The Indian real estate market is set to experience a major shift as buyer confidence will be greatly influenced by the recent decision by the Punjab Real Estate Regulatory Authority (Punjab RERA), which will have a lasting impact on how much risk developers are able to assume when providing possession of properties to buyers. This decision is further evidence of the ongoing pressure that developers will continue to face in delivering their projects on time to buyers.
The Punjab RERA has decided against Omaxe Chandigarh Extension Developers Pvt. Ltd and ruled that buyers have the right to compensation for delayed delivery of possession of their homes up to the date of occupancy and cannot negotiate away their rights as a homebuyer.
In this dispute, the buyer purchased a premium penthouse unit in the Tower Mystic-A of “The Lake” New Chandigarh project — which he was entitled to as part of his offer to purchase for 1.85 crore (1.85 crore = approximately 216,000.00 USD @ ₹85.6/1.00 USD) within New Chandigarh — and was excited about living in a luxurious community but experienced months of confusion and helplessness.
This contract for the purchase of the unit was executed on January 4, 2023, and included an allotment agreement for 1.85 crore (approximately 216,000.00 USD). The buyer had paid deposit money in excess of ₹65 lakhs (approximately 88,800.00 USD) at the time of purchasing the penthouse, with the developer providing a delivery date of July 31, 2023.
Delivery of the penthouse to the buyer did not occur until approximately six months later, at which time the buyer filed a complaint under the Real Estate (Regulation and Development) Act, 2016 (RERA) – and specifically, to protect buyers from unfair practices such as this.
The developer received reports of issues beyond the lack of built property.
The parties also suspect the developer of misappropriating funds, in addition to project delays. Buyers believe that other than being charged for the project based on a super area of 2570 sq ft when the actual carpet area was recorded at only 1498 sq ft, the developer has also wrongfully charged buyers nearly ₹75.64 lakh (about USD 88400) in excess for this aspect.
The developer responded that there were no issues related to pricing, as all pricing terms were clearly placed in writing and signed in an agreement. Also, possession was offered only after receiving an occupation certificate, and so the developer had no further liability.
The ruling by Punjab RERA, however, was fairly comprehensive but yet sound, as it states that the developer must give the buyer interest as compensation for delayed possession from July 31, 2023, to January 18, 2024, per the provisions of section 18 of RERA; and the developer would not have to refund the buyer’s money based on the super area since both parties had mutually agreed to this term in their contract.
Legal representation for the buyers reports that the total compensation amount to be provided will be ₹44.5 lakh (approximately USD 52000). This amount will be made up of i) a refund of ₹35 lakh (approx. USD 40900); and ii) interest of ₹9.5 lakh (approx. USD 11100).
The decision made by the court in this case has wider ramifications than just one penthouse in New Chandigarh.
India’s real estate market is worth more than $300 billion, and it will surpass $1 trillion by 2030. Historically, the Indian real estate sector has struggled with delivery delays, lack of transparency in contracts, and lack of trust from buyers. To restore balance to the market, in 2016 the Government of India introduced the Real Estate (Regulation and Development) Act (RERA). This ruling illustrates that RERA is helping restore balance to the Indian real estate marketplace.
Developers can take this ruling as a warning.
This ruling reassures buyers.
This ruling provides accountability for the Indian housing market, which is more important than just providing compensation.
