Homebuyers now stand a better chance of recovering lost money and compensation in stalled projects following a recent ruling by the National Consumer Disputes Redressal Commission (NCDRC) that has held land owners (who are often joint venture partners) also responsible for paying compensation.
Legal experts said that the ruling will particularly aid homebuyers where a developer is absconding or has become insolvent.
"The opposite parties are jointly and severally directed to complete the construction of the flats within three months, obtain the occupancy certificate, and pay due delayed interest at 6 percent annually from the date the possession," the order dated December 15, 2023, said.
In this case, the commission held that the developer, Unishire Homes LLP, and its joint development partners are liable for paying delayed compensation for a Bengaluru-based project with a handover date of 2016.
Advocate Chandrachur Bhattacharyya, who argued in favour of the homebuyers, said that the delayed compensation pending in this case is to the tune of about Rs 4-5 crore.
"While today, homebuyers hold only the promoters responsible for delays in projects, the judgement clearly establishes that the joint development partners are also responsible," Bhattacharyya added.
The order
The two parties launched the project Unishire Terraza in north Bengaluru in December 2012. Homebuyers started booking the apartments between 2012-15 for Rs 1-8 lakh.
Looking at the facts of the case, the commission noted that the apartments should have been delivered by 2017. However, the developers and their partners failed to do so.
Ten homebuyers, who were paying rent as well as loan EMI, approached the NCDRC for further relief.
The commission noted that there has been a delay of more than six years in handing over the project. In October 2023, it ordered the developer to pay 6 percent per annum delayed interest to the homebuyers.
However, Bhattacharyya added that the homebuyers then filed a review application for the landowners and joint development partners to be jointly and severally (separately or individually) held liable for not handing over the possession within the stipulated time.
The commission found merit in the review application and ordered the opposite parties, including the developer and landowners, jointly responsible for the delay in the project.
The impact
A circular issued by Karnataka RERA in December 2019 clarified that landowners with revenue share in real estate projects should be treated as promoters. "The developer shall register the project, including the revenue share of the land owner/promoter," the circular added.
Dhananjaya Padmanabhachar, Founder and Convenor of the Karnataka Home Buyers’ Forum said, "Today, most developers will form a company and go into a joint development agreement with the landowners for developing a project. However, under circumstances of delay, they will abscond, leaving homebuyers in limbo."
Thus, according to him, the landowners will continue to own the land until the conveyance (transfer of the title) is done as per Section 17 of the RERA Act..
"With this judgement, homebuyers will have increased options for recovering their investments, especially in cases where the developer goes absconding or the company announces insolvency. In such cases, the homebuyers can still make the landowner a party and recover the money," Bhattacharyya added.
Homebuyers today only impede the developers, and they should be aware that the landowners are also responsible for the completion of the project. "Thus, in such cases, the scope of recoveries for the homebuyers increases significantly when the joint development partners are also impeded," he added.
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