Home Buyer’s Legal Rights & Remedies

Home Buyers can seek relief against builders / developers (termed as ‘Promoters’) under the Real Estate (Regulation & Development) Act (RERA), Consumer Protection Act (CPA) and Insolvency & Bankruptcy Code (IBC).

 Provisions of RERA

RERA seeks to provide uniform laws throughout the states, for protecting the interests of home buyers by seeking increasing transparency in functioning of Promoters and reducing the chances of default or misappropriation of funds by Promoters.

RERA provides a separate grievance redressal system relating to the real estate industry. For expeditious redressal of complaints of home buyers under the Act, it provides for establishment of the following:

• Real Estate Regulatory Authority; and
• Real Estate Appellate Tribunal.

It basically and broadly provides for remedy for following breaches / contraventions by Promoter / Real Estate Agent:

• Inviting / Offering for sale, etc., without registration of project by Promoter.
• Acting as agent or inducing / facilitating purchase by home buyers without registration as Real Estate agent or promoting any project without being registered with Real Estate Regulatory Authority.
• Any unfair practice being adopted by Promoter / Real Estate Agent.
• Violation of terms and conditions by Promoter, subject to which approval was granted.
• Adoption of fraudulent practice by Promoter.
• Violation of any provisions of the Act / Rules / Regulations.

Home buyers can file a complaint against Promoter for the following reasons:

• Delay in delivery of property possession.
• Refusal by Promoter to refund the amount on cancellation of unit booking.
• Delay in registering property with RERA.
• Extra amount being demanded by Promoter.
• Refusal to pay penalty by Promoter for delay in flat possession.
• Change in project layout without approval from buyer.

RERA complaint should be in prescribed format and can be filed for violation of RERA Act, Rules or Regulations. The following information is required to file a complaint under RERA:

• Details of Promoter
• Details of home buyer
• RERA Registration number of the property, if available; and
• Grievance details, like delay in delivery of property possession, imposing additional costs by builder, change in layout, etc.

The compliant is to be filed along with following documents:

• Promoter-buyer agreement
• Allotment letter
• Payment receipt
• Payment details / Bank statement of home buyer
• Photos of project
• Legal notice copy.

Benefits of filing a case under RERA includes:

• Transparency in complaint process.
• Buyer can claim compensation with interest in case of delayed possession.
• Adequate and judicious mechanism.
• Speedy and efficient redressal of grievances based on complaints.

The complaint against Promoter with RERA must be filed along with prescribed fees given under RERA Rules.

The complaint is evaluated and RERA either accepts or rejects. If the complaint is accepted, RERA informs both Buyer and Promoter and asks them to appear for hearing. Once the hearings start, RERA needs to dispose of case and give a decision within 60 days.

                                                     Provisions of CPA

CPA provides speedy redressal to consumers by establishment of Forums at District, State and National level. CPA only applies where consumer alleges unfair trade practice or defect / deficiency with respect to goods / services. Home buyers were also included within the purview of the Act by interpreting the word "Services" under the Act to include construction, since construction is also a service.

                                                      Provisions of IBC

IBC was one of the most successful legislation promulgated by the Parliament to provide a uniform code for Insolvency Resolution of all persons, whether individual, partnership firm or corporate entity.

By virtue of recent amendment to IBC, in August 2018, the allottees of project are considered and are deemed to be Financial Creditors within the meaning of IBC. Hence, they are entitled to maintain Insolvency Application. In case of admission of Insolvency Application, they are entitled to participate and vote in meeting of Committee of Creditors that is constituted.

                         Comparative Analysis of RERA Vs. CPA Vs. IBC

Parameter	RERA	CPA	IBC
Procedure	Complaint is to be filed before Real Estate Regulatory Authority established in each state by respective state government where the project is situated.	Complaint is to be filed before Consumer Forum having territorial and pecuniary jurisdiction to hear complaint.	Insolvency Application is to be filed before Adjudicating Authority, i.e., a) National Company Law Tribunal having territorial jurisdiction over the place where registered office of corporate entity is situated in case of corporate entities; b) Debt Recovery Tribunal in the territorial jurisdiction of which non-corporate entity resides, carries on business or personally works for gain.
Timeframe for redressal	RERA has been formed recently and it takes (on an average) couple of years for redressal of complaint.	It takes about 5 to 6 years for redressal of grievance or adjudication of dispute by Consumer Forum.	It takes about 6 months for adjudication of insolvency application and to admit the same by Adjudicating Authority.
Who is eligible to file	A home buyer or prospective purchaser can file complaint, irrespective of the fact that such person is corporate entity or individual.	A consumer, i.e., a person who satisfies the requirement under Section 2(d) of CPA can file complaint. Thereby, only a person, typically individual who enters into agreement for purchase of flat can file complaint when he purchases the same for his individual use and residence.	Since by recent amendment, allottee of project is considered a Financial Creditor, any person whether an individual or corporate entity can file an Insolvency Application under Section 7 of IBC.
Appellate Structure	Stage 1: Real Estate Regulatory Authority Stage 2: Real Estate Appellate Tribunal Stage 3: High Court Stage 4: Supreme Court.	S1: District Forum S2: State Forum S3: National Forum S4: Supreme Court	S1: National Company Law Tribunal S2: National Company Law Appellate Tribunal S3: Supreme Court
Accessibility	There are typically, as of now, one or two Real Estate Regulatory Authority offices in each state.	District Forums are established in every district of the State. Furthermore, State Commission presides in capital of each state and sometimes has benches in other parts of the State. National Commission presides at Delhi and has circuit benches in various parts of the country which are rotating.	NCLT is typically constituted for each state and presides at one place in the state or sometimes one NCLT is empowered and is having jurisdiction over two states.
Execution / Reliefs provided	Real Estate Regulatory Authority typically exercises its power by way of an order to impose fine, deregister project, include promoter in list of defaulters, direct completion of project in manner provided in consultation with State Government and pass appropriate orders incidental thereto. It penalises promoters, so that they are prevented and discouraged from undertaking further projects when they do not have requisite resources.	The Consumer Forum has the power to execute its own orders. This makes execution of orders also an expeditious affair in comparison to regular suits or execution of orders passed by various courts / quasi-judicial forums. Also, since scope of Consumer Act is limited, relief and consequently its execution is comparatively an expeditious affair.	Once NCLT admits the Insolvency Application, IRP comes into picture to manage the affairs of the Company and in case of failure of Corporate Insolvency Resolution Process ("CIRP") of corporate entity, liquidation would be commenced. NCLT monitors entire process from time to time and various reports are required to be filed with NCLT. In case of non-corporate entity, bankruptcy or liquidation would be commenced by DRT.

                           Analysis of provisions relating to granting of reliefs

A. Under Section 71(1) of RERA, it is explicitly clear that a person can avail one of the two remedies, either file complaint with RERA Authority or before appropriate Consumer Forum. This is due to the fact that, in both the remedies, one is seeking or can seek is recovery of money along with interest, compensation and costs. 

B. Where different reliefs are to be sought from RERA Authority and Consumer Forum, different complaints in both the institutions are maintainable. However, few remedies which only RERA can provide, and which the Consumer Forum is not competent, are: 

    i. Power to issue directions for completion of project in consultation with State Government by appointment of suitable agency; and 

   ii. Power to include Promoter in the list of defaulters and / or to prohibit from undertaking new projects. 

C. Section 71(1) read with 72(2) of RERA makes it clear that the bar is only in respect of remedies that can be commonly obtained under both the enactments. Hence, one is always at liberty to approach RERA Authority or Consumer Forum for separate and unconnected remedies. 

D. Also, RERA provides for handing over possession within 30 days of obtaining occupancy certificate and execution of conveyance within 3 months of obtaining occupancy certificate. Under RERA, one cannot seek relief as to directions to be issued to Promoter for complying with conditions for granting Occupation Certificate and obtaining grant of the same. Even in case of failure of Promoter to handover possession or grant conveyance, RERA can only impose monetary penalty and relief in the nature of monetary interest. 

E. Consumer Forums have power to grant reliefs, in the nature of directions to Promoter, to provide occupancy certificate, handover possession and granting conveyance in favour of ultimate entity formed of home buyers. Since construction is also "Service", CPA provides for power of Consumer Forum to issue directions to remove deficiencies in the services in question, which includes power to grant reliefs as stated previously. 

F. Since home buyers are deemed to be Financial Creditors under IBC, they can file an Insolvency Application under Section 7 of IBC. On admission of Insolvency Application, in case against Promoter being a company, moratorium would come into force for a period of 6 months which would lead to stay of all proceedings against the Promoter. 

G. If Promoter is complying with provisions of RERA as to separate bank account opened for money received with respect to the project, and has been unable to complete construction due to financial issues or any other reason, he will be financial creditor only with respect to interest on amount paid from date of default till project completion or till RERA taking action, if home buyer does not choose to terminate the agreement. If home buyer chooses to terminate the agreement, then he becomes Financial Creditor to the extent of payments made to Promoter plus interest due from the date of default. 

H. If the Promoter has sound financial position and home buyer seeks to obtain specific performance as to completion of project, then filing an Insolvency Application may not be feasible option. 

I. Consumer Forum would be a great alternative remedy to obtain specific performance.

                                                         Conclusion

• If person is a consumer and seeks performance of statutory obligation or compensation in respect thereof, then Consumer Forum is a better and effective remedy especially in case where Promoter has financial ability to pay. Also, he may file a complaint with RERA to blacklist Promoter and other reliefs which RERA can provide but Consumer Forum cannot.
• If a person is not a consumer, then RERA would be more appropriate remedy.
• If a person is not a consumer and seeks specific performance of statutory obligations from Promoter, his only remedy would be to file a regular suit. However, for compensation and other reliefs, he may approach RERA.
• If a person, whether consumer or not, is seeking only return of his money, especially when Promoter’s financial position is deteriorating, then Insolvency Application before NCLT would be appropriate remedy. It will help to obtain recovery of maximum amount of money invested along with Interest. Completion of project may take several years due to various practical difficulties that may arise in the completion of project. Also, execution of orders for payment of money will not have any fruitful result if Promoter does not have financial ability to pay it.
• Also, the more the project is closer to the verge of completion, RERA would be a more effective remedy especially if home buyer desires to obtain his / her unit coupled with the consideration that RERA can also provide compensatory reliefs.
• Consumer Forum, since having power to enforce their own orders, also provides great remedy in case where builder has completed construction but delayed possession or not complied with statutory obligation, to obtain reliefs in respect of both.
• Home buyer can always initiate criminal proceedings against Promoter for fraud or other criminal offences or acts committed by it.