Consumer forums are sending errant developers a strong message that there are costs attached to not completing projects in time and that buyers would get their due.
In a recent order delivered on April 1, the Delhi State Consumer Disputes Redressal Commission directed a Noida-based builder to refund a buyer the cost of the flat and an additional sum as compensation for failing to start the project in time.
The buyer, who had booked into the project in Greater Noida in 2007 was promised possession in March 2010. According to the order, the buyer paid Rs 49.92 lakh to the builder and had taken a home loan to meet a large part of the payment. While the buyer met all his payment obligations, the builder had not even commenced construction until March 2010.
?The complainant had a dream of having own house but it was completely shattered by the builder by merely getting the huge amount. Obviously, this has caused the mental agony, harassment and sheer suffering,? the commission said in its order.
The buyer, in his complaint had also sought interest on the amount paid. The commission observed, ?Admittedly, the entire amount was deposited on November 14, 2007 and it is more than five years that there is no construction activities in respect of the project alleged to have been launched… even the site plan has not been filed… and the builder is getting the fruits of the huge amount for over five years.?
The commission then directed that interest at 9 per cent per annum be paid and awarded an additional Rs 3 lakh as compensation for the mental agony suffered.
?It appears to us that the builder has adopted a very noble method of collecting the money from the poor customers and dragging such customers to litigation and refusing to refund the payment made by such customer,? the order said.
The strong tone of the order notwithstanding, the key question is will this ruling act as a sufficient deterrent to developers who keep delaying delivery?
?Generally speaking, yes, a judgment containing austere observations can operate as a deterrent. This would more properly be the case if the judgment were delivered by the National Consumer Disputes Redressal Commission (NCDRC) since after that an appeal lies only before the Supreme Court and so the NCDRC enjoys a sufficiently high slot in the hierarchy so as to pose deterrent value to the party concerned,? says Anurag Sharma, Partner, (Litigation), APJ-SLG Law Offices, a Delhi-based law firm.
It is a familiar story. The buyer signs on, honours the payment commitment while the developer does not commence the project in time or delays the project, often by years together. Further, the buyer, who has financed the purchase through a home loan has a significant interest cost to bear on account of the delay.
A recent study by analytics firm PropEquity said that out of the 1,920 projects launched in the National Capital Region (NCR), the Mumbai Metropolitan Region and the Bangalore Metropolitan Region, nearly 45 per cent was facing delays. Within the NCR, affordable housing projects faced the major brunt of delays, with as much as 92 per cent of all such projects getting delayed, followed by 76 per cent in the mid-end housing segment and 72 per cent for luxury projects.
Santhosh Kumar, CEO-Operations at Jones Lang LaSalle India says that it is the primary responsibility of the buyer to carry out proper due diligence. ?To begin with, the onus of primary investigation on the credibility and track record of a developer lies on the consumer. In this respect, the parameters a buyer must follow in buying property are the same as in the acquisition of any other valuable asset. A prospective buyer should check into the developer?s credibility, past projects and performance and delivery record. He should also ensure that the project is funded by a known bank and that the project has all the correct approvals.?
Delays in delivery of housing project has occurred in public sector or government led projects too, in India. State consumer disputes redressal commission cause lists are peppered with cases where buyers into government-promoted housing projects have been at the receiving end of such treatment.
In one such case the Delhi consumer commission in an order delivered on January 15, asked the Delhi Development Authority (DDA) to compensate an applicant for allotting a flat under one of its housing schemes to another applicant. DDA had taken cover under a rule which the commission found unacceptable. The applicant had booked a flat in 1996-97 for around Rs 5 lakh. The commission ordered DDA to give another flat of the same description in the vicinity or else refund Rs 30 lakh in line with the escalation in property values.
These are interesting orders. A reason why buyers are reluctant to exit a booking is the cost escalation from the time they booking the flats.
Consumer redressal forums have been very effective at delivering timely rulings and as another example from Ludhiana shows have been effective at giving the consumer his due. In this case the Punjab Consumer Disputes Redressal Commission on March 6, ruled in favour of an applicant from Ludhiana, a slum dweller who was allotment of a house meant for economically weaker sections but later cancelled by the Greater Ludhiana Development Authority (GLDA) taking cover under a rule. The commission, ordered the GLDA to compensate with interest the payment to the applicant if an alternate house could not be allotted.
Apart from the courts and consumer forums the other forum flooded with similar complaints is the Competition Commission of India, (CCI) which successfully pulled up the country?s largest realty firm. The rule under which the CCI could move against the company was however different, that of abuse of market dominance. The case is, however, now under appeal with the Competition Appellate Tribunal.
But this does not mean realtors are always at fault. In several cases, the CCI has dismissed the complaint as it did not find any basis to establish market dominance.
Consumer forums have penalised realty firms mainly on the grounds of deficiency in service, courts for reneging on a contract and the CCI for abuse of market dominance. Since there is no real estate regulator at present, the two methods will be in use. It also gives consumers an option to decide which forum to walk up to to handle their grievances.