Pay Interest for Delay; Home Buyers Entitled to Compensation for Delay in Possession: SC to Developers

SC grants much-awaited relief to flat buyers

Recently, the Supreme Court of India passed an order which gives the much-needed relief for flat buyers of the country. The Bench comprising of Justices DY Chandrachud and KM Joseph said that the flat buyers are entitled to be indemnified for the delay in getting possession over the house. Moreover, they are also entitled due to failure on part of the developer to comply with the representation made to them when signing the contract in connection with the provisions of facilities.

In this case, DLF Southern Homes Pvt Ltd (now known as Begur OMR Homes Pvt. Ltd.) and Annabel Builders & Developers Pvt were constructing 1980 dwelling units at Begu in Bengaluru. The home buyers had made a complaint in the National Consumer Dispute Resolution Forum regarding the delay in receiving possession of flats. 

The Court has directed them to pay a 6% interest per annum on the cost of the flats to the buyers who were given the possession after a delay of two years.

The order also stated that in cases where there is a gross delay in handing over of possession beyond the period stipulated in the contract, the jurisdiction of the consumer forum to award just and reasonable compensation is not constrained by the terms of a rate mentioned in the builder’s agreement.

“Developers sell dreams to home buyers. Implicit in their representations is that the facilities which will be developed by the developer will provide convenience of living and a certain lifestyle based on the existence of those amenities. Having sold the flats, the developer may find it economically unviable to provide the amenities. The flat purchasers cannot be left in the lurch or, as in the present case, be told that the absence of facilities which were to be provided by the developer is compensated by other amenities which are available in the area,” stated the Court.

NCDRC upheld contractual terms in favour of the developers

Earlier, the National Consumer Disputes Redressal Commission (NCDRC) had dismissed a consumer complaint filed by the buyers and sided with the defense argued by DLF Southern Homes Pvt. Ltd. and Annabel Builders and Developers Pvt. Ltd. In fact, NCRDC did not find any deficiency of service on their part in complying with their contractual obligations.

The developers further argued that despite a delay in handing over the possession of the residential flats, the purchasers were not entitled to compensation more than what was estimated in the Apartment Buyers Agreement (ABA).

The one-sided nature of ABAs does not reflect an equal platform for home buyers and developers

The Bench disagreed with NCDRC's verdict and affirmed that it cannot be oblivious to the one-sided nature of ABAs as they are drafted by the developers themselves usually and hence protect the interests of the developers. 

The Judges were of the view that this one-sided nature of the drafts does not reflect an equal platform for the homebuyers and the developers.

Thus, flat owners are entitled to compensation for delay in receiving possession of the house and the builder's failure in fulfilling the promise of providing the stated facilities.