Booked flats for Rs 1.16 crore, two homebuyers awaiting possession find project lapsed; MahaRERA orders builder to give money back with interest

Mr Kishor Krishnan Kutty and Deepak Laxmidas Thakkar both booked a flat each in a Mumbai-based project in 2013. However, little would they have thought that their dream of owning a home would turn into a long legal battle. While they were promised possession by December 2014, the homebuyers have yet to receive it.

Both buyers collectively paid Rs 1.16 crore for 2 flats in the project, but to no avail. Adding to their woes is the fact that the project in which they made a booking has lapsed on MahaRERA website. Seeking relief in the matter, they approached the tribunal asking for a refund of their money, along with Rs 20 lakh compensation each.

Observing that the project remained incomplete and had lapsed without an extension, the Maharashtra Real Estate Regulatory Authority has granted relief to both the buyers, directing the builder to refund the amounts paid by them.

Flats booked in 2013, possession promised in 2014: What went wrong?

Kutty and Thakkar booked a flat each on the 6th and the 7th floor of the said project and were given an allotment letter dated 18.02.2013, and orally assured possession by December 2014. The developer said that construction upto the 5th floor was completed and the remaining two floors would be completed by 2014.

Relying on the builder’s words, they agreed to purchase Flat Nos. 603 and 703, respectively. While Kutty claims to have paid Rs 50 lakh by cheque and another Rs 6 lakh in cash, Thakkar stated that he paid Rs 50 lakh by cheque and Rs 10 lakh in cash. Both of their payments made by cheque (Rs 50 lakh) were acknowledged by the builder.

The payments towards the respective flats were completed during 2013-14, after which they repeatedly followed up with the builder for possession. However, the developer continued to state that approvals for construction above the 5th floor were yet to be obtained, they claimed.

Why did the homebuyers purchase flats above 5th floor despite no construction?

In their complaint, both the homebuyers submit that, although the commencement certificate dated 22.10.2010 permitted construction only upto the 5th floor, the builder sold flat Nos. 603 and 703 during 2012-13, representing that the requisite approvals would be obtained and the project completed by 2014.

However, the architect’s certificates dated 29.07.2017 and 13.03.2019 showed no progress in construction of the upper floors.

What did the builder say about the delay and refunding the money?

The developer stated that the complaint amounts to forum shopping, further claiming that in respect of Flat No. 603, an amount of Rs 45,24,000 was received and disputed the alleged additional payment of Rs 10.76 lakh. In the case of Flat No. 703, the builder said it got Rs 50 lakh, out of which Rs 10 lakh was refunded, leaving a net amount of Rs 40 lakh.

Homebuyers were aware of the pending approvals for the upper floors at the time of booking, it added and submitted that the delay was because of disputes regarding municipal charges, the COVID-19 pandemic and lockdown.

What did MahaRERA observe in this case?

The tribunal observed that both the buyers have paid substantial amounts for the respective flats. Upon perusal of the MahaRERA portal, it was found that the project has lapsed and the respondent has failed to take any steps for extension.

“The latest architect certificate dated 31.02.2019 uploaded on the portal substantiates that the project remains incomplete and the respondent thereafter has failed to update the progress of the project, which substantiated that the project remains incomplete and are at default,” the tribunal said.

MahaRERA underscored that despite having accepted substantial amounts from the complainants towards the respective flats, the builder failed to hand over possession along with the requisite Occupation Certificate within the stipulated period.

What worked in favour of the homebuyers in this particular case?

What weighed decisively in favour of the homebuyers was the prolonged and continuing default, Dr. Adv. Rishabh Gandhi, Former Judge and Founder, Rishabh Gandhi and Advocates, told ET Wealth Online.

The project had lapsed, there was no Occupation Certificate, construction remained incomplete, and the flats allotted to these buyers were on the 6th and 7th floors even though the Commencement Certificate then permitted construction only up to the 5th floor.

Gandhi explained that Section 18 of the Real Estate (Regulation and Development) Act, 2016 is crucial. “Where the promoter fails to complete the project or give possession, an allottee who chooses to withdraw is entitled to refund with prescribed interest. MahaRERA rightly emphasised that a homebuyer cannot be made to wait indefinitely for the promoter to obtain approvals and complete the project.”

Moreover, the homebuyers prevailed because they held allotment letters and had strong documentary proof of payments; they had sent legal notices dated 14.09.2020 formally withdrawing from the project, and the RERA portal showed the project registration had lapsed, highlighted Khushi Parmar, Advocate, D.M. Harish & Co. LLP.

Final order: Homebuyers win; to get their money back with interest

The tribunal has directed the developer to refund the amounts paid towards the respective flats, along with interest applicable from the respective date of payment, within 60 days of the order.

Additionally, the builder has also been ordered to pay costs of Rs 20,000 each to both the homebuyers.

Parmar underlined that the developer's attempt to stall by pointing to its own pending civil suits failed because Section 79 of the RERA Act bars civil court jurisdiction over matters the Authority can decide, and its failure to execute agreements for sale or seek registration extension further undermined its position.

How much refund will each homebuyer eventually get?

While Kutty and Thakkar claimed to have paid Rs 56 lakh and Rs 60 lakh each, both cases had a cash element of Rs 6 lakh and Rs 10 lakh.

Taking this into account, Gandhi said that the MahaRERA order should not be read as mechanically awarding Rs 56 lakh to one purchaser and Rs 60 lakh to the other. “MahaRERA has directed refund of the amounts paid towards the consideration of the respective flats, together with interest.”

The precise final figure will therefore depend upon the principal amount that is established as having actually been paid, particularly because the cash components were disputed, he added.

Does paying in cash for a home have any negatives? Should buyers always make payments that can be traced?

Cash does not, by itself, extinguish a buyer's legal claim, but it can make proving the claim considerably more difficult, Gandhi shared. “That problem is visible in this case: both purchasers alleged cash components – Rs 6 lakh and Rs 10 lakh - but there were no receipts for those payments, and the developer disputed the amounts.”

Payment Trail: On the other hand, a bank transfer leaves a contemporaneous evidentiary trail; an undocumented cash payment often leaves the buyer fighting a second battle.

The Income Tax Angle: There is also a statutory reason to avoid large cash payments. Section 269ST of the Income-tax Act restricts receipt of Rs 2 lakh or more in cash in the circumstances specified therein.

This is why buyers should pay through account-payee instruments or recognised electronic banking channels and insist upon a receipt and updated statement of account. “In property transactions, every rupee paid should leave a paper trail,” Gandhi stated.

Should you book flats on floors not constructed yet? What to check when booking a property

Buying a property can be an exhilarating experience, especially for first-time buyers, but you should not stop at checking whether a project has a RERA registration number.

“The buyer must verify the sanctioned plan, Commencement Certificate, approvals for the particular wing and floor, title and encumbrances, declared completion date, pending approvals and litigation, and the project's quarterly updates on the MahaRERA portal,” Gandhi explained.

On the facts of this case, booking a 6th- or 7th-floor flat when the existing Commencement Certificate extended only up to the 5th floor plainly involved substantial risk. An assurance that “approval will come” is not the same thing as an approval already granted, he remarked.

A buyer should buy what is legally sanctioned today, not what is merely promised for tomorrow.