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

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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.

in this case has lost both the house and time. The developer will sell the same flat to another buyer at the current market value say Rs 12,000 per sq ft and would make Rs 1.2 crore, an extra profit of Rs 60 lakh.

“In some cases, where the buyers are able to exert some pressure, the developers have paid about 10 to 12 per cent interest on the amount refunded,” says R Madan, an advocate who is fighting on behalf of buyers. “However, the interest was calculated from the date of possession mentioned in the agreement till the date of refund. The developers happily paid that interest as it was only for 2-3 years while they used the buyer’s money for 6 years without interest. On the other hand this interest was not substantial for the buyer to match the current market value of another flat in the vicinity,” adds Madan.

In India, sale agreements are usually prepared by the developers. The usual agreement for a standard under-construction project would usually indicate 3-4 years as the time-frame for completion. The buyer is bound to arrange the fund within this period while the developer is bound to keep his side of the deal and hand over the keys on the mentioned delivery date.

It is expected that the developer — being a businessman — must have considered all possible factors while finalising the cost and the time frame for delivery. “He has presumably paid for the land and cleared the legal title before accepting bookings. Otherwise it would amount to cheating,” says Naresh Mehta, a property consultant.

“He must have anticipated the fluctuations in demand, the rate environment and cost of inputs before fixing the price. He is supposed to be aware of the time needed for approvals, procurement of men and material and the construction process before he lays down the delivery date in the agreement,” adds Mehta.

“So, after the agreed date of delivery, the developer cannot justify delay on any of these factors as they are supposed to be factored beforehand. Now, in the absence of any natural calamity, if delay occurs beyond five years, it can easily be called ‘developer made’ calamity,” says Paresh Parekh (name changed), an aggrieved buyer who is preparing to take a legal action against a developer in Panvel.

There are several examples of buyers caught in similar circumstances. If the pecuniary value of one’s complaint

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