2018, and in January 2019 when the loan sanction process was interrupted, he cancelled the booking and sought a refund.
However, despite multiple reminders when the refund was not processed, Ranjan moved KRERA asking for relief.
The order
While arguing before the KRERA, the developer denied all allegations and said, "As per the agreement signed between the company and Square Yards, the amount is debited in an Escrow Account where the developer gets 78 percent of the share while the agent gets the rest."
An escrow is a contractual arrangement in which a third party receives and disburses money for the primary transacting parties, with the disbursement dependent on conditions agreed to by the transacting parties.
Thus the developer added that the booking amount that was debited to the Escrow Account cannot be operated by him solely and has to be operated together.
However, KRERA said that according to documents submitted to the Authority, the booking amount is supposed to be refunded in case the home loan was not sanctioned.
"The issue is not due to delay but the homebuyer seeking a withdrawal of the money invested. The homebuyer has paid the booking amount to the Escrow Account jointly held by the developer and the agent. Therefore both parties must refund the amount to him," the order said.
Experts say order sets a precedent
Legal experts said while the real estate market in Bengaluru continues to remain in a frenzy with rising prices and a shortage of inventories, there is a boom in real estate agencies in the city. Thus it is necessary to penalise and make agents share the responsibility of homebuying, as they are important mediators in terms of transactions, they said.
Bengaluru saw a 42 percent jump in total home sales value from Rs 27,045 crore in the first nine months of 2022 to Rs 38,517 crore in the first nine months of 2023, according to data by ANAROCK.
Legal experts said that KRERA has already made it mandatory for the agents to register themselves which is valid for 5 years.
Advocate Amit Anand said, "This order certainly lays a precedent as KRERA clearly wants to put the responsibility of home selling not just on developers but also on agents. It makes sure that the homebuyers are not misled in terms of their investments in real estate."
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