Property Delays: what to do when a builder delays possession in India?

Introduction:

Delays in property possession by builders are a widespread concern among homebuyers in India, often resulting in financial strain, uncertainty, and frustration. It is imperative for individuals to grasp the legal remedies and practical steps available when confronted with such delays to safeguard their rights and interests. This article seeks to offer comprehensive guidance on navigating the challenges posed by a builder’s delay in delivering possession of a property in India. Today, homebuyers have multiple legal options at their disposal in cases of delayed possession, encompassing civil, criminal, and consumer laws. Notably, recourse can be sought under the Consumer Protection Act 1986, the Real Estate (Regulation and Development) Act of 2016, and by invoking the Insolvency provision under the Insolvency and Bankruptcy Code, 2016 (IBC) through the National Company Law Tribunal (NCLT).

In instances where the builder fails to furnish possession of the property within the stipulated timeline outlined in the sale agreement or causes delays in possession, they become liable to refund the amount received along with due interest. Typically, the interest rate stands at 10%. Additionally, failure to deliver possession may subject the builder to a fine amounting to 10% of the estimated project cost or imprisonment for a period of up to 3 years, or both, as stipulated by law.

Remedies for the buyer:

Before taking any action, it’s crucial to ascertain the reasons behind the delay in possession. Delays can stem from various factors such as construction delays, regulatory approvals, financial issues, or conflicts between the builder and contractors. Identifying the cause of the delay is essential in determining the appropriate course of action. The initial step involves reviewing the sale agreement or builder-buyer agreement signed with the builder. It’s imperative to scrutinize clauses related to possession dates, penalties for delay, and the builder’s obligations in case of delays. Understanding both your rights and the builder’s obligations as outlined in the agreement is paramount.

Next, initiate communication with the builder to inquire about the project’s status and the reasons for the delay. Document all forms of communication, including emails, letters, and meetings, for future reference. Clearly express your concerns and expectations regarding possession timelines. If the builder fails to provide a satisfactory response or continues to delay possession without valid reasons, exploring legal options becomes necessary. Consulting with a qualified real estate lawyer is advisable to understand your legal rights and options for recourse under the law in the following manner-

• Issue Legal Notices: The most common legal action is to send a legal notice to the builder when they fail to deliver your property after the due date of delivery for a refund of the advance amount paid to him during the signing. The legal notice should contain the name, description, and place of the builder and the complainant, details of the cause of action, and relief claimed by the claimant. It should be sent on the letterhead of an advocate and should clearly mention that the buyer’s right is infringed due to the builder and they seek relief from him.
• File a complaint with RERA: Section 18 of RERA provides that an allottee has the option to withdraw from the project if the possession is delayed by the builder. The procedure involves filing a complaint with the authority by providing relevant documents and evidence of delay. The Real Estate Regulatory Authority will assess the case and determine the compensation amount based on the prescribed rates or agreed-upon rates in the agreement. Buyers can even ask for compensation to buy an alternative accommodation at the current market price.
• File a Complaint in Consumer Forum: Delay in possession provides a right to the builders to file a complaint in the consumer forum for deficiency of goods or services. Delay in delivery causes deficiency in services entitling the buyers to receive a refund of the money along with reasonable compensation. An interest rate is applicable as directed by the forums on the builders for the delay in the possession of the project. 
• Approach National Company Law Tribunal: In the event, that the delay in delivery of possession of the purchased property is due to a shortage of funds and the project cannot be continued further, in such circumstance’s buyers should resort to NCLT and initiate insolvency proceedings against the builder under the Insolvency and Bankruptcy Code 2016 for the claim amount to be above 1 lakh. The average time period over which the case resolves is from 12-20 months as the company is dissolved and the claim is received upon liquidation.

Relief one can sought:

Buyers who have entered into agreements with builders or developers for the purchase of a property are entitled to certain legal remedies in case the possession is not delivered within the stipulated time frame. Some of the key remedies available to the buyers include:

• Refund of amount paid- One of the primary remedies available to buyers is the refund of the amount already paid to the builder along with interest.  Buyers can approach forum of RERA for refund of their amount with interest and compensation.  In addition, Buyers can also reach out to consumer Forum for seeking compensation. The interest rate on the refund amount may vary, and courts often consider factors such as the prevailing market rate and the nature of the default.
• Compensation for mental agony and harassment- In addition to seeking a refund, buyers can claim compensation for the mental agony, harassment, and inconvenience caused due to the builder’s delay in delivering possession. Courts often consider the emotional distress and financial hardships suffered by the buyers and may award compensation accordingly.

In the case of Ghaziabad Development Authority v. Balbir Singh, the court determined that neither a request for a full refund nor a promise to surrender the party’s apartment in possession could be justified. The applicant was instructed to apply for a different flat at a greater price instead. According to the court, the award of interest at a rate of 18% is appropriate in light of these facts. The court also concluded that in addition to interest on the money invested, there must also be recompense for the allottee’s mental agony and harassment.

• Termination of agreement- If the delay is substantial and the buyer is no longer interested in acquiring the property, they can seek the termination of the agreement. In such cases, the builder is required to refund the entire amount paid by the buyer, along with any interest or compensation as determined by the court. The definition of “unfair trade practice”, under Section 2(47) of the Consumer Protection Act, 2019 is pretty exhaustive. The primary aim is to introduce honesty and truthfulness into the interaction between manufacturers and consumers.

Statutory provision:

Before 2016, there was no specific legislation in place to protect homebuyers from issues related to delayed possession. The introduction of the Real Estate (Regulation and Development) Act (RERA) in 2016 marked a significant milestone in addressing such concerns and providing relief to affected individuals. It functions as a regulatory authority, akin to the Reserve Bank of India (RBI) for banks, established in each state to oversee matters pertaining to the real estate sector. While the provisions of RERA may vary slightly from state to state, its overarching goal is to ensure transparency and accountability in the real estate market, thereby safeguarding the interests of homebuyers.

Although the specific rights granted to buyers may differ across states, RERA has enacted certain rules and provisions aimed at protecting homebuyers’ interests, particularly concerning property possession. Some key provisions of RERA include:

• Mandatory Registration: Every new real estate project needs to be registered with the respective state RERA authority before initiating any marketing or sale activities. By registering the project, it becomes legally authorized and provides transparency. 
• Possession Timeline: As per the RERA guidelines, the timeline of the possession within which the builder must deliver the property to the buyers should be well specified and the same should be mentioned in the agreement, executed between the buyer and the seller, along with the project registration documents. This prevents unwanted delays and provides the home buyers with a clear understanding of the timeline within which they can expect possession of the property.
• Consequences of Delayed Possession: In case any builder fails to deliver the possession of the property within the agreed timeline they are liable to pay compensation to the home buyers along with the interest. RERA rules define the compensation amount calculated based on the agreed-upon terms or prescribed rates.
• Extension of Possession Timeline: As seen in most cases, developers can seek an extension of the possession timeline for events such as force majeure events or any other valid reasons, after obtaining approval from the RERA authority.
• Occupancy Certificate: Before handing over the possession, developers are required to obtain an occupancy certificate from the relevant authorities to signify that the building is constructed in compliance with the approved plan and is safe for usage by the buyers.

Conclusion:

The inability of a builder to adhere to possession timelines can pose significant challenges for buyers. Fortunately, the Indian legal system offers various remedies to alleviate such concerns and safeguard buyer rights. Buyers have the option to pursue a refund of payments made, demand specific performance of the agreement, claim compensation for mental distress, or terminate the agreement, depending on their specific circumstances. Landmark court rulings in India have solidified buyer rights and set a strong legal precedent for seeking redress in cases of delayed possession. It’s imperative for buyers to familiarize themselves with these remedies and assert their rights to ensure a fair and equitable resolution. While navigating the complexities of delayed possession can be daunting, staying informed, proactive communication with the builder, and exploring legal avenues for recourse are crucial steps in seeking resolution. Whether through dialogue with the builder, legal channels, or seeking compensation, asserting one’s rights is essential in addressing the issue of delayed possession effectively

BY- esha (Intern)