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Delivery of new flats: Delays can attract high penalty for developers

Oct 19 2013, 08:58 IST
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In a landmark judgement, the Maharashtra consumer commission has ordered a developer to pay the market value of an equivalent unit for delay in delivery. In a landmark judgement, the Maharashtra consumer commission has ordered a developer to pay the market value of an equivalent unit for delay in delivery.
SummaryRecent court ruling relieves buyers of the risk of being duped by developers.

Even before the real estate regulator is formed, consumer courts are taking the lead in establishing the best practices for the sector. On the most common issues — developers taking more than the time they promised in which to deliver a flat — consumer courts are coming down on the side of the buyers.

This time we examine a recent judgment by Maharashtra State Consumer Disputes Redressal Commission to figure out if it has a wider application for others in a similar situation. The recent judgement puts the onus of delay beyond reasonable limits on the developers and relieves the buyers the risk of being duped by developers when they renege on their promise.

The case

The Maharashtra State Consumer Disputes Redressal Commission, in a judgement on September 13, gave a landmark decision in favour of the buyer Anant Ieetkar. Ieetkar had booked a flat in December 2008 in Kalyan, an extended suburb of Mumbai, and paid approximately Rs 19 lakh to the developer. The flat was supposed to be delivered by September 2010. The project was in limbo for years. Construction had not begun. Ieetkar waited until 2011. Eventually, he filed a complaint with the commission.

In his complaint, Ieetkar alleged negligence on the part of the developer in not handing over possession by the promised date. He asked for delivery of the unit, additional charges for the mental harassment he was put through, and the interest payment as per the agreement. In his complaint, Ieetkar also provided documentary proof of the current market value of the flat from a valuer.

The developer admitted to receiving full payment for the flat and that construction would begin “as soon as possible” after getting requisite permissions.

The commission called this case as the “best example how the developer exploits the prospective purchasers” and ordered the developer to pay the current market value of a flat with the same specification in the same locality, which would be around Rs 60 lakh, in case the unit was not delivered within three months. In addition, the commission also directed the developer to pay Ieetkar Rs 3 lakh as compensation for mental harassment and Rs 30,000 for legal charges.

In its judgement, the commission quoted a judgement from the Supreme Court, which held that “while quantifying the damages, consumer fora are required to make an attempt to serve ends of justice, so that compensation is awarded, in an established case, which not

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