Tackling RERA Non-Compliance and Loan-Related Issues: A Practical Guide for Homebuyers

Homebuyers often face severe hardships when builders fail to honour commitments under the Real Estate (Regulation and Development) Act, 2016 (RERA). The situation becomes even more challenging when financial liabilities like housing loans exacerbate the burden. Addressing these issues requires a multifaceted legal strategy to ensure justice and financial relief. Below is a practical guide to navigating such scenarios, supported by relevant case precedents.

Step 1: Enforcing RERA Orders Against Builders

Property Attachment Under Section 40(1) of RERA

If a builder fails to comply with a RERA execution notice, the buyer can move for the attachment of the builder's properties under Section 40(1) of the Act. This step ensures enforcement of the tribunal's orders and compels the builder to act. Buyers should provide concrete evidence of non-compliance and demonstrate the financial or material harm suffered due to the delay.

Relevant Case: In the matter of Sanjay Kumar Gupta v. DLF Universal Limited, the Haryana RERA authority ordered the attachment of the builder’s properties when the builder failed to refund the buyer as per a RERA ruling. This case highlights the power of RERA authorities to enforce compliance through attachment orders.

Contempt Proceedings

When builders deliberately disregard RERA orders, buyers can initiate contempt proceedings. This approach not only enforces accountability but also deters similar actions in the future.

Legal Insight: The Neelkamal Realtors Suburban Pvt Ltd v. Union of India case underscored the importance of strict adherence to RERA provisions, affirming that builders must comply with orders issued under the Act.

Step 2: Managing Loan Liabilities Through Legal Forums

Filing an Impleadment Application Before DRT

Buyers struggling with loan liabilities can seek relief by filing an impleadment application before the Debt Recovery Tribunal (DRT) to make the builder a party to the dispute. This approach shifts focus onto the builder’s breach of obligations as the root cause of financial distress.

Legal Precedent: In Pioneer Urban Land and Infrastructure Ltd v. Union of India, the Supreme Court held that homebuyers are financial creditors under insolvency laws, recognising their right to seek remedies for financial harm caused by builders.

Filing Counterclaims Against Banks

If a loan was sanctioned under a subvention scheme, buyers can also consider filing a counterclaim against the bank for negligence. Banks are obligated to conduct due diligence before releasing funds, and any failure in this regard can be challenged.

Relevant Case: The Jet Airways (India) Ltd v. SBI decision, although primarily addressing corporate debt, highlighted the importance of diligence by financial institutions. This principle is equally applicable in cases where homebuyers suffer due to a bank’s negligence in verifying a builder’s credentials.

Step 3: Exploring Consumer Forums for Relief

Holding Builders and Banks Accountable

Under the Consumer Protection Act, 2019, buyers can lodge complaints against both builders and banks for deficiency in service. Builders delaying possession or failing to fulfil their contractual obligations can be penalised. Similarly, banks can be held accountable for practices that contribute to financial distress.

Case in Point: In Amit Agarwal v. Supertech Ltd, the NCDRC ordered the builder to compensate the buyer for delayed possession, reinforcing that such delays amount to a deficiency in service.

Additionally, in Rajiv Soni v. Union Bank of India, a consumer forum penalised a bank for negligence under a home loan agreement, setting a precedent for holding financial institutions accountable.

Claiming Compensation for Hardships

Buyers can claim damages for mental agony, financial loss, and other hardships caused by delays or negligence. Proper documentation and a well-drafted complaint significantly strengthen such claims.

Step 4: Negotiating with Banks for Temporary Relief

Requesting a Moratorium Period

Buyers can approach their bank to request a moratorium on loan repayments until the builder completes the project. This temporary relief can alleviate financial strain during periods of uncertainty.

Reducing EMI Burdens

Negotiations can also include requests for reduced Equated Monthly Instalments (EMIs) or revised interest rates. Many banks are open to restructuring loans in genuine cases of hardship caused by a builder’s non-performance.

Case Reference: In ICICI Bank Ltd v. Kiran Soni, the borrower sought relief due to financial challenges arising from the builder’s delay. The court encouraged both parties to negotiate a resolution, showing that such measures are feasible.

Conclusion

Dealing with builder non-compliance under RERA and tackling associated financial challenges demands a strategic and multi-pronged approach. Buyers can:

1. Invoke Section 40(1) of RERA for property attachment.
2. Approach DRT to implead builders and file counterclaims against negligent banks.
3. File complaints under the Consumer Protection Act for deficiency in service.
4. Negotiate with banks for moratoriums or reduced EMIs.

By taking these steps, buyers can safeguard their rights and hold both builders and financial institutions accountable. Legal counsel plays a critical role in navigating the complexities of multiple forums and ensuring the best outcomes for buyers.