Banks cannot auction defaulting projects without allottees’ consent- HARERA


Status as on-16/12/2020

HARERA said that rights of the allottees are not secondary to those of lenders in case of default, thus, banks cannot auction property without allottees’ consent.

In future, banks need to take prior approval from RERA and 2/3rd of homebuyers before auctioning any project. Approval from authority to be taken in two stages; first before the initiating the auction and second before transferring the property to buyer.


In a landmark judgment, HARERA has barred the auction of a loan-defaulting project by bank to recover damages without prior adjustment of allottees’ dues.

Recently, complaints about a peculiar trend has been noticed in real estate sector where promoters mortgage their project lands, structures and receivables to lending institutions in order to procure loans for construction and development of projects. When these promoters fail to repay the loans, the financial institutions directly auction the properties mortgaged against the same to recover money by invoking the SARFAESI Act, 2002.

Such auctions cause dissatisfaction and violate the rights of the allottees of the project as there is no acknowledgement of their role. They spend their lifetime hard-earned money to buy their dream home and end up with uncertainty and deprivation only.

In a recent case, promoter M/s Supertech Limited approached PNB Housing Finance Limited for a construction loan for the project “Supertech Hues”. It was duly granted to M/s Supertech Limited against equitable mortgage of the project land by deposit of the title deeds along with receivables from the same.

The borrower failed to repay the loans and therefore became a defaulter. Then, the mortgaged project was put for e-auction by PNB Housing Finance Limited. So, the homebuyers moved to HARERA.

Milestone discernment by HARERA

The latest judgment is first of its kind and a revolutionary step by HARERA towards the protection of interest of homebuyers.

The authority stayed the e-auction in its order dated September 11 and said that the rights of allottees are not subservient to those of the creditors. Therefore, banks cannot supersede or infringe the rights of allottees in case of default. The authority has clarified that banks are duty bound to make certain the proper verification before loan payments and its utilization towards the actual purpose. The lending institutions shall be held equally responsible if they are unable to ensure the same.


The above-mentioned decision by HARERA in favour of homebuyers is highly appreciable. It will create a new pathway in the real estate regime and furnish a clearer and stronger role of allottees’ among the other stakeholders. Further, lenders will be subjected to higher responsibility regarding scrutiny of borrowers and proper utilization of their money.

Disclaimer – The above article is based on interpretation of the related judicial pronouncement and related laws which may differ from person to person. The readers are expected to take expert opinion before placing reliance on it. For more information, please reach us at or call us at 8383011629

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