The Real Estate (Regulation and Development) Act of 2016, commonly known as the RERA Act (hereinafter referred to as “Act”), was enacted with the aim of enhancing efficiency and transparency in the real estate sector while safeguarding the interests of homebuyers. Before the introduction of the RERA Act, it was a common practice for the builders/ promoters to cause delays in handing over the possession of units to homebuyers, leading to prolonged delays. Although the homebuyers had redressal mechanisms, the same were often inefficient and it used to take an awfully long time for the dispute to resolve, thereby causing significant delays. One of the key objectives of the RERA Act was to establish a swift adjudication process for dispute resolution so that buyers could get instant relief from the corrupt practices of the builders. The RERA Act especially Section 18 of 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 local state government in the event of default by the Promoter. The Act also obligates the builders to compensate the buyers in case there is a delay in delivering possession of the unit or in case the builder has failed to fulfill other obligations as specified in the RERA Act, or the rules, and regulations made thereunder.
Do homebuyers have the right to seek a refund under the RERA Act?
When a promoter is unable to deliver possession, Section 18(1) of the RERA Act entitles the homebuyer to take the refund of the entire invested amount from the builder including interest and compensation. Moreover, the RERA Act provides an additional option to homebuyers and allows them to take delayed possession of the unit along with the interest over the entire amount paid by them, for every month of delay in possession by the Builder/ Promoter, in case they wish to do so. It depicts that the RERA Act has provided vast rights to homebuyers and in case of delay on the hands of the builder it is upon the homebuyers, whether they wish to take possession of the unit or to take a refund of the entire investment. In either case, the homebuyers are entitled to charge interest over their investment.
The right of the homebuyer to seek a refund with interest is unqualified and absolute. The same has been established by the Hon’ble Supreme Court in Imperia Structures Ltd. Vs. Anil Patni and Another wherein it was held that Section 18 confers an unqualified right upon an allottee to get the refund of the amount deposited along with interest at the prescribed rate if the promoter fails to complete or is unable to give possession of an apartment as per the date specified in the homebuyer’s agreement.
The same has been reiterated by the Hon’ble Supreme Court in the case of Newtech Promoters and Developers Pvt. Ltd. Vs. State of U.P. where the Hon’ble Court noted that the legislative intention and mandate is clear that Section 18(1) is an indefeasible right of the allottee to get a return of the amount on demand if the promoter is unable to handover possession in terms of the agreement for sale or failed to complete the project by the date specified and the justification which the promotor wants to tender as his defence as to why the withdrawal of the amount under the scheme of the Act may not be justified appears to be insignificant and the regulatory authority with summary nature of scrutiny of undisputed facts may determine the refund of the amount which the allottee has deposited, while seeking withdrawal from the project, with interest, that too has been prescribed under the Act. This right is unconditional and absolute, as affirmed by the Hon’ble Supreme Court in the case of Imperia Structures Ltd. Vs. Anil Patni and Another. The court clarified that the buyer’s right to seek a refund is independent of construction stages or occupancy certificates.
The interest for delay in possession of the flat cannot be denied on the fact that there is no registered agreement to sell. In a recent order dated 17.06.2022, the Maharashtra Real Estate Appellate Tribunal observed that merely because there is no registered agreement between a developer and homebuyer, interest relief for delayed possession under section 18 cannot be denied. In the absence of a formal agreement, any other document such as an allotment letter, brochure, template, or email communication mentioning the date of possession can be considered to work out the delay in possession.
Furthermore, under section 18 of the Act, the homebuyers also have the right to seek compensation in case they face a loss due to defective title of land or the Promoter fails to discharge any obligations under the RERA Act, or the Rules and Regulations made thereunder or if the Promoter fails to comply with terms and conditions of the Agreement to Sell. In case the buyers seek the relief of compensation the complaint shall lie to the adjudicating officer under the RERA Act who has the power to determine the compensation and the same shall not lie with the RERA Authority. The Hon’ble Supreme Court, in Newtech Promoters and Developers Pvt. Ltd. Vs. State of U.P. (supra) , clarified that the regulatory authority has the power to examine and decide on matters related to refund, interest, penalties, and delayed possession. However, the adjudicating officer exclusively holds the power to determine compensation and interest, ensuring a clear division of powers.
Conclusion
The intent behind Section 18 of the RERA Act is to reimburse the allottee, including their life savings with interest, as determined by the authority. The legal system affirms that the buyer’s right to seek a refund, as outlined in Section 18, is absolute and without conditions. Importantly, the buyer has the discretion to initiate either a refund complaint with interest or a compensation complaint. The provisions outlined in Section 18 have proven highly effective in safeguarding the interests of buyers, enabling them to reclaim their earned funds, along with specified interest, from promoters.