Developers to pay interest to home buyers

LUCKNOW : Erring developers will now have to pay interest to home buyers on their deposit in case of delay in delivery of flats, according to Uttar Pradesh Real Estate Regulatory Authority (UPRERA).

“Home buyers seeking refund of their money due to default by developer in delivery of their home would be entitled to interest on deposit equivalent to the Marginal Cost of Fund Lending Rate (MCLR) levied by State Bank of India on home loans,” says the order issued by UPRERA chief Nitin Ramesh

THE VCS OF ALL DEVELOPMENT AUTHORITIES HAVE BEEN ASKED TO FOLLOW THE MCLR FORMULA WHILE DEALING WITH SUCH CASES

Gokarn.

The order comes in the wake of a letter written by the chairman of Ghaziabad Development Authority (GDA) to UPRERA chairman drawing his attention towards the lack of clarity over interest to be paid to a home buyer by a developer in case of non-delivery of a project.

“Of the 4,315 complaints received by various development authorities from home buyers, the presiding officers (vice chairman of development authorities) have so far disposed of 1,346 so far,” said Gokarn.

But a large number of these orders are being challenged by the developers as there is no uniformity or standard operating procedure to decide the interest rate to be paid on the money of home buyers who decides to opt out of the project.

“VC GDA has pointed out that interest rates varying from 9 per cent to 24 per cent are being levied by the presiding officers while deciding such cases, which is leading to confusion and non-compliance of the orders by developers,” said UPRERA chairman.

Gokarn, who is also principal secretary, housing has now directed VCs of all development authorities to follow the MCLR (8.25 per cent presently) formula while dealing with such cases and where no interest rate has been defined in the builder-buyer agreement.

However, other than fixing the interest rate, the UPRERA chief has directed the presiding officers to refrain from awarding any compensation to homebuyers in such cases of default.

Besieged by complaints from home buyers, UPRERA in October last year decided to pass the buck to vice chairmen of development authorities, who were authorised to dispose of complaints in their respective areas of jurisdiction from home buyers within two months. “Gujarat, Maharashtra and Madhya Pradesh are also following this procedure and the Maharashtra high court too has given a ruling in the matter,” said the chairman of the real estate watchdog.

But not all harried homebuyers are happy with the order, which they feel, is not enough to compensate for the delay and other hardships they have to undergo in the event of non-delivery of their flat. “It has to be a level playing field. Home-buyers should be paid the same interest on their deposit which a developer charges in case the former defaults in timely payment,” said Arshi Parvin, who has taken a prominent Lucknow developer to task over non-delivery of her plot. She said the developer has clearly stated in the agreement that 24 per cent interest would be levied in case of delayed payment but has cleverly omitted any mention of a vice-versa situation.