REAL ESTATE SECTOR & CONSUMER PROTECTION ACT

 

REAL ESTATE SECTOR & CONSUMER PROTECTION ACT

As per official reports and statistics, the Indian real estate sector had a market size of USD 120 billion at the end of 2017, and is expected to reach USD trillion by 2030. It comprises of 4 sectors – housing, retail, commercial and hospitality. Increases is income, rapid urbanisation and government policies which focus on growth of commercial industries have led to a huge demand for residential and commercial real estate opportunities.

CONSUMER ISSUES

The process of buying real estate reveals a lot of uncertainties in the process – the construction will take years to be fulfilled and a substantial amount of money has been invested by the consumer for purchase of their house. Accordingly, the common grievances of consumers with respect to the real estate sector can be divided into two parts – problems faced before

construction and problems faced after construction

1. False/misleading information being given by the real estate agent.

2. Inordinate and unjustified delay in construction.

3. Delay in allotment and transferring the title of property to the consumer.

4. Charging of additional money due to unfair clauses in the contractual

agreement,

5. Delay in payment of compensation if a grievance is recognised by the

service provider.

6. Selling of common spaces without permission of the residents.

7. Lack of maintenance of facilities and amenities.

REAL ESTATE REGULATORY AUTHORITIES

Before 2016, the real estate sector in India was unregulated. The CREDAI

(Confederation of Real Estate Developers’ Association of India) is a nonprofit

organisation which was established in 1999. It lays down a voluntary

code of conduct which is applicable to all real estate developers who are

members of the CREDAI and it established a Consumer Grievance Redressal Forum in 2012 for resolving disputes among buyers and CREDAI members.

However, its voluntary nature meant that there were no real safeguards

available to the buyers. In 2016, the Real Estate (Regulation and

Development) Act was passed which provided for the establishment of a

Real Estate Regulatory Authority by the state governments in their respective

states. The purpose of these authorities is to protect the interests of

consumers in the real estate sector.

In addition, it provides for the creation of the Real Estate Appellate Tribunals

by state governments in their respective states for hearing all appeals against the order/decision of the Real Estate Regulatory Authority.

CASES

Mere registration of flat does not confer a right for allotment.

U.P. Housing and Development Board v. Ramesh Chandra Agarwal

Facts: In 1982, the Appellant floated a scheme for Economically Weaker

Sections. The Respondent deposited an amount of Rs. 500/-, initially in

1982, for registration. Later, in 1985, an additional amount of Rs. 500/- was

deposited when the registration fee was enhanced to Rs. 1000/-. The

Appellant is governed by the Rules, 1979. The first advertisement was

published by the Appellant in 1992. In terms of the above Rules, registered

applicants were required to furnish their written consent for being included

in the draw of lots. None was provided by the Respondent. Respondent filed

a consumer complaint nearly eleven years after the date of registration. In

the meantime, a second advertisement was published by the Appellant on

15 January 1995. By an order, the District Forum, Ghaziabad disposed of

the complaint by directing that, the Respondent, at the highest, may secure

an allotment, if he so desires at the current value fixed by the Appellant.

Against this order of the District Forum, the Respondent filed a first appeal

before the State Commission. On 25 September 1995, the Appellant

published an allotment notice indicating the proposed allotment of vacant

properties. On 28 August 1996, the Appellant enhanced the registration

amount and all existing registered applicants were required to pay the

difference in order to keep their registration alive for future schemes. On 1

November 2002, the Appellant issued an office order providing that those

applicants who failed to get an allotment in the draw of lots could be entitled to refund of the registration monies. Thereafter, appeal was dismissed by the SCDRC in the absence of any representation by the Respondent. The Respondent then filed a revision before the National Commission. A direction has been issued to the Appellant to allot a flat on the ground floor in the Mandola Vihar Yojana, Ghaziabad to the Respondent subject to his paying a sum of Rs. 2,50,000/- towards consideration for the flat within a period of six weeks from the date of the passing of the order. Aggrieved by the direction of the NCDRC appellant filed the revision petition before the Hon’ble Court.

Issue: Whether National Commission erred in issuing a direction to Appellant

to make an allotment to Respondent?

Decision: Supreme Court set aside the order of NCDRC and held that the

Appellant is governed by the terms and conditions advertised in its

Registration Booklet and by the Rules of 1979 such as (i) mere registration

does not confer a right for allotment, (ii) the Board is not bound to allot a

house or plot to every registered holder, (iii) that after the Board advertises

the availability of a scheme in the newspaper, every registered applicant is at liberty to submit a consent letter for participation in the draw of lots and the applicant must show readiness and willingness to participate in a draw of lots in respect of a specified scheme.

Delay in granting possession

Wg. Cdr. Arifur Rahman Khan and Aleva Sultana & others v. DLF

Southern Homes Pvt. Ltd. (Now Known As Begur Omr Homes Pvt.

Ltd.)

Facts: Complainants had booked residential flats in a project called Westland

Heights at New Town, DLF in Bengaluru. The agreement entered into

between the buyers and the developer stipulated the completion of the project within 36 months from the date of execution of agreement except for force majeure conditions. The flat-buyers were informed on 12 January 2011 that possession of apartments was expected to be completed by mid-2012, the dates were further extended up to 2015 when they were informed of another delay by a notification dated 4th May 2015 that they hadn’t received the Occupation Certificate (OC), thus the obligation of handing over possession within 36 months was not fulfilled. The NCDRC accepted the submission of the Respondent that there was no deficiency on their part in complying with the contractual obligations and that despite delay in handing over possession of the flats the Complainants were not entitled to compensation in excess of what was set-out in the Apartment Buyers Agreement which is Rs. 5 per sq. ft per month.

Issue: Whether the flat-buyers are constrained by the stipulation in

Apartment Buyers Agreement of providing compensation at the rate of

Rs. 5 per sq. ft per month?

Decision: The Supreme Court observed that failure of the developer to

comply with the contractual obligation to provide the flat to a flat purchaser

within a contractually stipulated period amounts to a deficiency. In cases

where there is a gross delay in the handling over the possession beyond the contractually stipulated period, the jurisdiction of the consumer forum to

award just and reasonable compensation is not constrained by the terms of

a rate in builder agreement.