Here are 5 legal options before homebuyers if their housing project is excessively delayed

It is the homebuyers who have to bear the brunt of delays in projects including an opportunity cost with elongated periods of rent payments and disruption in their financial planning, not to mention the mental agony.

If you are an aggrieved homebuyer seeking relief in a stalled real estate project, here are five options before you. 

1 Approach RERA

In case a real estate developer delays delivery or possession of a residential property, homebuyers can file a complaint with the real estate regulatory authority of the state in which the project is located.

The Real Estate Regulation Act, 2016 (RERA) entitles aggrieved homebuyers to compensation via interest or a refund along with interest on the amount paid for purchase of a property.

Alternatively, the regulatory authority can build pressure on builders to expedite the completion of the project.

This mechanism is also applicable for projects which commenced before the introduction of the Real Estate Regulation Act, 2016 but are now registered under a real estate regulatory authority.

“As RERA is a new law, cases are not more than 7-8 years old usually. The volume of cases is low, so the RERA authority typically functions with a little more speed,” said Soumya Banerjee, Partner, AQUILAW.

Also Read: 5 things home buyers must know about MahaRERA making it mandatory for realtors to mention delivery date of amenities

“However, it has been seen in a few states that getting the order (passed by RERA) executed is challenging, thereby delaying the entire remedial process,” said Sadhav Mishra, partner and head of real estate, SNG & Partners, Advocates & Solicitors.

Banerjee pointed out that in such cases, an aggrieved homebuyer can avail other options such as the RERA appellate authority or High Courts for penal action against contempt of order. 

2. Seek remedy under the Consumer Protection Act, 1986

Homebuyers qualify as consumers under the Consumer Protection Act, 1986. The National Consumer Disputes Redressal Commission under the Consumer Protection Act is a quasi-judicial forum which aggrieved homebuyers can approach for a remedy in case of stalled/stressed projects. Every state has a state-level forum while major cities house city-level platforms too.

According to the Act, for properties valued up to ₹20 lakh, complaints must be filed with the concerned district commission. For properties ranging between ₹20 lakh to ₹1 crore, the state commission is the designated forum. For claims surpassing ₹1 crore, homebuyers must register their grievances with the National commission.

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There is no mandatory requirement to engage an advocate to file such a complaint as the procedures are relatively simple, lawyers say. The complaint may be filed by a single consumer or group of consumers having shared interests.

According to government data, over 50,000 cases related to real estate are pending in consumer courts. In a written reply to Lok Sabha, Minister of State for Food and Consumer Affairs B L Verma informed that there have been 2,44,813 cases filed in consumer courts at national, state and district levels. Out of that 1,94,555 cases have been disposed and 50,258 cases are pending as on July 31, 2024.

Consumer courts deal with a diverse range of cases, thereby including a larger volume of cases than real estate regulatory authorities, reasoned legal professionals.

3 Resolution under the Insolvency and Bankruptcy Code, 2016

In case of a delay in the completion of a real estate project, a corporate insolvency resolution process can be jointly initiated against the concerned promoter by not less than 100 allottees or not less than 10% of those affected by the same real estate project, whichever is less. It is to be noted that the total default amount must exceed ₹1 crore.

The Insolvency and Bankruptcy Code, 2016 has recognized homebuyers as financial creditors thereby allowing them to initiate the corporate insolvency resolution process against the promoter/developer with various amendments subsequently, explained Mishra.

Homebuyers are permitted to initiate the Corporate Insolvency Resolution Process (CIRP) against the builder company, under Section 7 of IBC.

Homebuyers can approach the National Company Law Tribunal which will then appoint an Insolvency Professional to attempt to resolve the builder’s financial situation. 

Also Read: Economic Survey: One in four cases settled after admission under IBC from the real estate sector

4 Remedy from Civil Courts

Homebuyers can file a recovery of money suit under the Civil Procedure Code, 1908, or a criminal case under the Criminal Procedure Code, 1974 if a concerned promoter is guilty of cheating/fraud or making false and misleading representations. 

However, legal professionals who spoke to HT.com pointed out that typically civil courts first direct homebuyers to approach RERA or a consumer forum for projects not registered under RERA. 

It must be noted that Section 79 of RERA bars a civil court from entertaining a suit or proceeding tied to matters falling under the jurisdiction of the Act.

In November 2023, the National Consumer Dispute Resolution Commission had ruled that RERA and consumer courts cannot be approached on a complaint at the same time, said Prabhakar K S, founder and CEO, Shree Tax Chambers.

5 File a complaint with the Competition Commission of India

According to the Competition Act 2002, if a builder is in a dominant position and has misused his position leading to the disadvantage of the buyer, he/she can file a complaint before the Competition Commission of India against the builder for the abuse of the dominant position.

“It is, however, applicable in fewer number of cases because CCI has a very strict way to determining whether developers are engaging in any anti-competitive practices,” said Banerjee. 

Overall, homebuyers must not exercise multiple resolution avenues simultaneously, advice lawyers.