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.

only serves the purpose of re-compensating the individual, but which also at the same time, aims to bring about a qualitative change in the attitude of the service provider”.

According to Uday Wavikar, the lawyer representing Ieetkar, compensating the consumer at the current market value will increase consumer’s trust in the system. “In earlier judgements, consumers were merely granted a certain amount of interest on the principal amount paid. In reality, no amount of interest is enough, considering the rising real estate rates. But with a compensation like this, a consumer can at least consider buying a house in the same area,” says Wavikar.

Consumer forums across the country are lined up with similar complaints against developers. But as the Ieetkar judgement shows, such wilful default on the part of developers would now entail a heavy price.

Some developers agree. “Dedicated execution is of utmost importance to ensure timely delivery,” says Ram Raheja, director S Raheja Realty, a Mumbai-based developer.

“The key factor for delays in majority of the cases is cash flow. The diversion of funds is an unethical practice but it may not be true for all developers. I believe that defaulters should be punished. However, the buyers also have to be very diligent and should ensure they get the documents, especially the approvals checked by professionals,” adds Raheja.

The Checklist

Even as the judgement in this case could inspire more complaints, it is not yet a settled question of law as it can be potentially appealed with the National Consumer Disputes Redressal Commission and finally, the Supreme Court.

Let us take the example of a flat, say 1,000 sq ft in 2007 in Borivali, Mumbai. The going rate then was Rs 6,000 per sq ft. The agreement says the year of possession in March 2010. The developer, however, does not hand over the keys until March 2013 as the work is not complete. When the buyer asks reasons for the delay, he is presented with an option: take back the Rs 60 lakh paid from 2007 to 2010.

The buyer had two choices then. One, he may wait indefinitely for the project to complete, as he has already exhausted his funds. Two, he can take Rs 60 lakh back and look for other options.

This is also not possible as the rates in the area have doubled and he will get a far smaller unit for the same price at that locality. This buyer

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