Homebuyers Right to Seek refund Under RERA Act
What is RERA Act?
The Real Estate (Regulation and Development) Act of 2016, commonly known as the RERA Act (hereinafter referred to as “Act”), was enacted to enhance the efficiency and transparency in the real estate sector while safeguarding the interests of homebuyers. Before its introduction, the Indian real estate sector was largely unorganized, with rampant malpractices. Builders often exploited homebuyers by making them sign arbitrary documents, delaying possession, or delivering units significantly different from what was promised.
Although the homebuyers had access to legal remedies, the process was inefficient and time-consuming, thereby causing significant delays. One of the key objectives of the RERA Act was to introduce a swift adjudication process to address disputes promptly and provide immediate relief from builders’ corrupt practices. The RERA Act imposes certain obligations on the buyers, one of them being refunding the total amount to homebuyers along with interest as prescribed by the respective state government in the event of default. Additionally, it mandates compensation for delays in possession or other violations of the Act, rules, or regulations.
Homebuyers’ right to seek refund under the RERA Act?
The RERA Act grants several rights to homebuyers, including the right to seek a refund of their entire investment along with delay penalty (interest) and compensation.
Right to seek refund under section 12
Section 12 of the Act imposes an obligation on the promoter to compensate or refund the buyer if they have collected advances or deposits based on false or misleading advertisements. Often, developers lure buyers by showcasing an attractive model apartment or making exaggerated claims in their brochures and prospectuses. However, after investing a substantial amount, buyers often realize that the actual unit is significantly different from what was advertised. In such cases, Section 12 entitles buyers to claim compensation for any loss or damage sustained due to such misleading information. Additionally, if the buyer wishes to withdraw from the project, they have the right to seek a full refund along with applicable interest.
The Maharashtra Real Estate Regulatory Authority (MahaRERA) has upheld this right in various cases. For instance, in the Ruparel Skygreens, I project in Borivli, MahaRERA directed the builder to refund the entire amount along with two percent interest after it was established that misleading information was provided in the brochure at the time of booking.
In The Bombay Dyeing & Manufacturing Company Limited v. Ashok Narang and Ors., the Bombay High Court, in its judgment dated August 30, 2021, held that Section 12 applies retrospectively and extends to agreements signed before the enactment of the Act. The court upheld a refund order against Bombay Dyeing for failing to deliver flats as per the promised timeline.
Right to seek refund under section 18
Section 18(1) of the RERA Act also entitles the homebuyers to claim a full refund along with interest and compensation if the promoter fails to hand over possession within the agreed timeline. Moreover, under the RERA Act the homebuyers can choose to accept the delayed possession of their unit while claiming interest for every month of delay. This provision empowers homebuyers with the discretion to choose between a refund or possession with interest, ensuring them protection against the delays caused by the developers.
This right of the homebuyer to seek a refund with interest is unqualified and absolute. The Hon’ble Supreme Court in Imperia Structures Ltd. Vs. Anil Patni and Another, reaffirmed that Section 18 grants an absolute and unconditional right to homebuyers to seek a refund with interest if the promoter fails to deliver the unit on time. The Court also clarified that this right is independent of factors such as the stage of construction or the issuance of occupancy certificates.
Similarly, in Newtech Promoters and Developers Pvt. Ltd. Vs. State of U.P.,the Hon’ble Supreme Court held that Section 18(1) grants an “indefeasible right” to the homebuyers to claim a refund if possession is delayed beyond the date specified in the Agreement. The court further clarified that the buyer’s right to seek a refund is independent of construction stages or occupancy certificates.
This right of seeking interest for delay in possession of the flat is absolute and cannot be denied even if there is no registered agreement to sell. The Maharashtra Real Estate Regulatory Authority (MahaRERA) ruled that even in the absence of a registered sale agreement, homebuyers are entitled to claim interest for delayed possession. Documents such as allotment letters, brochures, and email communications specifying possession dates can serve as sufficient evidence to establish the delay.
Right to seek compensation along with the refund
The homebuyers do also have a right to seek compensation along with refund and in other cases too. For eg. Under different provisions of Section 18 of the RERA Act, homebuyers can claim compensation if they suffer losses due to a defective land title, the promoter’s failure to fulfill obligations under the Act, or non-compliance with the Agreement to Sell.
It is important to note that while adjudicating refund-related complaints, RERA authorities can impose delay penalties, typically ranging from the SBI Marginal Cost of Lending Rate (MCLR) +1% to SBI MCLR +2%, depending on the state. However, RERA authorities do not have the power to grant compensation. The right to determine compensation is exclusively vested in the Adjudicating Officer appointed by the Real Estate Regulatory Authority in consultation with the government. If a homebuyer seeks additional compensation beyond the delay penalty, they must file a separate complaint before the Adjudicating Officer. In some states, RERA Authorities automatically transfer such complaints, while in others, buyers must file a separate petition.
Read more about Execution of Orders passed by RERA Authority: Execution of Orders Passed by RERA Authority – Krine Legal
The Hon’ble Supreme Court has resolved ambiguities regarding the powers of the Regulatory Authority and the Adjudicating Officer concerning refund and compensation. In Newtech Promoters and Developers Pvt. Ltd. vs. State of U.P., the Court clarified that the Regulatory Authority has the jurisdiction to decide complaints related to refunds, interest on refunds, interest for delayed possession, and penalties. However, when it comes to determining compensation and interest thereon, the exclusive authority lies with the Adjudicating Officer, as per the combined reading of Sections 71 and 72 of the Act.
Conclusion
One of the key objectives of the RERA Act is to safeguard the interests of homebuyers by ensuring they receive reimbursement for their life savings, along with a reasonable interest and compensation as determined. Sections 12 and 18 of the Act provide homebuyers with an absolute right to seek refunds with interest, independent of construction status or developer justifications. Additionally, homebuyers can claim compensation for losses due to misleading advertisements, project delays, or other violations of the Act. The Supreme Court has repeatedly upheld these rights, ensuring robust protection for homebuyers against fraudulent practices by developers. The provisions outlined in RERA have proven to be highly effective in the swift resolution of disputes.
