Left in the lurch by builders, many buyers move consumer court: Here’s what the orders say

Saurabh also said the builder was forcing him to take possession of the incomplete flat and on asking for the completion certificate, he misbehaved with him and his father. “In 2016, I approached the state consumer commission and have been waiting for justice ever since. Not just me, my whole family has suffered. My father was the one impacted the most… his health took a turn and he passed away last year, waiting for the flat,” he said.

To delve deeper into the issue, The Indian Express looked at consumer court orders relating to housing.

What the orders say

A look at over 170 Delhi State Consumer Commission judgments till October this year relating to housing (where possession was either not handed over to buyers or was delayed despite buyers paying most of the price for the property) threw up some interesting details:

– In most cases, buyers had paid over 95% of the amount. The total delay caused to buyers who complained in the consumer commission was a staggering 1,268 years and the total compensation granted to them was over Rs 37 crore.

– In 162 cases where there was delayed possession, The Indian Express found that the average delay was 8.62 years — ranging from 2 to 17 years.

– The average compensation granted by the Commission to buyers was over Rs 25 lakh plus other costs including 6% interest for the delayed possession. The compensation ranged from Rs 2 lakh to over Rs 5 crore.

– In 51 cases, the compensation (excluding penalties and interest) given was up to Rs 10 lakh. In 47 cases, the compensation was from Rs 10 to 25 lakh. In another 34, it granted ranged from Rs 25 to 50 lakh. In just four cases, compensation granted ranged from Rs 50 lakh to Rs 1 crore. While in a total of 9 cases, compensation granted was over Rs 1 crore and just two cases saw compensation worth Rs 5 crore or more.

Under construction building in Raj Nagar extension in Ghaziabad. (Express Photo By Gajendra Yadav)

– In 90% of the cases, the Consumer Commission ruled in favour of buyers who purchased houses/plots in Gurgaon, Greater Noida, Bhiwadi, Sonipat, and Gautam Buddha Nagar among other locations. While developers Parsvnath and Taneja Developers and Infrastructure (TDI) topped the list of complaints filed, other developers facing complaints were BPTP, Avalon, Ansal, Ireo, Vatika, DLF, Omaxe and Raheja.

– Over the year, 65 cases (38%) were from Greater Noida, 25 (15%) from Sonipat, 19 (11%) from Gurgaon, and 21 (12%) from Faridabad. These four regions formed over three-fourths of the cases. Ghaziabad and Noida together had 24 cases (12 each) while Panipat and New Delhi had two cases each. While Alwar had 6 cases and Gautam Buddh Nagar had 4, Sohna (in Haryana) had just one case.

A committee formed by the Union Housing and Urban Affairs Ministry in a recent report said 44% of stalled real estate projects in the country are in the National Capital Region (NCR). It further said 4 lakh units of property worth over Rs 4 lakh crore were stalled and that around 60% of the value was stalled in the NCR. The committee, chaired by Niti Aayog Chairman Amitabh Kant, recommended that all stakeholders — developers, financiers and land authorities — will have to take “haircuts”, that is accept less than what is due, to make the housing projects financially viable.

The grievances

Apart from delayed possession, several home buyers The Indian Express spoke to raised other grievances — construction which is yet to begin, incomplete construction, biased agreements, changes in agreements, and arbitrary charges levied before handing possession among others.

Jitendra Sharma (41), a businessman who purchased a flat priced at Rs 30 lakh in Ghaziabad told The Indian Express that his possession had been delayed for over four years. “I’ve approached RERA… I’m not alone. Around 250 of us didn’t get our flats…,” said Jitendra. He said construction of his tower was incomplete and had been pending for many years.

Another buyer, who refused to be named, purchased a flat in Noida and has been awaiting possession for over 12 years. She hasn’t approached a consumer court as of now out of fear and hopes the builder will deliver.

In 90% of the cases, the Consumer Commission ruled in favour of buyers who purchased houses/plots in Gurgaon, Greater Noida, Bhiwadi, Sonipat, and Gautam Buddha Nagar among other locations. (Express Photo By Gajendra Yadav)

A few lawyers The Indian Express spoke to, who handle cases pertaining to real estate, said the construction-linked plan (CLP) — according to which 95% of the payment has to be made to the developer before the final slab is laid and the remaining 5% has to be given on possession — is behind the woes of buyers.

Advocate Pawan Kumar Ray, who helped buyers Nalin and Monika Sood receive the largest compensation (around 5.5 crore) from the Delhi Consumer Commission this year, said, “Most developers prescribe the CLP to buyers… basically most of the payment for the house has to be done by the time the basic structure of the house is ready.”

Ray, who claims to have fought over 4,000 real estate cases, showed multiple agreements wherein 40% of the payment of the house was paid by buyers within three months, and another 25% was paid after construction of the raft and the basement. “Basically plastering and main costs which the developers incur only take place after the structure is ready… What these developers do is take the money from buyers and siphon it off to some other project,” he claimed.

“Another problem is that the whole structure, and not singular units, is looked at while providing the occupancy certificate. What happens then is that many buyers have their certificates but their society is inhabitable — societies with large structures ready, but not a single house which is habitable,” he added.

“Construction of my tower has been pending for years. I’ve approached RERA… I’m not alone. Around 250 of us didn’t get our flats” — Jitendra Sharma, a businessman who purchased a flat priced at Rs 30 lakh in Ghaziabad. (Express Photo By Gajendra Yadav)

Advocate Goutam Prasad gave a differing view. He said most cases in consumer courts were related to bookings of flats which happened prior to 2017. He said earlier, builders used to “siphon off money” that they received from one project to start another without finishing construction on the previous project.

“All this changed in 2017 when the RERA made it difficult to divert money collected in advance for a project,” he said. He was referring to an amendment in the Real Estate (Regulation and Development) Act, 2016, which directed developers to deposit 70% of the amount into a separate account which can only be used for construction of the given property.

“You will see all these developers making legal arguments in court to prevent paying compensation… but the truth is they don’t have money,” said Prasad, adding that most of his clients were waiting to receive their flats for more than 8-10 years.

Developer’s defence

In the 170 judgments, The Indian Express found in most cases, the legal defence of the developers was that the buyers didn’t fall into the category of a ‘consumer’ — which means they purchased the property either for resale or for large-scale profit-making activities.

The developers also stated that buyers failed to complain within a time period of two years, hence, making their complaints invalid. In some cases, it was also argued that the case at hand involved complex questions of law and that it didn’t fall under the jurisdiction of the Consumer Commission. Some developers also said buyers who had multiple properties were using them for commercial purposes and hence ceased to be ‘consumers’.

In 8 cases where the commission ruled in favour of developers, it noted that while possession was delayed, the consumers failed to complain within the time period of two years.

In another four, it was noted that since the consumers initially accepted their possession without protest, they had ceased to be ‘consumers’. In two cases, the buyers had defaulted on their payments.

In most cases, however, possession wasn’t handed over to complainants to date and the commission noted that this was a continuous wrong siding.

The developers, while arguing in court, gave various reasons for the delay. For instance, in properties that were supposed to be handed over by 2013, developers cited Covid and demonetisation as reasons for the delay. Another excuse relied upon was the 2008 financial crisis which also led to a real estate sector crisis — in most of these cases, the delay in handling possession was about 10 years.

Advocate Arvind Kumar Tiwary, representing Fantasy Buildwell which gave the highest compensation till October this year, argued that the complainants were not “consumers” under the Consumer Protection Act 2019, as they had entered into a Builder Buyer Agreement with the intention of reselling the unit, which amounts to a commercial purpose.

Tiwary also argued that the Delhi Consumer Commission does not have territorial jurisdiction to adjudicate this complaint, as the property in question is situated in Gurgaon’s Sector 54.

In another case, Parsvnath Developers, which had to pay Rs 40 lakh for a 14-year delay, argued that delay in completing the construction was not wilful and was due to the global economic slowdown experienced by the real estate sector in the country.