Buying a Home is every person’s dream. “Makaan” as we know is termed as one of the basic necessities of life. Buying a Home is a transformative experience. There’s a sense of belongingness once you reside in a Home that you own. A person visits hundreds of homes, speaks with many channel partners and property agents before finally zeroing in on his dream project which suits his budget. He then invests his life savings or takes up or takes a loan from Banks and Financial Institutions and starts paying the EMIs for his “Makaan”.
But what if the “Dream Home” remains a dream. The homebuyer can face numerous challenges while dealing with a Real Estate developer. Some of the numerous challenges are listed below:
- Delay in Possession
- Non-Delivery
- Project Scrapped
- Violation of Plan
- No Proper Govt. Approvals
- No Commencement Certificate or Occupation Certificate (OC)
- Structural Defects
How does one address these issues? What remedies does a Home Buyer have against the Builders and Developers?
A Homebuyer can take legal action against the Builder or the Developer under the following Laws and Regulations:
- The Consumer Protection Act, 1986
- Real Estate (Regulation and Development) Act, 2016
- Insolvency and Bankruptcy Code, 2016
Consumer Protection Act, 1986
Consumer Protection Act establishes consumer disputes redressal agencies at different levels, viz. district fora; State Commissions and the National Consumer Dispute Redressal Commission NCDRC” and collectively such commissions, “Agencies”), with jurisdictions being defined in terms of territory and the value of goods and services, as well as the compensation claimed the Supreme Court in M/s Amrapali Sapphire Developer Private Limited v M/s Amrapali Sapphire Flat Buyers Welfare Association had approved the jurisdiction in case of an aggrieved group to file its complaint directly before the NCDRC, if the claim exceeds the threshold of one crore rupee
In terms of the relief granted to aggrieved home-buyers, the relevant Agency may pass an order directing the builder or developer to return the money paid to them along with compensation for any loss or damage caused to the concerned home-buyers due to the negligence of builders or developers. They also have the power to grant punitive damages if deemed fit. Penalties may also be imposed on such erring developers, and they may also be imprisoned for a maximum period of 3 years. While dealing with these offences, the Agencies have been given non-obstante power to try the case and dispose them summarily.
Under the CPA, a complaint regarding goods or services may be filed by any consumer, or registered association or group of consumers having same interest. The complaint filed by the home-buyers must be accompanied by fees prescribed by the Consumer Protection Rules, 1987. Further, there is no specific form in which the complaint must be filed before the Agencies established under the CPA. Therefore, a plain paper application would suffice in this regard. This makes the filing of complaints easy and convenient for the consumers, and the Agencies more approachable than a civil court.
Real Estate (Regulation and Development) Act, 2016
RERA seeks to protect home-buyers as well as help boost investments in the real estate industry. The Act establishes Real Estate Regulatory Authority (RERA) in each state for regulation of the real estate sector and also acts as an adjudicating body for speedy dispute resolution. What SEBI is to the Stock Markets and what IRDA is to the Insurance Sector, RERA is to the Real Estate Industry.
After the introduction of RERA, seeking legal redressal against defaulting buyers has becomes much more smooth. RERA now provides for a one stop forum to the aggrieved instead of dabbling between civil, criminal or consumer forums. RERA envisages Real Estate Regulatory Authorities to be created in each State to not only promote the interest of all the stakeholders under RERA but also deal with their grievances.
RERA affords the option to appeal against the decision of the concerned Real Estate Regulation Authority, to the Appellate Authority, and thereafter to the High Court and the Supreme Court, and all in a time-bound manner. As the proceedings are to be concluded within a given time frame, the adjudication mechanism can be opined to be more expeditious as compared to the adjudication mechanism provided in the earlier grievance redressal mechanisms.
Insolvency and Bankruptcy Code, 2016
The Insolvency and Bankruptcy Code, 2016 (IBC) is the bankruptcy law of India which seeks to consolidate the existing framework by creating a single law for insolvency and bankruptcy. Insolvency and Bankruptcy Code was primarily introduced with the aim to mitigate the losses of NPAs borne by the Indian Banking System. Though it is highly doubtful that it can bring back the amount already stuck in stressed assets in the form of NPAs but it can, to a large extent help to avoid the overall crisis.
The moment it comes to the homebuyers and the relief provided to them, no accurate answer comes to one’s mind. Although Real Estate (Regulation and Development) Act (RERA) has been enacted to provide relief to the homebuyers due to the lack execution arms not much action upon the orders provided by the RERA authorities is visible.
The decision of the Supreme Court in Jaypee Infratech case introduced Homebuyers into the category of financial creditors for the purpose of representation in the meeting of the committee of creditors and did not clarify whether the homebuyers can file a petition against the builder or developer to commence Corporate Insolvency Process or not. After the Insolvency and Bankruptcy (Amendment), 2017 the homebuyers were included in the definition of financial creditors arising from:
Section 5 (8) (f):- “any amount raised under any other transaction, including any forward sale or purchase agreement, having the commercial effect of borrowing”
Based on various judgements from High Court and Supreme Court, home buyers have multiple forums to their rescue and it depends on them as to under what Act or Code they wish to proceed.
