Stand up against erring builders

Amit Kumar

Inordinate delay in delivery of flats by a builder has almost become a common occurence now. one of the major fears of homebuyers is whether the builder complete the project in time or not and in the absence of strict regulatory norms builders rarely follow the schedule date of delivery mentioned in the Builder- Buyer Agreement.

In most of the cases delay in delivery varies from a minimum of one year to five years and in some cases, even more. Hapless buyers, many of whom have taken loans to finance are burdened with the EMIs as well as rent.

Buyer in Catch 22 situation

It is a catch 22 situation for buyers as they can neither walk out of the situation nor make the builder pay for this lapse. It is not in the interest of a buyer to cancel the sale agreement and seek refund. As cancellation of the agreement after waiting for two, three years or even more, would cause more loss to the buyers than to the builder. With property prices shooting up it is unlikely for a buyer to exit and get another property for the same price. Moreover, there is no guarantee that the new flat will be delivered in time.

Builders in order to attract buyer to buy flats, offer to pay compensation @ Rs5 or 10 per sq. ft. per month for delay in offering possession from schedule date and a clause to the said effect isinvariably mentioned in the Builder-Buyer agreement. But the amount offered is so meager that it fails to compensate the buyer.

Moreover, there are so many other clauses in the Builder-Buyer agreement, which nullify this claim of the buyer against the errant builder. For example, Builder-Buyer agreement often contains a clause that if there is a delay in payment of installment even by a day, the buyer shall not be entitled to compensation for delay in offering the possession of flat and the builder shall charge 18 per cent interest on delayed payment. These agreements are mostly one sided.

Landmark judgement

This situation would have continued in India but for the landmark judgement of National Consumer Dispute Redressal Commission, New Delhi in the case of Satish Kumar Pandey Vs. Unitech Ltd. delivered on 6th June, 2015. The National Commission minutely scrutinised the clauses of Builder-Buyer agreement in the above case and held that a term of above nature in Builder-Buyer agreement is wholly one sided, unfair and unreasonable. National Commission also held that such a practice constitutes unfair trade practice under the Consumer Protection Act, 1986.

The National Commission held in the said case that builder charges compound interest @18 per cent per annum in the event of the delay on the part of the buyer in making payment to the builder but seeks to pay less than 3 per cent per annum of the capital investment is nothing but it is unfair trade practice within the meaning Section 2 (r) of the Consumer Protection Act, 1986 as Builder adopts unfair methods or practice for the purpose of selling the products. National Commission in the said case awarded compensation at rate of 12 per cent per annum for period of delay in offer of possession from the schedule date.

The commission awarded 12 per cent of interest on the ground that the cost of borrowing for individual home buyers is about 11.5 per cent and thus, it would take care of the additional financial burden on the individual home buyers on account of delay in handing over the possession of the flat purchased by them.

The commission also directed that if a builder fails to deliver possession by the last date stipulated in extended period, thereafter, it would be pay interest at the rate of 18 per cent.

The National Commission has recently passed similar order in series of cases namely Santosh Johari and Others Vs. Unitech Ltd, Satinder Pal Singh Bawa Vs. Sahara India Commercial Co. Ltd., and Sahara Grace Consumer Grievance Association Vs. Sahara India Commercial Co. Ltd. and Others. Since, these judgements of the commission have been delivered after June, 2015 onwards, appeals by builders are pending in the Supreme Court.

However, one thing is clear that buyers can certainly take recourse to law against unscrupulous builders and seek just compensation in case of delay in offering possession of flats.

Even the Supreme Court in the case of Dr. Amita Dhanda and others Vs. Emrald Court Owner Resident Welfare Association on 30.7.2014 ordered the builder to pay the entire principal amount along with 14 per cent compounded annually in a case where the High Court has directed the authorities to demolish the tower constructed in violation of law.

The legal rights of the buyers are increasingly getting recognised and grievances are being addressed and they should exercise their legal rights and seek fair just compensation from the builders in case of delayed projects.

Consumers should not be deterred by one-sided agreement favouring builders, nor should they be deterred by superior financial position of the builder as the law is with the common man. Consumer Courts and Apex Court have come to the rescue of hapless buyers against the builder in lobby in cases of delayed projects.

— The writer is Advocate on Record, Supreme Court of India