Kiranjot Kaur, a 5th-year Law Student specializing in Corporate Law at the School of law, Lovely Professional University has written this article “Analysis of Consumer role in RERA”
Real Estate is one of the most important sectors of our country. Many people work hard for their entire lives, just to buy a dream property of their own. Improving the economic status of the people leads to some sort of investment. Ultimately leading to purchasing their own property being one of the most sought-after. Real Estate consists of properties as land or constructed buildings. Buying a house is still a dream for many individuals. However, purchasing a property can also arise a lot of problems, especially for the buyer, who already invests a lot of his money in furtherance of purchasing the property.
These issues violate the basic consumer laws that a consumer (buyer) possesses. Hence, the buyer must be aware of his consumer rights, while purchasing a property. Proper legal assistance and law act as a guardian of the consumers. It also ensures speedy trial and ensuring justice for the consumers/buyers.
Does the Consumer Protection Act, 2019 cover the buyer under its ambit?
Many builders have intentionally mislabeled customers as non-consumers under the Consumer Protection Act, of 2019 to avoid liability and ensure that the buyer is not protected under the customer protection act. However, in the case of Aloke Anand V Ireo Pvt Ltd and Ors, the Hon’ble National Consumer Disputes Redressal Commission(NCDRC) held that a home-buyer comes under the definition and ambit of a ‘consumer’ as per the Section 2(1)(d) of the Consumer Protection Act, 2019 and can sue the builder under the provisions of the Consumer Protection Act, 2019. However, the Commission had also stated that indulging the buyer in the trading of companies should be avoided. Also should have bought the property as an end user.
PROBLEMS BUYERS FACE WHILE BUYING PROPERTIES
The Real Estate sector has never been hassle-free, and given the huge growth in the sale and purchase of properties in the past few decades, the issues in this sector have multiplied. A lot of greedy builders, lure in unsuspecting buyers with malicious purchase offers or trouble them by providing deficiency in services. Following are the issues that a consumer willing to purchase a property might face whilst buying a property:
Unfair Clauses in the Flat Buyer Agreement
The agreement signed between the builder and the purchaser is called a Flat Buyer’s Agreement (FBA). It contains all the relevant clauses, terms, and conditions that both parties agree upon, and will be relevant during the course of the completion and handing over of the property to the purchaser. This contains the dates of payment of the due amount, a penalty in cases of delayed payment, etc.
Many times, the builder however draft and include unreasonable clauses in the FBA, like high rates of penalty on the buyer for delayed payment, unreasonably long periods for the completion of the construction, and other clauses favoring the builder. These one-sided clauses can often cause mental agony to the purchaser. Even the Hon’ble Apex Court in the case of Pioneer Urban Land & Infrastructure Limited V Govindam Raghavan held that these one-sided agreements, containing bias clauses favoring one party are a clear case of deficiency of service, under Section 2(11) of the Consumer Protection Act, 2019, and such agreement would not be final and binding if a buyer is compelled to sign a biased one-sided agreement.
False Assurances and Claims by the Builders
Many times, the builders use fake adverts and misleading advertisements to lure in more potential buyers of the property. Flat builders have many times used deceptive means of advertising and have given false hopes to the buyers. They claim to provide world-class facilities, high-end services, high-rise buildings, etc. in their projects, while it doesn’t even exist nor the builder has any intention to provide the same to the buyers.
The Hon’ble Supreme Court in the case of DLF Universal V The Director General (Investigation and Registration) had held that these false adverts, and misleading advertisements, made specially to induce potential customers, and showcasing facilities and amenities which does not exist or will not exist amounts to a form an unfair trade practice, defined as per the Section 2(47) of the Consumer Protection Act, 2019.
Delays in handing over the Possession
Delayed Possession is nothing but handing over the possession of the respected property after the stipulated date of handing over the possession, even after the buyer has timely paid all of his dues. Most of the time, it is due to the ill intention of the builder.
This hurts the home buyers, who have already duly paid by the clauses of the Flat Buyers Agreement (FBA), and have many times taken home loans at high-interest rates, despite legally being the purchaser of the property.
In the case of Emaar MGF Land Ltd V Karnail Singh, it was held that delays in possession are a type of deficiency in services, and not by the Consumer Protection Act, 2019.
Sale of disputed Properties
A lot of times, the builders/seller sell one property to two separate individuals. In addition, they sell a property in a legal dispute or allot property that is in litigation. Builders have often practiced allotting such properties to individuals, even though they have no clean title. In the case of B.N. Venkatesh Murthy V Bangalore Development Authority, the respondent had made a sale of plots that were in litigation and had no clean title. The court had stated, upon the appellant’s complaint that the sale was arbitrary and amounted to a deficiency in services, under the Consumer Protection Act, 2019.
Usage of Substandard Materials in the Construction of the Property
Builders have often used substandard and cheap materials for the construction of the property, to increase their profits. This offers a low quality as expected, and hurts the buyers, who spend extra money to purchase high-quality products. The builder has also many times engaged in poor quality of workmanship, leading to poor and low-quality properties.
In the case of Kailash Malpanu V Kishore Kumar Khatri, the court had decided that in cases of usage of substandard materials by the builder, the builder was held guilty of deficiency in services as per the Consumer Protection Act, 2019 and the buyer was awarded compensation along with 18% interest.
REAL ESTATE (REGULATION AND DEVELOPMENT) ACT, 2016
The demand for regulation concerning the real estate sector in India is not a new one. The 21st century saw a huge spurt in transactions involving the real estate sector in India. This of course led to an increase in the need for real estate regulation in India. Urbanization and the growing economy also played an important role in the need for regulation.
The Real Estate (Regulation and Development) Act was finally passed in 2016. As per the State List given in the 7th Schedule of the Indian Constitution, the act does not regulate real estate or real estate development, as both falls under the authority of the State. Rather, the act covers authority only over the sale and transaction of real estate, including properties, plots, apartments, etc.
The drafters of the activities prepared it to establish a regulatory authority, as stated in the preamble. It also establishes an appellate tribunal to regulate, control, and promote planned and healthy development and construction, sale, transfer, and management of colonies, residential buildings, and other similar properties.
The introduction of this act was a much-needed step, as it had provisions for the proper regulation of the real estate industry, and would ensure that the consumers and homebuyers are protected from the mala fide intentions of greedy builders.
LEGAL PROVISIONS UNDER RERA
Under Section 31 of the Real Estate (Regulation and Development) Act, 2016, the aggrieved party can file a complaint against any builder, seller, or agent of the concerned property.
Section 3 of the Act makes it mandatory for prior registration of the real estate property/project with the concerned Real Estate Regulatory Authority, and if the seller/builder is unable to register the such property with the concerned authority, the builder shall be liable to a penalty which can be up to 10% of the total cost of the concerned property/project, as per the section 59 of the act. The aggrieved party can file a complaint with authority or adjudicating officer as per section 31 of the act.
For the registration of the property/project, the builder has to provide certain information. Information shall consist of the brief details of his venture, the project details, genuine copies of various governmental approvals, etc, as per section 4 of the RERA, 2016. If the builder is unable to do so, he won’t be able to register the property. Also, in case the builder provides any false or fabricated information, and is unable to meet the conditions set out in Section 4, then he would be liable to a penalty of up to 5% of the concerned property, as per section 60 of the RERA which provides for the Penalty.
Emaar MGF Land Ltd CO V Aftab Singh
This was a case of delayed possession, where the respondent was unable to get the possession even after paying on time. The respondent had filed a complaint as per the provisions of the Consumer Protection Act. However, the builder claimed that due to an arbitration clause mentioned in the agreement signed between the two parties, it was arbitrary of the buyer to file a consumer complaint. However, the Hon’ble Apex court had decided that the buyers of any property are defined as consumers as per the Aloke Anand V Ireo Pvt Ltd and Ors, and hence the buyer has the right to seek redressal as per the Consumer Protection Act.
Ireo Grace Realtech Pvt Ltd V Abhishek Khanna and Ors
In this landmark judgment of the Supreme Court, it was decided that the buyer cannot be compelled by the developers and the sellers to be bound by one-sided clauses and agreements present in the Flat Buyers Agreement (FBA). Many times, the builders compel the buyers to be bound by unreasonable clauses like a high penalty in cases of delayed payments, no provisions for a penalty in cases of delay by the builder, etc. However, this judgment set out a precedent that the clauses in the agreement cannot be one-sided.
Kolkata West International City V Devasis Rudra
In this case, the buyer was unable to get possession of the property, despite paying in time due to the delay by the builder. The buyer was made to wait for an extended period to get possession of the property, but it was never given to him. Moreover, he was never provided any refund along with an interest rate and other charges. However, the Hon’ble Court held that the buyer is liable to pay the entire amount deposited along with a percentage rate of interest to cover up the financial hardships faced by the appellant while paying for the property.
Newtech Promoters and Developers Pvt Ltd V State of UP
The Hon’ble court had decided that the buyer has the absolute right. Whether he wants a refund or the possession of the property, in cases of delayed possession of the property. The buyer is entitled to a refund in cases of delayed possession. The buyer can choose possession of the property during the grace period, which the builder is obligated to construct.
The Real Estate industry has become an important part of the Indian Economy now. With a such high number of transactions, both in terms of quantity and amount, it is natural that some legal disputes/grey areas will arise, both for the builders and the consumers. Protection of the consumers, and ensuring that the real estate industry is properly regulated is an important challenge for the authorities and the governments, however, acts like RERA, 2016 have significantly assisted in ensuring proper regulation of the real estate industry in the nation.
The act adjudicates the complaints and appoints adjudicating officers. The act covers both the allottees and the purchasers/buyers as well as sellers of the property. RERA also provides for provisions of penalty/punishment in cases of any violation of any of the provisions of the act.
The act has given consumers, to some extent, more liberty in terms of buying properties. Regulatory backing is crucial for real estate industry development; it’s an important step forward.
For a detailed article on “The arrival of RERA & its benefit on the Indian Economy”: Click Here
Aloke Anand V Ireo Pvt Ltd Consumer Case No. 1277 of 2017
Pioneer Urban Land & Infrastructure Limited V Govindam Raghavan C.A. No. 12238 of 2018
DLF Universal V The Director General (investigation and Registration) Civil Appeal No. 5680 of 2006
Emaar MGF Land Ltd V Karnail Singh 2014 SCC OnLine NCDRC 332
B.N. Venkatesh Murthy V Bangalore Development Authority III (1994) CPJ 96 (98) (NC)
Kailash Malpanu V Kishore Kumar Khatri 1997 (1) CPC 238
M/S Emaar Mgf Land Ltd V Aftab Singh CA No. 23512-23513 of 2017
Supra note 1
Ireo Grace Realtech Pvt Ltd V Abhishek Khanna and Ors AIR 2021 SC 437
Kolkata West International City V Devasis Rudra First Appeal 958 of 2016
Newtech Promoters and Developers Pvt Ltd V State of UP Civil Appeal No (S). 6745-6749 of 2021