MUMBAI|BENGALURU: Realty developers are seeking clarity over the government’s new draft rules under the Real Estate (Regulation and Development) Act, 2016, that proposes to impose penalty for delay in delivery of apartments to homebuyers. The rule is expected to bring a level-playing field for homebuyers as builders currently charge higher penalties from customers for their dues, but offer lower interest in case of delay on their part.
According to the new draft rules, the builder is expected to pay interest at the State Bank of India Prime Lending Rate plus 2%, which effectively comes to 11.2% based on current rates. Homebuyers are also expected to pay the same interest for their dues to builders in case they default.
“Delay needs to be linked and defined clearly for the purpose of customers asking for refund. Delay can be construed only if there’s delay in possession as agreed. Lots of investors may misuse the absence of such definition to seek refunds in case they don’t see their investments appreciating faster,” said Getamber Anand, president of the Confederation of Real Estate Developers’ Associations of India (CREDAI).
While the move is aimed at offering homebuyers relief from delay in deliveries, experts also pointed out that the penalty should have been higher.
“The fixing of interest rates at 11.2% is far less than the penal rates imposed by consumer courts in past cases, which has been up to 18%.
This removes the element of deterrence against errant developers who routinely divert customer monies to other projects. Delayed projects cause major harassment to buyers and require interest at penal and not just compensatory rates,” said Aditya Pratap, a Mumbai-based advocate who has appeared in several cases involving real estate matters.
Anand reckons that the problem needs to be addressed in a holistic manner and the issues such as delay in approvals also need to be considered. “There are bad guys in the industry, but not everyone is bad. Nobody wants to delay the project out of choice. The rules should also provide for cancellation if a customer is intentionally defaulting on payments regularly and getting away with payments of interest only.”
Developers have been maintaining their stance that various stakeholders including approval authorities and civic bodies also should be brought under the regulations to avoid delays in delivery.
Credits ET Realty