Fall Out of Real Estate Boom- A Consumer's Perspective

The boom in the real estate saw emergence of many builders, who played upon the emotional side of human nature to own one's own dream house, commercial space etc. Besides the ever rising prices of the houses/flats etc attracted many to invest in the real estate with a hope that their money will give the best returns if invested in the real estate sector. The interest of the consumer in the real estate lead to heavy bookings of the buildings, innovation of the concept of pre-launch bookings, the flats/commercial space were sold while at the drawing board stage. The consumer never bothered to check the credentials of the builder, sanctions by the competent offices etc. Instead the consumers were led by alluring advertisements issued by the builders, promising delivery of possession of constructed building/flat within the stipulated time. The builders promised refund of money immediately on cancellation, some of them also promised assured returns by way of rent.

After the bubble has burst, needless to say, the promises of the builders have gone for six. The purchaser/consumers have paid the entire sale price/major consideration and they are under debt of bank/financial institutions, savings have evaporated and there is no sight of completed building. The promising builder has vanished or has started avoiding calls; request for refunds, delivery of possession is unheeded. Instead some builders have the audacity to demand more money on account of alleged escalation cost with a remote possibility of possession being handed over to them. What do poor and harassed consumers do in such circumstances.

I need to emphasize consumer is not helpless and should not allow the builder to run over him. He should fight for his right, the law of land supports him in this regard. The Consumer Protection Act, 1986, will come to the rescue of such erring builders and will force the builders to pay compensation to the consumer, hand over the possession of the flat booked/alternative flat in the same locality and will ask to builder to bear the cost of escalation, if any, on account of rise in price of constructing a building. The purchaser/buyer is a consumer within the meaning of the above mentioned Act and failure of the builder to hold on to the promise made at the time of booking in delivering possession etc would constitute deficiency of service.

A cheated customer can lodge a complaint with the consumer forums pointing out the deficiency of services by the builder. A consumer court is divided into three forums namely, district forum, state commission and National Commission. Where the value of the property is less than twenty lakhs, the complaint will be filed in the District Forum. Where the value of the property is more than twenty lakhs but less than One Crore the complaint will be filed before the State Commission and where the value of the property is in excess of Rs. One Crore the complaint will have to be filed in the National Commission.

In the matter of DLF Universal Ltd Vs Brig (Retd) Kamal Sood, the National Commission, reported as MANU/CF/0069/2007 was faced with a situation, wherein the consumer was led by the advertisement of the builder of delivery within stipulated time and consequently on the failure to deliver, the builder contended that government permissions, such as approval of zoning plan, layout plan and schematic building plan were not given, thus the delay in construction should not be a ground for grant of compensation to the consumer. The consumer was further burdened with the escalation cost due to such delay. The Hon'ble National Commission observed that it is unfair trade practice on the part of the builder to collect money from the prospective buyers without obtaining the required permissions such as zoning plan, layout plan etc. It was further held that it is the duty of the builder to obtain the requisite permissions or sanctions for construction etc in the first instance, and thereafter recover the consideration money from the purchaser of the flat/buildings. The National Commission further observed that if there is any express promise that the premises would be delivered within the stipulated time and if it is not done so, escalation cost is required to be borne by the builder.

In another matter titled as Veena Khanna Vs Ansal Properties and Industries limited, reported as III (2007) CPJ 185(NC), the National Commission set aside an order of the State Commission, wherein the builder was directed to refund the money to the consumer along with the interest @ 13%. In the alternative, it was directed that if the builder chooses to hand over the possession of the flat, the order of refund with interest will not come in operation. The builder taking advantage of the order refunded the money, because of the rise in the prices of the immovable properties. The National Commission observed that refund of money with interest at bank rate does not mean that the complainant is adequately compensated for delay in construction of flat by the builder and not delivering the possession of the flat. It was noted that because of the delay in construction and delay in deciding the matter it is practically impossible for a consumer to purchase a flat at the market price.

It was held that it was the duty of the state commission to direct the builder to deliver the possession of the same flat or flat of similar size to the consumer with compensation for delay in delivering the possession. Or in any circumstances, adequate compensation ought to have been given so that the complaint could purchase a new flat of the same size at the prevailing market rate. Mere payment of interest is not an adequate compensation.

So the buyers do not lose heart and do not get threatened by the size of the builder. You are not helpless and so should you not fee.

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