Buying Guide

Ways to seek Compensation for Construction Delays!

Real estate sector has been experiencing various ups and downs over the last 1-2 years. But, interestingly, demand for property is ever increasing. Builders are promising to offer a host of amenities and special features to attract prospective buyers. But, projects are rarely getting completed on time.

A builder-buyer sale agreement usually has a clause for delay. However, some projects witness endless delays. In such cases, hapless buyers get stuck without knowing how what to do. Fortunately, consumers finally have got a voice and a forum to vent their grievances. Using consumer courts, citizens have been able to get back their money from few sloppy builders. Central government too has set certain rules for the builders for providing compensation to buyers affected by project delays.

Consumer Protection Act 1986

Consumer Protection Act gives end consumers certain rights against exploitation. A consumer can take help of this Act for claiming compensation in case of project delays. According to this Act, the builder is liable to refund the amount paid with interest (for the period of delay) if there has been a breach of contract. A promoter, who constructs or intends to construct such blocks of building of flats, shall specify in writing the date by which possession of the flat is to be handed over. Default would attract penalty under Consumer Protection Act.

State Laws

Certain states such as Maharashtra also have formed certain regulations such as Maharashtra Ownership Flat Act (MOFA), which lay certain rules for regulating the construction, promotion, sales, management and transfer of flats. According to Section 8 of this Act, the builder is liable to refund the money obtained by the customer with interest, if he cannot justify the delay in handing over possession of the project.

Consumer dispute redressal commission

If a person is buying an apartment for personal use, the buyer can file a case in the consumer dispute redressal commission at the district, state and national level, depending on the property value or amount of damage suffered. For a property less than Rs 20 lakh, complaint can be filed in the District Commission in respective district. For property over Rs 20 lakh and less than a crore, it can be filed before the state commission and for property over Rs 1 crore it can be filed before the National Commission in New Delhi.

In a recent hearing during May 2015, the National Commission gave a ruling that disputes between the builder and land owner cannot be termed “beyond control” for being held accountable for poor quality of service. The ruling stated that in case of delays, the customer is entitled to a refund along with interest and compensation from the builder. It also stated that the builder can neither extend the date of possession unilaterally nor insist on allocating an alternate property to escape refund.

Other provisions

Apart from the Consumer Protection Act and state laws, there are certain provisions provided by the judiciary to help and protect consumers. According to the Domestic Building Contracts Act of 1995, the builder should provide the following warranties to the buyer:
• All work would be completed on time
• All work will be carried out according to the specifications and plans mentioned in the contract
• All material used by the builder is of high quality
• Work will be done in a legal manner with reasonable skill and care
• The home will be fit for occupation on completion

As per this law, a buyer can claim compensation for any delays.

The real estate sector in India is unfortunately unregulated to a large extent. But fortunately, the draft of the Real Estate Regulation Bill seeks to outline the obligations of the builder in project delivery. A regulatory body will also be established, according to this bill, in order to hear consumer woes.

Using consumer courts, many citizens have been able to get back their money from builders. Buyers are also increasingly becoming aware of the availability of a protection against project delays, owing to different laws. But many consumers also lose their case in the consumer forums because they forget to check the delay and compensation clause in their agreement. Hence, it is always a good idea to go through the contract carefully and look for a delay and compensation clause, which will give you additional protection against delays.

Points to Remember

• Property buyers can present their own cases in consumer courts. If needed, they can take help from a lawyer.
• A consumer or the property buyer must file his/her complaint within two years of the dispute arising, after which it becomes outdated.
• A written complaint can be filed before the District/State/National Consumer Forum depending on the expected amount of damage.
• Builder’s problems can’t justify delay and for this he is liable to pay a penalty and compensation. Default would attract penalty under both Consumer Protection Act and the Flat Act.
• Every consumer must get the bill or receipt for whatever he makes the payment.
• Often, builders have an agreement clause that assures buyers a daily damage for delayed possession. Ensure your agreement includes compensation for delay in possession.
• In case of any customization within the unit or any added promise made by the builder which is not mentioned in the sale agreement, it is recommended that buyers get it in writing from the builder. For instance, while selling the unit builder may promise to provide a second car parking but later on he may go back on his words.

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