Real Estate Regulatory Authority Act, 2016 (hereinafter referred to as “RERA Act”) basically aims to bring efficiency and transparency to the real estate industry, and one of the main priority to protect the interest of the buyers in the real estate sector. Before the commencement of this act, it was in practice that the builder failed to deliver the possession of the unit to the buyers even after the long delay on their account.
Though there were redressal mechanisms they were not as efficient as it used to take awfully long time. Section 18 of the RERA act puts an obligation on the builder or promoter to refund/return the amount along with the compensation to the buyer in case of a default on the hand of the promoter in providing the possession of the unit or in case the promoter fails to discharge any other obligation mentioned in the act or the rules and regulations made thereunder.
When the promoter fails to give possession:
Buyers invest their hard-earned money into real estate projects with the goal of one day owning their ideal home. However, their dream is dashed when the builder fails to hand over ownership of their flats after a lengthy delay.
According to Section 18(1) of the RERA Act, the buyer is entitled to a return of the entire amount invested in the promoter’s project, including interest and compensation, if the Promoter:
- Failure to provide possession in line with the terms and conditions of the Sale Agreement.
- Is unable to execute the job within the agreed-upon time frame.
- Failure to deliver possession owing to the termination of his company as a result of the cancellation of his project under this act or for any other reasons.
It is pertinent to note here that Section 18 (1) gives two kinds of rights to the buyers i.e. Right to get a Refund along with Interest and the Right to get Compensation.
Right to receive compensation
Following cases where the allottee is entitled to receive the compensation as per the act:
- When there is any structural change or defect or any other defect in workmanship.[Section 14(3)]
- When loss is caused to the buyer due to defective title of the land, on which the project is being developed.[Section 18(2)]
- When the promoter or builder fails to discharge any other obligation under the act which includes delay in possession, as the time of handing over the possession of the unit is prescribed as per the agreement.[Section 18(3)]
The adjudicating officer, who will be selected by the Real Estate Regulatory Authority in cooperation with the government, would have the authority to decide on compensation. The buyer must file a separate application with the adjudicating officer, and the authority cannot make compensation decisions.
In Newtech Promoters and Developers Pvt. Ltd. Vs. State of U.P. (supra), the Hon’ble court noted that when it comes to refund of the amount, and interest on the refund amount, or directing payment of interest for delayed delivery of possession, or penalty and interest thereon, the Hon’ble court noted that when it comes to refund of the amount, and interest on the refund amount, or directing payment of interest for delayed delivery of possession, or penalty and interest thereon, The regulatory authority has the authority to investigate and decide on the outcome of a complaint.
At the same time, when it comes to requesting the relief of adjudging compensation and interest thereon, the adjudicating officer has sole authority to decide, based on the collective reading of Sections 71 and 72 of the Act.
Section 72 of the RERA Act laid down that the adjudicating officer must have due regard to the following factors when deciding the quantum of compensation or interest:—
- the amount of disproportionate gain or unfair advantage as a result of the default;
- the amount of loss caused as a result of the default;
- the repetitive nature of the default;
- other factors considered necessary in the furtherance of justice.
It is also worth noting that the Adjudicating Officer has the authority to conduct an investigation and direct the payment of compensation along with interest, as the case may be, and such complaints must be disposed of within 60 days, failing which the reasons must be recorded.
Right to receive a refund
Section 18: Return of amount of compensation
As per section 18 of the RERA Act, the buyer or the allottee holds the right to receive refund an unqualified right to get a refund of the amount with interest if, the promoter of the builder fails or is unable to complete or provide possession of a unit, plot, building, it can be either in terms of the agreement for sale or to complete the project by date specified therein or on account of discontinuance of the business as a developer either on account of suspension or revocation of the registration under the Act.
The buyer’s entitlement to a return with interest is unqualified and total. In Imperia Structures Ltd. vs. Anil Patni and Others, the Supreme Court held that Section 18 gives an allottee an unqualified right to a refund of the amount deposited with the promoter as well as interest at the prescribed rate if the promoter fails to complete or is unable to give possession of a flat by the date specified in the home buyer’s agreement.
The same was reiterated by the Hon’ble Supreme Court in the case of Newtech Promoters and Developers Pvt. Ltd. vs. State of U.P., where the Hon’ble Court noted that the legislative intention and mandate is clear that Section 18(1) is an indefeasible right of the allottee to receive a return of the amount on demand, if the promoter is unable to handover possession in terms of the agreement for sale or fails to complete the project by the date and the justification which the promoter wishes to offer as his defense as to why the withdrawal of the amount under the scheme of the Act may not be justified appears insignificant, and the regulatory authority may determine the refund of the amount which the allottee has deposited, while seeking withdrawal from the project, with interest, as prescribed by the Act.
Interest for Delay in Possession:
Section 18 (1) of the RERA Act, further stipulates that if the allottee does not wish to withdraw from the project, he is entitled to interest for each month of delay until the promoter takes possession. The interest for the delay in possession of the unit cannot be disputed due to the lack of a recorded agreement to sell.
In a recent judgment dated 17.06.2022, the Maharashtra Real Estate Appellate Tribunal said that interest relief for delayed possession under Section 18 cannot be rejected simply because there is no documented agreement between a developer and a property buyer. In the absence of a formal agreement, any other document specifying the date of possession, such as an allocation letter, brochure, template, or email message, might be considered to figure out the delay in possession.
Section 18 of the RERA Act proposes to restore the allottee’s life savings with interest calculated by the authority. The judiciary has ruled that the buyer’s right to demand a refund under Section 18 is absolute and unqualified. Furthermore, the buyer has the option of filing a complaint for a refund with interest or a complaint for possession.
The measures indicated in Section 18 of the Act have proven to be quite effective in preserving the interests of purchasers, and many buyers have been able to recover from promoters their hard-earned money as well as the required interest.