Consumer Connect: ‘MahaRERA Must Direct Builders To Pay Interest For Delay’

Q. In case of delay in getting possession of the flat from the builder, is the home buyer entitled to get interest on the amount paid by him for such delayed period? Who decides such interest rate? Is such interest payment by the builder automatic or the home buyer has to file a case? Is such case to be necessarily filed in MahaRERA or can one file such case in Consumer Court also?

—Neha Joshi, Goregaon

A. Please note that time is essence of the Agreement for Sale between the builder/promoter and the homebuyer/ allottee. Hence, delay on part of the builder in giving possession of the flat and delay on the part of homebuyer in paying his instalments on time, both are penalised under Real Estate Regulation & Development Act, 2016 (RERA, for short). Sec 18 of RERA, to the extent relevant, is produced herewith for your information: “ If the promoter fails to complete the project or unable to give possession of an apartment in accordance with the terms of the agreement for sale, by the date specified therein, or due to discontinuance of his business as a developer on account suspension of the registration under this Act or for any other reason, he shall beliable, on demand, in case the allottee wishes to withdraw from the project, to return the amount received by him in respect of that apartment (flat) with interest at the prescribed rate. Provided that

Where an allottee does not wish to withdraw from the project, he shall be paid by the promoter interest at the prescribed rate, for every month of delay, till the handing over of the possession.”

From this provision under Sec 18 (1) of RERA it would be clear that if there is any delay on part of the promoter in giving the possession “for any reason” and the homebuyer wants to continue in the project despite delay, the homebuyer is entitled to get interest. This interest rate is prescribed under Rule 18 of MahaRERA Rules which is SBI’s highest Marginal Cost of Lending Rate (MCLR) plus 2 % per annum. Such interest payment by the promoter/builder to the allottee/homebuyer is supposed to be automatic. This is clear from the wordings used in Sec 18 as reproduced above. In case where the allottee wishes to exit the project he has to call upon the builder to refund the money with interest. That is why the words used in case of exit are “on demand”. However, in case where the allottee does not wish to withdraw from the project, the word used are “he shall be paid” the interest at the prescribed rate. This means, it is not necessary for the allottee/s to make a demand for payment of interest for a delayed period. Such interest payment for delay is mandatory and has to be automatic without asking.

In fact, it is noteworthy that the model RERA Agreement for Sale also provides a clause no. 4 which is worth reproducing it here: “If the promoter fails to abide by the time schedule for completing the project and handing over the apartment, the promoter agrees to pay to the allottee, who does not intend to withdraw from the project, interest at specified rate on all the amounts paid by the allottee, for every month of delay till the handing over of the possession.”

However, despite such clear cut statutory provision under Sec 18 of RERA mandating the builders to start paying interest per month for the delay without asking and despite the specific clause in the Agreement for Sale where the builder agrees to pay to the homebuyer interest at prescribed rate for every month of delay, rarely any builder is seen who automatically starts paying interest for every month of delay to such homebuyer. Hence, the homebuyer, who is entitled to get such interest payment for every month of delay from the builder, is ultimately forced to file a case either in MahaRERA or in the Consumer Commission. In such situation, he has a choice to file a case either with MahaRERA or in Consumer Commission under Consumer Protection Act. However, he cannot file cases on both these platforms.

In fact, the violation of this statutory provision is so gross and rampant that MahaRERA Chairman must take suo motu cognizance of such rampant violation of Sec.18 by the builders’ community and issue general directions to all the promoters in Maharashtra to comply with this binding provision. This will substantially reduce the number of cases being filed by the allottees who are being refused the rightful interest for delayed payment.

(Advocate Shirish V Deshpande is chairman, Mumbai Grahak Panchayat. Queries can be sent to him on email: shirish50@yahoo.com)

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