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2017 – When the jury intervened to favour home-buyers

2017

by Pooja Bhatia,

2017 was a time full of surprises as buyers who have grappling with the problem of delayed home possessions, came together to form residents’ associations and seek legal intervention on the matter. The big news came from homebuyers filing a petition against reputed builders like Jaypee, Amrapali, Unitech and Supertech in the Supreme Court demanding stern action against the delay in the transfer of possession of flats to the owners. The apex court took note of the buyer dilemma and ordered a refund in many cases. It was then speculated that many project developers were likely to be declared insolvent. Also, because of many more developers like Earth, Gardenia and Era openly admitted that they were not in a position to pay their debts.

With RERA in sight, many homebuyers are now speculating that builders will declare insolvency since they do not wish to be under the purview of the (Regulation and Development) Act 2016 (RERA). The act is being touted as the biggest regulatory reform of the sector and the most obvious deal with RERA is for the buyers who see the act as a major development to regulate the developer community and deal with issues like delay in delivery of projects.

However, at the moment it does seem to trouble in the paradise of homebuyers. People who have invested in the past and have been waiting for almost 6-7 years to receive possession of their flats are fretting over the fact that with RERA implementation, developers and builders are likely to come out of their closet and declare insolvency.

What will happen in this case? Will the buyer money be stuck with no house built in sight? A solution has to be reached quicker to not only safeguard the interest of the buyers but also to secure the reputation of the real estate industry.

It is big developers who are posed as defaulters here and the news does affect the sentiment of the industry. Only recently, with measures like demonetization and RERA, did the people start expecting the property business to run on a plain track. It was natural for them to expect the business shifting from unorganised levels to organised functioning, led by big players- at least in their perception.

So, if big players declare themselves bankrupt, it will reflect poorly on the industry sentiment as a whole.

Thankfully, there have been many instances where legal bodies have intervened in a pragmatic approach towards the buyers.

Take, for example, the National Company Law Tribunal (NCLT) which has implemented the Insolvency and Bankruptcy Code. If a case is referred to them, the tribunal needs 14 days to accept or reject the case, as per the protocol. If the case is accepted, a resolution plan follows to be implemented within six months. It has a grace period of three months. If there is no resolution plan, the company immediately gets into liquidation. This petition can, however, be filed by the banks in case the company defaults in the loan payment. Like in case of Jaypee Infratech, the petition was filed by the lender bank IDBI.

In case of builders opting for bankruptcy, the next course of action is taken by the state authorities. It intervenes to instruct the builder to complete the projects or involve a third-party to complete the due project, thus ensuring that it is not the buyers who suffer as a result.

As per a media report, Vivek Chib, a lawyer who has filed several cases against Unitech on behalf of buyers, said: “What these builders have been doing is a matter of fraud. They have been raising money on one project and then syphoning it off to another project. Everything is getting stacked up and now it has resulted in this domino effect.”

If this is the case, then it is unlikely that people will build trust in the state authority led to action. For one, a builder will most likely not have one project defaulter list. So, there has to be a plan B where the government has to put more action to provide relief to the buyers.

The only big relief has come from the apex court which clearly implied that if a real estate company cannot offer house possession within the fixed period, then it should refund the buyer with interest. That the buyer cannot be made to wait indefinitely.

Once a date of allotment has been specified in the allotment letter, it is mandatory for the builder to abide by it, ruled the National Consumer Disputes Redressal Commission in a recent order.

The situation is real and the bigger truth is that a combination of funds shortage, rising debt, piling inventory, a trust deficit and now, increased litigation has dampened the spirit of ordinary buyers. Increasing number of buyers are now forming associations, being together to approach the National Consumer Disputes Redressal Commission for better compensation or refund of their money. It does raise a big concern.

Pooja Bhatia is a property news enthusiast, who likes staying updated on business and corporate news, lifestyle at home, home interior elements, location insights and rest of the information, to make living better. She is also an avid traveler (a blogger on holidays) and an avid reader and a part of this real-time information, she converts into real estate enthusiasm.

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