MahaRERA directs homebuyers of delayed Mumbai project to exit only after completion

Two homebuyers jointly bought a flat in the project on May 14, 2015, for Rs 1.75 crore. The developer promised possession in December 2015, which was later pushed to March 2016. However, the buyers did not get their flat even then, having paid 90 percent of the total consideration.

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Bounced cheques

The developer waived the remaining 10 percent due to the delay and then changed the date of possession to March 2020, a 48-month delay from the agreed possession date of March 2016, which was not acceptable to the buyers.

The homebuyers and the developer entered into a memorandum of understanding on October 12, 2019, wherein the developer agreed to buy back the flat for Rs 3.15 crore, including interest. The developer issued four cheques to the buyers, which were dishonoured and returned.

The homebuyers then approached the MahaRERA to claim their refund along with interest in order to withdraw from the project.

Meanwhile, other buyers had also approached the MahaRERA against the developer, who told the regulator that the project was delayed due to reasons beyond its control and it did not have the resources to complete it. The developer said in an affidavit that it had tried to support the buyers by waiving the balance payable or by agreeing to buy back the property.

However, the MahaRERA said in its order dated September 28, 2022, that the developer had violated provisions of the Real Estate Regulation and Development Act and the two homebuyers were entitled to seek a refund along with interest.

The MahaRERA added that because of the complaint filed by about three dozen other buyers including the association of allottees, the project was taken over from the original developer and the association was given the first chance to complete it by themselves or by appointing a new developer.

“All the liabilities of the old developer herein towards all the allottees, including the present complainants, stands shifted to the association of the allottees or any new promoter, including those under the provisions of section 18 of the RERA,” the MahaRERA said in its order.

The regulator said although the RERA was enacted to protect the interests of allottees in a real estate project, the law is also concerned with the development of real estate projects.

“In such peculiar cases like the present case, if the MahaRERA thinks of only remedying the violation of the provisions of section 18 of the RERA at this stage, it may put unnecessary burden upon the association to pay the refund to the complainants at this stage, which may cause further delay in completion of this project.”

Also read: MahaRERA orders landowner to take over housing project as developer ‘abandons’ it

Association’s liability

Considering this aspect, the regulator said, the homebuyers are allowed to withdraw from the project only after it is completed. The association or the new promoter may sell the complainants’ flat after completion of the project and refund the money paid by them along with interest, the regulator said.

The regulator also said the liability of the association starts only from March 31, 2020, the date of possession stated in the October 2019 MOU and the MahaRERA cannot take into consideration the period before that.

Legal experts said some parts of the MahaRERA’s order were not clear.

“This order has been passed in respect of a lapsed project under RERA even though there is no privity of contract between the allottee and the association of allottees or new promoter,” said Trupti Daphtary, an advocate and solicitor based in Mumbai.

“There seems to be no clarity as to whether a fresh timeline will start for the association of allottees or the new promoter appointed by them to complete the project. As on date, it appears that the RERA website does not reflect the steps taken by the association to apply for project registration.”

Daphtary said the MahaRERA recently put up a list of projects that have lapsed since 2017, which showed that several projects in Maharashtra have lapsed. A project lapses when the timeline for completion is not met and the developer hasn’t sought an extension.

“MahaRERA must consider issuing guidelines or directions for ensuring the procedure and timelines to be followed by the association of allottees or the new promoter appointed to complete the remaining development works in respect of such lapsed projects,” Daphtary said.

According to Suhail Ahmed Khilji, a lawyer dealing in property matters in Mumbai, the order in the case of the Victory Platinum project may affect its feasibility because the association or incoming developer has been made liable to compensate the complainants for the wrongdoings of the former promoter.

“If the incoming developer has to take the liability for the payment of interest/compensation to the complainant plus construct on behalf of them without getting paid/reimbursed for the same, then there may not be much for the incoming developer to gain from the project and eventually it may affect the project,” Khilji said. “It will be interesting to see how the association of allottees/new developer may react to such an adverse order against them.”