In what may well be considered a landmark judgement, The National Consumer Redressal Disputes Commission (NCDRC) has directed real estate giant Unitech to pay a compensation of 12% per annum to consumers for delay in delivery of flats.
If the company does not adhere to the new deadline, they will have to pay a compensation of 18% per annum.
The reason this latest judgement assumes such significant proportions? The court overruled the contract between builders and buyers which had fixed the amount of compensation in case of delay in delivery at a meagre 1.8%.
Buyers in the housing project Vista, in Gurgaon, had filed a complaint when the delivery date for flats promised in 2013 was postponed to 2016 and 2018.
According to the Times of India, Sunil Goel, the lawyer for Unitech had, however, contended that the NCDRC did not have the jurisdiction to overturn the builder-buyer agreement.
That contention, of course, has been eclipsed in light of the latest ruling.
But is 12% Enough?
Not according to Bejon Misra, International Consumer Rights Activist.
Even 12% may not be enough of a deterrent to builders. And if you count the opportunity cost – paying rent, losing interest, etc. – the amount may be as high as 20 - 25%.
– Bejon Misra, Founder, Consumer Online Foundation
There are however, two other issues at play. Can a consumer court overturn a a legitimate contract between builders and buyers? And will such a high compensation be too much for real estate developers?
On the first issue, the NCDRC clearly feels that they are well within their rights – and if certain consumer rights lawyers are to believed – they may not be far off the mark.
On the second question, Joseph Pookatt, a consumer rights lawyer believes the company should have adhered to its deadline, since that is what it promised. “The Real Estate Bill’s provisions are pretty strict. If builders give a time frame, they should adhere to it,” he argued.
Courts are known to “mould” relief so justice is done. In this case, the delay is evidence of negligence. The compensation is what the court thought was adequate in the interest of justice.
– Joseph Pookatt, Consumer Rights Lawyer
Skewed Contracts
The bigger question is – why was the court forced to step in and overturn a contract?
It seems that homebuyers often get a raw deal because most contracts favour builders, according to Pritam Prabhat Hans, Director of Propex Realty Services.
Contracts usually ask builders to pay about Rs 5/square foot per month if they are not able to complete a project in time whereas a homebuyer has to pay 18% interest per annum.
– Pritam Prabhat Hans, Director, Propex Realty Services
Clearly, the question of the court stepping in would not even have risen had the contract between the builder and buyers been a fair one. That then, is the next step.
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