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Comprehensive Protection to the Property Buyer against Delay in Property Possession

Written by:
Prachi Darji
Published on

Concrete Structure to the Real Estate Industry:-

The real estate regulation and development act 2016 has passed its due process of approval in the Lok Sabha, Rajya Sabha and also the final phase of the president approval. The act proposes to establish state level authorities known as the Real Estate Regulatory Authorities (RERAs) to monitor the business activity of promoters, builders and other stakeholders in the real estate industry. This move will not only regulate the real estate sector by giving it the necessary structure, but it will also make every stakeholder accountable for their duties and responsibilities. It is the responsibility of the state government to set up a RERA within the state. In addition, a district level municipal authority can also take up legal cases against the developer for delay in possession or other unscrupulous activity. The district level authorities will enjoy the same power as that of a civil court.

Steps of grievance redressal for delayed possession under the act:-

  • Speedy redressal process: One of the strongest steps undertaken by the government under the Real Estate Regulation and Development Act 2016 is the empowerment of the municipal and district level authorities, by giving them the power to pursue legal cases and probe enquiry into the cases of prima-facie guilty parties. According to the act, the district level authorities will have the same power as the civil court in all consumer grievance cases related to the real estate industry.

  • Digitisation of land: The land and the property construction plans, and the statutory documents such as the various permits issued by local authorities are required to be under the purview of the Real Estate Regulatory Authority (RERA). In other words, the construction activity cannot begin unless the land, entire project plan and history of previous projects including delay in possession or payments is made available in the public domain. This will be possible due to the digitization of all agreements.

  • Insurance for ownership status: The ownership name of the property buyer will not only be digitized for maintaining its legal status but it will also be insured by an insurance company. This will be done to avoid any legal hassles that may be caused due to denial of the property developer regarding the partial or complete buyer-side ownership of the property or land.

  • Equal responsibility of all stakeholders: According to the act, all stakeholders will be equally responsible to make the construction agreement a legally binding contract. It will be mandatory for all stakeholders including architects, project engineers and other parties to see to it that 70% deposit of buyer’s money is maintained only for the cost of construction and other relevant costs.

  • Builder-side liability to pay compensation and fines: This act introduces liability by way of punishment of imprisonment and fine or both, applicable to the land developer and property builder for delay in property possession. Any advertising of property done by the builder before registration of the land will also make the construction company liable to pay damages, if such advertisement misrepresents the actual facilities offered to the customer.

  • Legally binding obligation of Property Developer: According to the new act, the property buyer will be protected by a highly proactive legal system against all frauds, unscrupulous charges, misguiding claims and delays caused by the property developer.


Safety of Buyers Money – One of the high priorities of the Real Estate Bill:-

One of the major clauses laid down by the act is that the construction company will have to deposit 70% of the money received by the property buyer in an escrow account. This deposit amount will serve as an insurance against the transfer of money to initiate another project or for any other purpose. This clause supports the fact that the money received by the developer should be used only for construction related expenses. The real estate regulation and development act will eliminate the possibility of undue expenditure undertaken by construction companies to make up for construction losses or to meet expenses in other projects.

Regulation protects property buyer from unscrupulous advertising:-

The act will prove to be a relief to both commercial and residential property buyers. This legislation will serve as a powerful instrument in ensuring the comprehensive protection of the buyers as well as the sellers’ interest in every transaction whether small or big. The developers also levied extra charges by way of including the super built-up area (corridors, lift and stair-case) in the carpet area (area of flat-bedrooms, kitchen, toilets and hall space) and showing it as the total area of the property. Due to this unscrupulous practice, many property buyers had to face the burden of buying highly expensive properties.

Now, with the introduction of the new and upgraded act, this unscrupulous activity will be hauled for the betterment of buyer. It means that the property seller will no longer be allowed to show the total saleable area of the flat as: super built-up + carpet; it will always be carpet area only. The regulation may seem to be making the real estate industry too rigid or too strict; however, thislegislation could bring about an ideal business scenario for both genuine property sellers and property buyers.

Introduction of Developer-side interest payment and punishment by law for delayed possession In the past, only the property buyer was liable to incur additional interest expenditure for any delay caused in payment of installment against property price. The act introduces seller-side interest payment for delayed possession. However, the act does not specify the duration of the delay but its recommended to take possession certificate from the builder after which the property developer becomes liable to pay the fine. In addition to the fine, the developer can also become liable to face a punishment of up to 3 years of imprisonment, that is, if found guilty in a delay of possession case.

In earlier times, the delayed interest payment or fine was also applied to other type of expenses such as Registration and Parking fee. Now, there will not be much room for additional fines because the developer is expected to register the property within 3 months of the construction start date. This eliminates the possibility of delay in registration of property and delayed possession to a great extent.

According to some of the established and reputed construction companies, one of the important aspects that cause delay are not specified by this act. This aspect includes delay caused due to long duration approval process of municipality and other administrative authorities. These bureaucratic manipulations which cause the corruption within the administrative authorities should also become subject to a thorough review under the act.