RERA: A Silver Lining or Just another Bureaucratic Hurdle for Delayed Possession

26th December, 2024 - 7:17 am Categories: RERA 0 Comments

Introduction

India’s real estate sector has been highly subject to deceit, fraud, delays, and other malpractices. Earlier, due to the lack of stringent laws and a proper statutory body, many individuals suffered from financial and emotional distress[i]. It became common for homebuyers to pay EMIs for years and still not have a roof over their heads.

With the high need for stringent regulatory bodies and strict laws and regulations, the Real Estate (Regulations and Development) Act of 2016 (“RERA Act”) came into force as a savior and guardian angel safeguarding the rights and interests of homebuyers. However, on the implementation side, it lacks the desired outcomes. This article helps us understand the legislative framework, practical nuances, the role of the relevant regulatory bodies, case studies surrounding the real estate regime, and challenges faced by homebuyers.

The Problem of Delayed Possession

“Delayed Possession occurs when the developer fails to hand over the property to the buyer within the time frame, specified in the Sale Agreement as per RERA Act registered timeline.”

In the case of Anuj Biswas and others V. Kapstone Construction Private Limited[ii], the complainant paid a certain amount to the promoter for 750 Square feet of flat. The flat was located at Rustomjee Urbania Azziano, on the 12^th Floor with a bank loan and other resources, the complainant paid 90% of the amount to the promoter. The complainant was informed that he would get possession on December 31, 2015, with 6 months of the grace period, but the date of possession in the registration document was December 2016. Despite repeated attempts by the complainant to contact the developer, they were informed in August 2018 that possession of the flat would only be granted upon the making payment of possession charges, the complainant denied possession and filed a complaint before, the National Consumer Disputes Redressal Commission (NCDRC). The commission relied on the judgment of the case, Emmar MGF Land Limited & Ors. V. Amit Puri[iii], where the court ruled that if the possession is delayed or not delivered at the right time as promised, the buyer has the right to either accept or reject the offer with full repayment of the amount with interest and compensation.

It is a very common cause of real estate matters that can be a result of financial mismanagement, inadequate project planning, or any other malpractice.  It leads to financial and emotional distress for the homebuyers. The developers must provide timely possession to the homebuyers. Delayed Possession has become synonymous with the Indian real estate sector. The excuses given to the homebuyers alleviate the distress faced by the homebuyers as the agreements are heavily skewed in the favor of builders, and homebuyers have limited scope to take action. Stuck in the vicious cycle of financial strain with paying EMIs for years or months, facing corruption at different levels, they end up getting no justice and losing hope.

RERA: A Comprehensive Framework?

The primary objective of the RERA is to bring transparency, accountability, and professionalism.

Mandatory Registration of projects (Section 3)

RERA requires all projects to be registered with RERA authorities making the scope of transparency. All the details of the project like, location, timeline, and other relevant information are recorded. Buyers are legally bound to register. Due to this, all the buyers are on the safer side. But this provision also has some exceptions, where the land is under 500 square meters or there are 8 or less than 8 apartments, the RERA Act will not be applicable for such cases. Then what about the homebuyers dealing in such circumstances? How would they be seeking redressal? This also increases the scope of fraud and other malpractices.

Compensation for Delayed Possession (Section 18)

 Provides two ways for homebuyers to seek redressal

1. A full refund of the amount given to the homebuyer with the interest
2. Buyers may opt to retain the property and claim monthly interest

The interest rate is based on the State regulatory body, RERA which is MCLR (Marginal Cost of Funds Based Landing Rate) +2%, and the interest rate is calculated from the due possession date to the actual handover.

This provision empowers housebuyers but in a practical scenario most of the buyers are sleeping over their rights and this often leads to prolonged legal battles. With the high burden on the regulatory body, justice is often delayed. And as we all know “Justice delayed is justice denied”

In the case of Renaissance Infrastructure V. Parth B. Suchak[iv], the complainant had an agreement with the promoter on December 10^,, 2009, that stated the transfer of six plots of land and a warehouse to the complainant, as compensation for his retirement from a partnership. As per the agreement, the developer was supposed to deliver the possession by March 9, 2010, with a grace period of 6 months failing which, a certain amount would be paid as compensation. Possession was delayed and the complainant filed a complaint with the Maharashtra Real Estate Regulatory Authority. The Maharashtra RERA ordered the promoter to pay INR 5.04 Crores for 80 months of delay and INR 6,30,000 monthly until the possession was delivered. The appellate authority upheld this decision and directed the promoter to deposit 50% compensation.

• Escrow Account for Financial Transparency

Section 4 of RERA Act makes it compulsory to deposit 70% of the total fund amount in a separate bank account, this ensures that funds provided by the homebuyers are not misused and also reduces the risk of mismanagement but it does not eliminate all avenues for developers to exploit loopholes.

• Grievance Redressal Mechanisms

Homebuyers can complain against the buyer with the help of the Online Portal of RERA State Authority. But the main problem here is, does every individual is capable of doing so? In a country where more than 60% of the population is living in rural areas with no literacy or education. Online Dispute Resolution (ODR), is not truly going to work. While RERA is in its baby stages, most of the people are unaware of it. Although, with the help of law professionals this would work for all individuals but also not all individuals can afford this way to seek redressal.

• Structural Defects

If there are structural defects on the property or house builders will be liable to rectify the defects within 30 days for consecutive 5 years of the possession, or else the developer will be compelled to pay the compensation and interest to the homebuyer.

Challenges of RERA Implementation:

• Awareness Deficit Among Homebuyers

One of the biggest problems in the implementation of the RERA Act is that people are not aware and mostly sleep over their rights. This raises a concern regarding the role of government in disseminating information to the public at large. The statute is protecting the poor, and that is true. However, for poor to know of the protection, he shall know.

• Fragmented and Diluted Implementation

RERA’s decentralized implementation across the states has led to a lack of uniformity in implementation. Due to the constant pressure from the real estate lobbies, many states have diluted the provisions of the statute and also excluded ongoing projects.

• Toothless Penalties

With different states having different authorities, they follow different interpretation mechanisms. Penalties on paper are stringent but the ground reality is much different. A major role of corruption is also observed where people having connections and some power misuse it. Especially in the Indian real estate sector mafias, criminals are often involved which is another reason for injustice to the innocent.

• Delayed Justice Defeat Purpose

RERA Act promises swift dispute resolution within 60 days, but in reality, this promise is just a wish. With all the homebuyers suffering, they face another phase of suffering which is delayed justice.

• Digital Shortcomings

While RERA emphasizes transparency through online portals, giving all the details, most state websites are not properly workable. Many times there are plenty of glitches, missing data, and worst cases wrong data are there. The lack of technology reflects how poorly the act is implemented.

Conclusion

RERA Act and the authorities formed under it have undoubtedly brought changes in the real estate ecosystem of India. The provisions provided for delayed possession are well-introduced and empower the homebuyers, protecting their interests and rights. However, the darker side of the said act is seen while implementing it. While the state’s negligence is a matter of concern, it’s the people who are sleeping over rights. While RERA offers hope to the poor but does not equally scare the developer for his misconduct and malpractices. As it is still on the stage of development, the need to make it more stringent is realized also by providing information to all the people, especially to the people of rural areas, who have no access to the internet and technology, a committee should be set up to deal with those individuals is also required. The government must address all these systematic challenges and ensure that the RERA act delivers on its promise. Only then can RERA Act[v] transform from being a partial savior to a robust protector of homebuyer’s rights.

Author: Akshat Gangwani, in case of any queries please contact/write back to us via email to chhavi@khuranaandkhurana.com or at Khurana & Khurana, Advocates and IP Attorney.

References

[i] Ministry of Housing and Urban Affairs

[ii] Consumer case no. 2760 of 2018

[iii] [II (2015) CPJ 568 NC]

[iv]  MANU/RT/0001/2020

[v] Real Estate (Regulation and Development) Act, 2016