When are buy­ers de­nied com­pen­sa­tion?

Na­tional Con­sumer Dis­putes Re­dres­sal Com­mis­sion rules out com­pen­sa­tion for those want­ing to exit a project be­cause of de­lays in de­liv­ery

HT Estates - - HTESTATES - Su­nil Tyagi

The com­pen­sa­tion pro­vi­sion in builder- buyer agree­ments has been drafted to cover events/ in­stances of de­lay in com­ple­tion of project, specif­i­cally where the in­vestors/ buy­ers/con­sumers are will­ing to con­tinue with the in­vest­ment and stay on in the project.

More­over, the com­pen­sa­tion amount is of­ten in the range of ₹ 5 to ₹ 10 per square feet which is nom­i­nal con­sid­er­ing the huge in­vest­ment made and the in­ter­est the con­sumer pays to the bank for a home loan. How­ever, the con­sumer is un­able to take ad­van­tage of this pro­vi­sion of com­pen­sa­tion if he ex­its from the project be­cause of de­lays in con­struc­tion.

One such is­sue was brought up in a case de­cided by the Na­tional Con­sumer Dis­putes Re­dres­sal Com­mis­sion this year. The Com­mis­sion heard three com­plaints against a lead­ing builder.

In all com­plaints, the com­plainants had booked one flat re­spec­tively in dif­fer­ent projects by the de­vel­oper in Greater Noida and paid 95% of the to­tal sale con­sid­er­a­tion un­der a down pay­ment plan. The com­plainants took loans from banks for the apart­ments and were pay­ing in­ter­est on the amount. In th­ese com­plaints the flat­buy­ers’ agree­ments were ex­e­cuted in the time span rang­ing from 2007 to 2008 with a prom­ise to com­plete con­struc­tion in 36 months.

How­ever, till the date of fil­ing the com­plaint, ie in the year 2014, the con­struc­tion was nowhere near com­ple­tion.

On ac­count of this al­leged in­or­di­nate de­lay in con­struc­tion, the com­plainants were no longer in­ter­ested in wait­ing for pos­ses­sion of the apart­ments and sought re­fund of the sale con­sid­er­a­tion paid by them with an in­ter­est at 18% or 24% per an­num. Since the de­vel­oper re­fused to lis­ten to them they ap­proached the Na­tional Com­mis­sion and pleaded for a re­fund with in­ter­est for the de­layed pe­riod.

The de­vel­oper re­jected to their de­mands on the ground that the in­ter­est rate sought was ex­ces­sive and that the com­plainants should be re­funded the amount and com­pen­sa­tion ac­cord­ing to the builder-buyer agree­ment.

The com­mis­sion held that the clause for com­pen­sa­tion in the flat­buy­ers agree­ment may ap­ply only in cases where con­struc­tion of the apart­ment is de­layed and de­spite the de­lay the buyer is will­ing to ac­cept pos­ses­sion. Thus, the clause re­gard­ing com­pen­sa­tion will not be ap­pli­ca­ble to the com­plainants in the cur­rent case as the com­plainants are not in­ter­ested in the apart­ments and are seek­ing a re­fund.

Re­gard­ing the per­cent­age of in­ter­est to be paid to the com­plainants, the com­mis­sion was of the opin­ion that since the de­vel­oper de­manded an in­ter­est at the rate of 24% in case of de­lay on the buyer’s part, if the project was de­layed by the de­vel­oper, the rate of in­ter­est should be the same (24%).

How­ever, the com­mis­sion (keep­ing in mind the es­ca­la­tion in the price of land and other fac­tors) de­cided that a rate of in­ter­est at 18% would be suf­fi­cient com­pen­sa­tion along with re­fund of the sale con­sid­er­a­tion paid by the com­plainants.

The afore­said order comes as a big re­lief for con­sumers/ in­vestors whose in­vest­ment is stuck in projects which are stalled and are un­de­liv­ered due to some rea­sons. The in­vestor on his part is also wary of ex­it­ing the project due to nom­i­nal penalty as per the com­pen­sa­tion clauses in the flat­buy­ers agree­ments.

Only home­buy­ers who stay in­vested in a project are el­i­gi­ble for com­pen­sa­tion if it gets de­layed.

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