Background
Over the past two decades, with the growth of population and the attraction of people to shift towards urbanization, the demand for housing has increased manifold. The government also introduced various housing schemes to cope with the increasing demand, but the experience shows that the demands of the housing sector could not be met by the Government at its own level for various reasons. To meet the requirement, the private players entered into the real estate sector to meet the rising demand for housing. Though the availability of loans, both from public and private banks, become easier, still the High rate of interest and the EMI have posed an additional financial burden on the people.
Challenges in the Pre-RERA Era
At the given time, the real estate and housing sector was largely unregulated, and the consequence was that consumers had to procure complete information for enforced accountability towards unscrupulous builders and developers in the absence of an effective mechanism in place. Though the Consumer Protection Act, 1986, was available to cater to the demand of home buyers in the real estate sector, the experience shows that this mechanism was inadequate to address the needs of the home buyers and promoters.
Introduction of the Real Estate (Regulation and Development) Act, 2016 (“RERA”)
At this juncture, the need for the Real Estate (Regulation) Bill was badly felt for establishing an oversight mechanism to enforce accountability in the real estate sector, providing an adjudicating machinery for a speedy dispute redressal mechanism, and safeguarding the investments made by the home buyers through legislation to the extent permissible under the law.
Apart from the project being statutorily regulated, it attaches certain authenticity with regard to completion of the project and a statutory obligation upon the developer and home buyer to abide by the terms and conditions of the home buyer’s agreement and statutory compliance with the mandate of law. In addition, any project that is approved under the RERA helps the promoter in raising funds from banks, and statistics show that buyers express their satisfaction in approved projects, which is beneficial not only to the home buyers but to the promoters and real estate agents as well.
Registration of Real Estate Projects – Chapter II
Chapter II of RERA relates to the registration of real estate projects. Section 3 mandates prior registration of real estate projects, including ongoing projects, with the Real Estate Regulatory Authority. Section 4 prescribes the ingredients of the application by the promoter for registration of real estate projects. In particular, the promoter is required to state in the application under subsection 2(L)(c) of Section 4, the timelines for completion of the project.
Section 5 relates to the grant of registration by the authority and inter alia states that no application shall be rejected unless the applicant has been given an opportunity of being heard in the matter. As per Section 5(3) of RERA, the registration is coterminous with the completion of the project. Under Section 6, the authority can extend registration based on the facts of each case or the occurrence of the force majeure. Section 7 pertains to revocation of registration. As per Section 8, the authority is under an obligation to inter alia carry out the remaining development work where there is a lapse or revocation of the registration.
Functions and Duties of Promoters – Chapter III
Chapter III lays down the ‘functions and duties of promotor’. Section 11 thereof elaborates on the functions and duties of the promoters. Under sub-Section (4) of Section 11, several obligations have been cast upon the promoters. Under subsection (5) of Section 11, the promoter may cancel the allotment if the allottee/home buyer commits any breach of the terms of the agreement for sale, and in such a case, the aggrieved allottee has the right to approach the authority.
Section 12 provides that if any default is committed by the promoter, either in reference to the information contained in the notice, advertisement or prospectus or on the basis of the model apartment, plot, or building, which causes any loss or damage to the allottee/home buyer by reason of any incorrect or false statement or wants to withdraw from the project, he shall be compensated by the promoter in the manner as prescribed under the Act.
Section 14 relates to adherence to Sanctioned Plans & Project specification by the promoters, and Section 14(3) empowers the allottee to receive compensation in the event of any structural defect.
Rights of Allottees and Consequences of Delay – Section 18
Section 18(1) of RERA spells out the consequences if the promoter fails to complete or is unable to give possession of an apartment, plot or building either in terms of the agreement for sale or to complete the project by the date specified therein or on account of discontinuance of his business as a developer either on account of suspension or revocation of the registration under the Act or for any other reason, the allottee/home buyer holds an unqualified right to seek refund of the amount with interest at such rate as may be prescribed in this behalf.
Section 18(2) of RERA mandates that in case loss is caused to the allottee due to a defective title of the land, on which the project is being developed or has been developed, the promoter shall compensate the allottee, and such claim for compensation under Section 18(2) shall not be barred by limitation provided under any law for the time being in force.
Section 18(3) of RERA states that where the promoter fails to discharge any other obligation under the Act or the rules or regulations framed thereunder or in accordance with the terms and conditions of the agreement for sale, the promoter shall be liable to pay ‘such compensation’ to the allottees, in the manner as prescribed under the Act.
If we take a conjoint reading of subsections (1), (2), and (3) of Section 18 of RERA, the different contingencies spelt out therein,
(A) The allottee can either seek a refund of the amount by withdrawing from the project;
(B) Such a refund could be made together with interest as may be prescribed.
(C) In addition, can also claim compensation payable under Sections 18(2) and 18(3) of RERA;
(D) The allottee has the liberty, if he does not intend to withdraw from the project, to be paid interest by the promoter for every month’s delay in handing over possession at such rates as may be prescribed.
Rights and Duties of Allottees – Section 19
Correspondingly, Section 19 of RERA spells out “Rights and duties of allottees”. Section 19(3) makes the allottee entitled to claim possession of the apartment, plot, or building, as the case may be. Section 19(4) provides that if the promoter fails to comply or is unable to give possession of the apartment, plot, or building in terms of the agreement, it makes the allottees entitled to claim the refund of the amount paid along with interest and compensation in the manner prescribed under the Act.
Section 19(4) is almost a mirror provision to Section 18(1) of RERA. Both these provisions recognize the right of an allottee to two distinct remedies, viz, refund of the amount together with interest or interest for delayed handing over of possession and compensation.
Absolute Right to Refund Under RERA
The unqualified right of the allottee to seek a refund referred under Section 18(1)(a) and Section 19(4) of RERA is not dependent on any contingencies or stipulations thereof. It appears that the legislature has consciously provided this right of refund on demand as an unconditional absolute right to the allottee, if the promoter fails to give possession of the apartment, plot, or building within the time stipulated under the terms of the agreement, regardless of unforeseen events or stay orders of the Court/Tribunal, which is in
either way not attributable to the allottee/home buyer, the promoter is under an obligation to refund the amount on demand with interest at the rate prescribed by the State Government including compensation in the manner provided under the Act with the proviso that if the allottee does not wish to withdraw from the project, he shall be entitled for interest for the period of delay till handing over possession at the rate prescribed.
