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Protection Of Homebuyers Interests Under Rera: A Critical Study
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PROTECTION OF HOMEBUYERS INTERESTS UNDER RERA: A CRITICAL
STUDY
AUTHOREDE BY - SONU KUMAR
ABSTRACT
Protection of interest of homebuyers
is of utmost priority of the Real Estate (Regulation and Development) Act, 2016.
With the enactment of RERA, 2016, the previously unregulated sector which was
moving on the evasive and aggressive approach of the promoter hitting hard to
Indian economy comes under the scanner of specialized body i.e RERA, thereby,
protecting the interest of the homebuyer. The timely intervention by the RERA
has done away with initial bottleneck created by the builder, thus safeguarding
the interest of the homebuyer. As per RERA, builders have mandatory to quote to
the carpet area and not in the super built area. This will help the customer in
the sense that he will not have to pay for an unusable area.
BRIEF INTRODUCTION
The real estate sector in India is
one of fastest growing sector in Indian economy but it is not able to balance
the demand supply continuum. There is special recognition of real estate sector
in global economy. Every country focuses on it since it is related to housing
and infrastructure of the country depicts the living standard of the people.
Indian Real Estate Sector has been expanded exponentially making it the second
largest player in the world economy. There is stiff rise in demand of home,
which real estate market has not been able to cope in spite of various
Government schemes and which private players takes advantage of it. There were
several issues like long delay in giving possession, fund deviation hampering
the real estate sector. There were no
preventive laws with respect to consumer protection and it was basically
unregulated. Therefore, in essence, there was need of “one nationwide” act like
RERDA, 2016 to develop “home-buying” ecosystem throughout country. This uniform
laws help to boost real estate sector and to entice more foreign direct
investment into this sector. It will also pursue to prevent ‘distortion’ and
'structural abuse of power' in this sector.
The passing of RERDA has brought
cheers among the homebuyers who have to fight legal battle against heavy weight
corporate giant for getting possession of the property. From the outset, RERA
would bring transparency and fairness into the purchasing process by protecting
the interest of homebuyer. Developer- promoter will be under surveillance of
regulatory body with regards to financial management, as well as their
deliverance of the end product. The RERDA aims to establish Real Estate Regulatory
Authority to protect the interest of homebuyer by providing speedy disposal of
the disputes arising in the real estate industry. The sole purpose of passing
this act is to protect the interest of millions of homebuyer who has been a
victim of aggressive builder and fighting a legal battle for so many years.
That, said, for any new law to be effective and sustainable, effective policing
and timely enforcement must work in tandem. The real estate sector has been
largest source of siphoning of black money.
THE EVOLUTION OF THE LAWS RELATING TO HOMEBUYERS
The evolution of laws relating to
home buyers start with the enactment of the Consumer Protection Act, 1986.
Usually home buyers file complain before the consumer forum for deficiency in
service by the developer. However after the enactment of the RERA home buyers
file complaint with real estate regulatory authority and adjudicating officer.
RERA has provided dedicated forum for redressal of disputes under real estate
sector. In India every state had its own law to regulate their real estate
business but RERDA is a centralized law to regulate real estate industry. The
RERA has brought much needed transparency and accountability to this sector.
RERA has made compulsory registration of the real estate projects as well as to
display data and information on the RERA website. This will certainly help the
home buyers to make informed choices while purchasing an apartment.
The enactment of the Insolvency and Bankruptcy
Code (IBC) in the Year 2016 has provided additional remedy to the home buyers
under which they can fie complaint to the National Company Law Tribunal (NCLT)
in the event of default committed by the developer. Under IBC home buyers is
now recognized as creditors and therefore in the event of default made by the
developer they can initiate liquidation proceeding against real estate
companies. But for the initiation of the liquidation proceeding a threshold
limit has been imposed under IBC whereby an application for initiation of
corporate insolvency resolution process shall be filed jointly by not less than
one hundred of such creditor in the same class or not less than 10% of the
total number of such creditor in the same class. But this provision of
threshold limit has raised concerned to file a suit as financial creditor being
diluted. Therefore IBC has provided additional remedy in the sense that after
having exhausted their remedy offered to them by RERA, They can approach to
NCLT for liquidation of real estate companies.
It is the duty of the Tribunal to assist the
home buyers in attaining the threshold limit prescribed under IBC. Home Buyers
can file class action suits under Order-8 Rule-1of the Civil Procedure Code, 1908
before the tribunals. The Tribunal can give public advertisement to home buyers
to become a party in the above mentioned class action suits. The Tribunal can
admit application without fulfillment of threshold limit under IBC in his
discretionary power.
DISPUTE REDRESSAL MECHANISMS PROVIDED IN THE RERA
The objective of the RERA is to
provide speedy and efficient dispute redressal mechanism for protection of
interest of homebuyer. Before the commencement of this act homebuyers usually
approach consumer forum for redressal of their dispute. But after the commencement
of the act, RERA has established specialized body i.e Real Estate Regulatory
Authority (RERA) and Adjudicating officer (AO) for resolving all disputes
between buyer and builder. But there is no arbitration clause in provided in
the act for settlement of disputes.
The purpose of this Act is to
regulate the real estate industry, protect innocent home buyers, and speedy and
cost effective redressal mechanisms. This Act has been welcomed by the real
estate customer, whose money has been stuck up without getting possession of
the property. The real estate sector has been mostly unregulated except for a
few laws like Consumer Protection Act regulating this sector. Taking advantage
of this unregulation, various stakeholders like the builders take advantage of
it by not providing the possession on time and diverting the fund for some
other purpose.
Before the enactment of the RERA,
many buyers usually file complaint and received some remedy from general law
the Consumer Protection Act, 1986('COPRA'). Consumer forum provide remedy for
deficiency in service by developer for delayed possession of flat. Despite
this, builders willfully delayed the litigation for years without giving
possession to the homebuyers[1].In
other cases, builders while entering into contract with homebuyers generally
insert arbitration clause in standard form of contract which buyers in lurch
without any remedy since buyers has to expend which is an expensive business
and buyer is not having full understanding of arbitration .The Government of
India while seeing the hardship faced by the buyer and for regulation and
development along with purpose of protecting the interest of homebuyers and for
setting up dedicated adjudicatory forum for redressal of real estate dispute
passed the act. Thus inspite of
regulation of the real estate sector, this act provides speedy dispute
redressal mechanisms for the protection of innocent buyers by setting up two
adjudicatory forums i.e., the Real Estate Regulation Authority ('RERA') and the Adjudicating Officer"
('AO') for regulation and management of this sector.
The key objective of this Act is to
provide a dedicated specialized body for redressal of all disputes concerning
this sector. The present Act has established the Real Estate Regulatory Authority
for the timely disposal of all disputes concerning this sector. Prior to the enactment, consumers of the real
estate sector approach Consumer Forum, although settled disputes stiffed the
litigation for a long time. As per the Consumer Protection Act, the Consumer,
first of all, have to approach the district forum, state forum, and finally, a
national forum thus delaying the remedy and making the process economical, and
burdensome. Taking advantage of this the builders usually adopted the policy of
tiring out the customer in the hope of meager settlement and withdrawal of
legal claims. Most builders, especially those regarded as large conglomerates,
recruited specialized legal counsel to design unfair contracts, and as a matter
of business, incorporated arbitration clauses to dissuade buyers from filing
lawsuits, which worsened the condition.
To curb this menace and to protect
the innocent buyer from aggravated developers RERA Act has established special
adjudicatory body i.e Real Estate Regulatory Authority for solving all disputes
pertaining to real estate sector.[2]
The Act mandated the regulatory
authority to dispose of the matter in a time-bound manner and has also provided
60 days’ time for adjudication of appeal by the Appellate Tribunal. This
ensures speedy disposal of cases and simultaneously reduces time lagged in
consumer forums. The function of the RERA is not only to adjudicate the cases,
but also to include regulation, development and management of the real estate
sector. The RERA under Sections 12, 14, 18 and 19.provides for the appointment
of an Adjudicating Officer for the purpose of settling disputes along with
amount of compensation to be provided to the homebuyers for the default of
developer. This power of awarding compensation by Adjudicating Officer will go
in long way in maintaining discipline in the real estate sector. Thus, As a
result, the RERA effectively establishes the RERA and the AO as two distinct
forums for the redress and enforcement of buyers' rights. The RERA can be
contacted for RERA Act infractions, while the AO can be contacted awarding
compensation. The Chandigarh Real Estate (Regulation and Development) (General)
Rules, 2016 (the "Rules") and 31(1) of the REA" make it clear
that the procedures before the two forums are independent and separate. The
Chandigarh Real Estate (Regulation and Development) (General) Rules, 2016 (the
"Rules") and 31(1) of the REA" make it clear that the procedures
before the two forums are independent and separate. .It is worthy to note why
the legislature would create two separate forums in a single enactment
especially when Section 72 point out the factors to be taken into consideration
while awarding compensation by the adjudicating officer to the aggrieved
homebuyers.[3]
BENEFITS OF HOMEBUYERS
The Act has been passed with
objective of resolving the conflict between buyer and builder in a faster and
time bound manner. The Act has provides several right to homebuyer such as
right to right to transparency in measurement, payment structure, completion
time, and penalties for delays or legal issues. The act gives sufficient
clarity to homebuyer in regard to area of measurement, refund of money, speedy
trial and financial discipline. RERA have given now given several option to
dissatisfied homebuyer for speedier action under RERA, 2016, IBC, 2016 along
with COPRA, 2019. The options lie with homebuyers to go to NCLT, RERA, and
Consumer Forum. However, it would be judicious for homebuyers to approach RERA
or Adjudicating officer under RERA since RERA is specific legislation dealing
with real estate matter and provide compensation or refund of money in a time
bound manner. The Act candidly provides penal provisions for violations
committed by the builders/agents under RERA against the homebuyers. The penalty
include the revocation of registration or fine or imprisonment, depending on
the nature of offenses committed.
The primary objective of the RERA is
to provide time bound and cost effective justice to the homebuyers, but the Act
has provided two adjudicatory forum for redressal of dispute which will at a
time create an issue of conflict of jurisdiction between two bodies thereby
will defeat the very purpose of act to decide the dispute in time bound manner.
For example it is the bounden duty of the developer to make promise in regard
to date of handling over the possession of the apartment during the course of
registration of the apartment. In case developer fail to keep to his promise
and do not give possession to the homebuyer then buyer can file complaint to
the authority for providing possession to the property as well as for
compensation for loss caused to him.54 Addition to Section 61 of the REA's
penalties, the builder may also get further remedies in the form of restitution
.for contravention of the provisions of Section 4. Therefore, the bone of
contention between buyer and builder is regarding failure to give possession on
time to the homebuyers. Delay in giving possession was major concern which new
enactment address by providing compensation to the homebuyer. However,
homebuyer can file complaint before regulatory for breaching the promise given
under Section 4 of the Act and simultaneously seek compensation under Section
71 for breach of Section 18 and 19 of the act. It makes little sense to file
two complaints about the same cause of action, that too before two separate
forums. From the perspective of the buyer, it would be more beneficial to file
the complaint before the AO and seek compensation, than to file a complaint
before the RERA and only seek the imposition of a penalty on the builder. This
creates an absurd position of law as there is no provision providing for the
transfer of complaints or joint-hearings before the RERA and the AO.
If the buyer does not file a
complaint to either RERA or AO, then as per Section 61 builder will escape from
liability, they nullify the objectives of the act like monitoring and
regulation. But the situation would be absurd if the two complaints were for
the same cause of action thereby will create a conflict of jurisdiction leading
to delays in the settlement of disputes and higher legal costs for the parties
as well as the possibility of contradictory judgments of the two authorities.
The key feature of the redressal
mechanisms of the REA is that it does not oust the jurisdiction of the consumer
forum. The proviso to Sec 71 states that the buyer may withdraw litigation
pending before a consumer forum and file a complaint before the AO for
compensation. 55 There is no such provision for transfer of complaint of
consumer forum to the AO directly; instead, the buyer will have to file a file
claim under REA to either AO or RERA.
The creation of two multiple forums
for adjudication of disputes may thwart the intention of the legislature for
providing speedy justice for the protection of the interest of the homebuyer.
Instead, the legislature could have given an overriding effect to this act over
all other acts including Consumer Protection Act, and established a single
forum i.e., the RERA with a judicial officer as a member to determine
compensation in accordance with Section 72 of the REA. This would have given an opportunity to the
RERA to adjudicate disputes in a time-bound manner without any issue of
conflict of jurisdiction over other authorities with little or less amount of
delay.
INDIAN SUPREME COURT ORDERS MORE EMPOWERMENT TO THE HOMEBUYERS
In the latest judgment in M/s. Newtech
Promoters and Developers Pvt. Ltd. vs. State of UP &Ors., Civil Appeal
No(S). 6745- 6749 of 2021 and eight other Appeals Civil Appeal No(S). 6750-6757
of 2021[13] delivered on 11 November 2021, the Apex opined that RERDA needs to
be amended in order to protect the interest of homebuyer. The Apex Court has
recommended that the RERDA, 2016, be amended to protect the rights of
homebuyers. The broad contours of the ruling are that RERDA's application is
retroactive, and it encompasses all projects for which completion certificates
were not granted when the Act was enacted. Before challenging any RERA
judgment, the Court also made it essential for developers to deposit at least
30% of the penalty imposed by the regulator. The verdict may serve as a
deterrent to such builders, who will now be required to deposit the entire
amount plus interest as a condition of doing business. Furthermore, the Court
determined that RERA has sole authority to order a refund of the sum, plus
interest, direct interest payment for late delivery of possession, or a penalty
and interest to the allottee. However, to speed up the procedure, the
adjudicating body has the right to assess compensation. After the RERDA's
implementation, homebuyers through the Forum for People's Collective Efforts
(FPCE) and other organizations have emphasized the weakening of RERA
restrictions in several states. Buyers will benefit from the judgment in many
ways, including creating a unified regulatory framework for all projects and
improved grievances. Buyers would enjoy a faster decision in cases where RERA
has issued a penalty since builders will have to pay a pre deposit before
challenging an order. Regarding developers, the orders imply that developers
must follow RERA regulations and register projects in progress before enacting
the Act if the relevant authority has not issued a completion certificate. In
general, builders who have appealed RERA decisions in previous years will have
to evaluate the circumstances they want to challenge the ruling. The decision
might force revisions to State Rules based on the Act. The review of these six
cases suggests that the Supreme Court of India's judgments, particularly on the
Amrapali Silicon City Private Limited and the latest one, the Newtech Promoters
and Developers Private Limited, have broader implications for the builders and
lessons for central and state governments. The rulings have been a boost for
homebuyers across the country. The Court is likely to bring any such favourable
ruling depending on the need of the time.
PREVALENT MALPRACTICES AFFECTING HOME BUYERS ADDRESSED BY RERA
RERA has been implemented to revamp
real estate sector. It has regarded as consumer centric legislation. Few
concern which RERA has been able to address are
1. .No delay in project- the major
concern prevalent in real estate sector has been transfer of possession to the
homebuyers. It has reduced the trust factor between homebuyers and developer.
Generally in that cases developer goes scot free with no accountability. To
address this issue as per RERA heavy penalty will be imposed on developer and
they will have to pay same interest as paid by consumer through EMI.
2. Diversion of fund by promoter Fund
diversion for launching another project has been a common practice in real
estate sector. Generally developer collect fund from consumer for one project
and then invest that money for launch of another project. This was major reason
for delay in of completion of the project. But now RERA forced the developer to
create a project specific bank account and deposit 70% of amount collected by
consumer in that account. This will help in completing project on time.
3 Unwanted surprises generally it
happens that developer promises lot of facilities to be provided to homebuyers.
But as the project progresses he usually taken aback by not getting those
facilities for which money has been paid by them. RERA has cure this remedy by
stating that that no developer can make any changes 68 without the permission
of homebuyers once property has been purchased by them.
4. Transparency and accountability -the
current scenario of real estate industry has been facing a lot of issues like
fraud on customer investment of black money.
CONCLUSION
The allottees are always on the
winning side since the Real Estate (Regulation and Development) Act, 2016, was
passed. Working on some place of stage in practical fashion is the act's
fundamental motto. Previously promoters easily violate the norms, rules and
ethics in real estate business and they never respect the voices of the
homebuyers after the sale and in due course of sale. But after the enactment of
the RERA, they swiftly take action once the Real Estate Regulatory Authority
order to do that. After the enactment of the homebuyers are getting remedies in
days instead of year. The effect of the passing of this act is such that now
the promoter has to follow rules, regulation and ethics of this profession.
[1] 1
E.T. Realty, Homebuyers Can Now Move NCDRC Directly against a Builder, October
13, 2016, available at
http://realty.economictimes.indiatimes.com/news/regulatory/homebuyers-
can-now-movencdrc-directly-against-a-builder/54823235 (Last visited on January
13, 2017).
[2] 2The
Real Estate (Regulation and Development) Act, 2016.
[3] Section 72 (provides that: "While
adjudging the quantum of compensation or interest, as the case may be, under
section 71, the adjudicating officer shall have due regard to the following
factors, namely:- (a) the amount of disproportionate gain or unfair advantage,
wherever quantifiable, made as a result of the default; (b) the amount of loss
caused as a result of the default; (c) the repetitive nature of the default;
(d) such other factors which the adjudicating officer considers necessary to
the case in furtherance of justice.").
Article Information
Protection Of Homebuyers Interests Under Rera: A Critical Study
Authors: SONU KUMAR
- Journal IJLRA
- ISSN 2582-6433
- Published 2024/06/19
- Issue 7
About Journal
International Journal for Legal Research and Analysis
- Abbreviation IJLRA
- ISSN 2582-6433
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