NCDRC Directs Developer To Refund Homebuyer At 12% Interest Rate For Delay
Addressing a plea filed by a homebuyer who had invested in a project by Umang Realtech, the National Consumer Dispute Redressal Commission (NCDRC) on June 13 said that homebuyers cannot be forced to pay a high penalty for delay in paying an installment when the developer gets away with only a fraction of that amount as a penalty for project delay.
The commission held that in case the builder-buyer agreement is partial and favours the developer, it qualifies as an unfair trade practice. Passing the verdict in favour of a homebuyer who had booked a flat in a Gurgaon-based project by Umang Realtech in 2012, Justice RK Agrawal and member of NCDRC M Shreesha noted, “In any case, such a clause… amounts to an unfair trade practice since it gives an unfair advantage to the seller.”
The homebuyer had been paying Rs 83 lakh, the cost of the apartment, in installments. The apartment was to be delivered in December 2015. However, four years have passed by and the project still remains incomplete. Following which the buyer has sought refund at 18 per cent per year of delay, the rate at which he had paid penalty when he had defaulted on a payment.
However, the developer said that the agreed compensation amounted to only Rs 5 per sqft for delay. The commission has noted, “It is also an admitted fact that the opposite party (the company) charged interest at the rate of 18 per cent per annum for any delayed payments made by the purchasers and there is no justification in offering a meagre Rs 5 per sq ft, which comes to approximately 1.4 per cent per annum which is only a paltry percentage of what it was charging for any delayed payments”.
Umang Realtech has been asked to refund the money with 12 per cent interest taking into account that banks have lowered interest rates in recent years. It also directed the company to pay Rs 1 lakh as compensation to the homebuyer.
Some similar cases
Shubhkamna Buildwell & Estates was also asked to refund money to all homebuyers and pay 12 per cent simple interest per annum as compensation who had invested in its Greater Noida West project as no construction took place at the project site in the last four years since its launch in 2014. The housing project was meant exclusively for retired and serving government employees. It was promised that about 820 flats would be delivered within three years.
In another case, the commission held that a homebuyer cannot be forced to forfeit any amount deposited with a developer in case he seeks cancellation of allotment of flat for delay in construction.
Earlier, the Supreme Court had passed a verdict upholding the interest of homebuyers. The order was passed when the commission was hearing a case of Unitech's Vistas, a housing project in Gurgaon launched in 2009 and was scheduled for completion and delivery in 2012.
However, in 2015, when the homebuyer moved the commission, it ruled in their favour and slapped a 12 per cent penalty on the developer for the delay in delivery. The developer had then approached the Supreme Court against the penalty to which the apex court had asked the developer to pay the fine and additionally imposed a penalty of 14 per cent interest on the refund amount.
In 2014, the Competition Appellate Tribunal or COMPAT upheld a 2011 order of the Competition Commission of India (CCI) which held a very prominent market player in the Gurgaon market guilty of using its market position to dictate terms of sale and agreement. The clauses were found to be one-sided, serving the interests of the firm than the buyers.
Pays to be alert
When it comes to real estate, the issues with buying a home are many. Nevertheless, it always pays to be alert and confident. There are multiple channels and boards you can approach in case of a violation of the clauses. In most cases, however, the sale and agreement deed is held to be sacrosanct. Issues such as noncompliance, fraudulent ways of usurping money, project delays, unauthorised constructions, unexplained conversion of land, unstructured selling, violating building bye-laws can also be brought forth a civil or criminal court, as per the nature of the issue. However, much depends on the buyers. Thorough research will come handy any day.
Remember: Buyer is king
Brajesh Pawar, a broker at Gharaunda says, "Most consumers are unaware of their rights or hesitate to approach the authorities. Yes, sometimes such buyers lose a lot of money owing to multiple trips to the courts and other regulatory bodies but such cases need to be registered so as to ensure that defaulting developers are penalised or necessary action is taken against them."
Asha Basu Nayar, Senior Parter, S Jalan & Company, Solicitors and Advocates says, "Delays in construction of residential projects are common in India. Most home buyers take a delay of 6-12 months as granted. However, if possession is delayed beyond the expected tenure, refunds can be claimed. You can file a case in the Consumer Disputes Redressal Commission at the district, state and national levels."
Approach the right forum
Although most leading developers have their own grievance cells, buyers may find these biased. However, even before RERA was formulated, developer bodies such as CREDAI had its own grievance redressal cell where the jury comprised of eminent judges and members of the governing council. The process is usually quick and there is a uniform code for all developers under the organisation which makes it mandatory for all members to accept the decision meted out to them in case of defaults. Besides, there is no money spent on hiring a lawyer etc. All expenses are borne by the body.
Not all developers are within the ambit of CREDAI. With RERA around, much of this process will be eased. There is enhanced accountability and clarity. At a time when the sector was fraught with issues leading to mistrust, the number of fence sitters has climbed up year on year. The Supreme Court's verdict brings a lot back on track.