Flat buyers must check if builder has right to construct & sell flats

The law mandates that certain documents must be registered, yet even without registration, permits these documents to be admissible in evidence. Would this be construed to dispense with the requirement to execute the agreement, whether registered or otherwise?
Case Study: Raj Developers had constructed Savitri Sadan building at Bhayander on a plot of land jointly owned by eight members of the Thakkar family. The builder failed to form the society. The shop owners and flat purchasers then formed a society on their own without the builder’s assistance. It was registered as Savitri CHS in March 1994.
The society later attempted to get conveyance of the land and building. As the builder failed to execute conveyance, the society filed a complaint before the Thane District Forum against the developer and eight members of the Thakkar family who had owned the building plot.
The forum observed that there was neither any agreement in respect of transferring the title from the land owners to the builder, nor was there any registered development agreement authorizing the builder to construct the building and sell the flats. The forum observed that when the builder does not have clear title, he cannot pass on the title to the society. Hence the forum concluded that it could not order execution of the conveyance. So the complaint was dismissed.
The society appealed against this order. Its argument was that the Maharashtra Ownership
Flats Act specially provided for unregistered agreements to be accepted in evidence.

The Maharashtra State Commission observed that the issue was not about the document being registered or not. It was whether the builder had any right to construct the building and sell the flats. There was no document to show that the builder had purchased the land or the land owners had given him a right to sell flats in the property. So, when the builder himself does not have any right, he cannot create a further right in favour of the society.
Accordingly, the Commission concluded that it did not have the power to direct the flat owners or the developer to execute conveyance. By its order (15.1.2017) delivered by Justice Bhangale for the Bench along with member D R Shiraso, the State Commission reaffirmed the view expressed by the District Forum, and dismissed the society’s appeal.
Conclusion: Flat purchasers must ascertain whether a builder has the right to construct a building and sell flats. A tacit understanding between the land owner and builder would be of no help. What is required is that there must be a written contract between the land owner and the builder. In the absence of such an agreement, the flat purchasers would never get any right to the flat purchased by them. So the only option available would be to seek a refund of their money along with compensation and costs.
Times of India – 22nd  January 2018

 

Grant adequate meeting time to jailed Unitech MD Sanjay Chandra: SC to Tihar Jail authorities

The Supreme Court today directed Tihar Jail authorities to grant adequate meeting time to their inmate Sanjay Chandra, Managing Director Unitech BSE -1.12 % Ltd, for allowing him to strike deals with prospective buyers.

Chandra, head of the embattled real estate group, was recently asked by the apex court to deposit Rs 750 crore with it by December end to safeguard the interests of homebuyers.

A bench of Chief Justice Dipak Misra and Justices A M Khanwilkar and D Y Chandrachud considered the submission of senior advocate Ranjit Kumar that Chandra gets 30 minutes meeting time in jail to deal with prospective buyers and for arranging money.

The apex court had on October 30 said that the jailed businessman will be granted bail only after the real estate group deposits money with its registry by December end.

Today, the senior lawyer said that Chandra has been required to be produced in various courts, consumer forum and commissions on a regular basis which hampered his endeavour to arrange money and hence, the production warrants issued against him by various judicial bodies be stayed for 15 days.

He also said that the accused be allowed to appear in courts through his lawyers. The plea was declined.The apex court, however, clarified that its earlier order directing all courts below not to take any coercive action against the accused for the time being would also be made applicable on all forums including state and national consumer commissions.

It had said if any proceedings were pending against Chandra and the company, those may continue and the final order be passed but no coercive steps would be taken for executing those orders.

Chandra is seeking interim bail from the apex court after the Delhi High Court on August 11 had rejected the plea in a criminal case lodged in 2015 by 158 home buyers of Unitech projects’ — ‘Wild Flower Country’ and ‘Anthea Project’ — situated in Gurugram.

Source – TOI

Maha RERA makes only developer, not land owner, answerable to homebuyers

Maharashtra Real Estate Regulatory Authority (MahaRERA) has withdrawn its office order making land owners equally liable as that of builders and developers

Maharashtra Real Estate Regulatory Authority (MahaRERA) has withdrawn its office order making land owners equally liable as that of builders and developers under the Real Estate (Regulation and Development) Act, 2016, the Bombay high court (HC) was told last week.

Advocate general Ashutosh Kumbhakoni told a division bench of justice Naresh Patil and justice Rajesh Ketkar that the authority has withdrawn the order dated May 1 by which it had introduced definition of the term “co-promoter” in the Real Estate (Regulation and Development) Act, 2016.

The office order defined co-promoter as the person or organisation, who under an agreement with the promoter (builder or developer) of a real estate project, is allotted or entitled to a share of the total revenue generated from sale of apartments in the project or in terms of constructed apartments in the project.

Kumbhakoni was responding to a petition filed by seven city residents, who own a 12,531 sqm plot at Nahur and who have given the land for development to a private developer, Shivkripa Enterprises.

 In the petition filed through advocate Vishwajeet Kapse they challenged validity of the office order primarily on grounds that the authority under RERA was not empowered to introduce any such new term into the enactment. “The impugned office order is tantamount to legislation,” stated the petition. “Respondent (MahaRERA) cannot legislate for the state, much less for the Union,” it added.

They took strong objection to the fact that the office order foisted a liability on land owners which was not contemplated either under provisions of the Maharashtra Ownership of Flats Act or under provisions of the RERA, 2016.

They said the authority under RERA failed to appreciate that the land owner, who is not himself the developer, does not undertake any construction activity and only parts with his rights as owner of the land to the builder or developer (promoter under RERA) to develop the land, and he has no further role to play in construction of the apartments and their sale to individual purchasers.

They withdrew the petition last week after Kumbhakoni made a statement to the effect that the office order has been withdrawn.

Source HT

MahaRERA orders Neptune to give home buyers flats in other wings

The Neptune 100 Above Buyers’ Welfare Association, set up by 53 home buyers who had booked apartments in Neptune Eleve’s B wing in Kanjurmarg in suburban Mumbai

In a first ruling on a complaint filed by an association of home buyers, Maharashtra Real Estate Regulatory Authority (MahaRERA) has directed Neptune Ventures and Developers Private Limited, which failed to give promised possession of flats in B wing of Neptune Eleve project in Kanjurmarg in 2014, to shift the flat buyers to flats in C and D wing, which are likely to be completed earlier. So far, the Maha- RERA had given orders on individual complaints only.

The Neptune 100 Above Buyers’ Welfare Association, set up by 53 home buyers who had booked apartments in Neptune Eleve’s B wing in Kanjurmarg in suburban Mumbai, had filed a complaint with MahaRERA that despite paying 10 to 30 per cent of the flat cost between 2010 and 2012, the developer had entered into registered agreements and had failed to give possession promised in 2014.

During the first hearing of the matter last month, the developer Neptune Ventures and Developers Private Limited had sought time to settle the matter amicably with the buyers. At the second hearing, the developer said that after discussions with the buyers, he had agreed to shift all 53 buyers to Neptune Eleve’s C and D wings which are likely to be completed earlier than the remaining wings in the project.

The association members agreed to option given by the developer withfour conditions. They demanded that the developer should not demand any fees for transferring their flat to a higher floor. They also demanded that the promoter should charge the money as per the subvention scheme he had advertised, and not impose additional costs.

They also demanded that the input credit on GST paid should be passed on to the association when the money comes to the promoter’s account, and that the developer should prepone his revised possession deadline from December 31, 2025 put on the MahaRERA website to June 2021.

MahaRERA adjudicating officer and chairperson Gautam Chatterjee then directed the developer to shift the home buyers’ flats to C and D wing of Neptune Eleve, and asked him to execute and register the agreements for sale as per RERA provisions before effecting any payments from them. He also directed that the future payment schedule should also be in accordance with the model form of agreement prescribed by RERA. As per the model agreement, the developer has to place 70 per cent of the project cost in an escrow account, and withdraw funds for the project in line with the construction schedule with the requisite certification by the structural engineer, the chartered accountant, and the architect.

Chatterjee also directed the developer to handover possession of the apartments by June 31, 2021 failing which the developer would be liable to pay interest to the buyers from July 2021 till the actual date of possession on the entire amount paid by the buyers. He also directed that the developer should not charge any extra money for floor rise if the buyers are shifted within 4 floors of the originally allotted floor or if shifted to a higher floor due to non-availability of apartments in Wings C or D. He also directed the developer to pass on the GST input credit to the home buyers after it is credited to the promoter’s account.

Source – Mumbai Mirror

‘Price of flat not relevant in case of claim for refund’

Ruhi Seth had booked an apartment in a housing projected to be constructed by Ireo Grace Realtech, a private construction company. Out of the total agreed consideration of Rs 1,84,44,568, Seth had paid Rs 33,56,942.
When the builder sent the draft of the agreement, Seth objected to certain clauses, refused to sign the agreement and sent it back to the builder, who revised the agreement, which too was not accepted. So Seth refused to pay further instalments till the dispute about the agreement clauses was resolved. Taking umbrage, the builder cancelled the flat allotted to her, and forfeited the entire amount paid by Seth.
Seth filed a complaint before the Delhi State Commission seeking a refund of the amount of Rs 33,56,942 paid by her together with interest amounting to Rs 34,24,081 computed at 24% per annum from Match 20, 2013 till May 20, 2017. She also claimed compensation and costs. The sum total of all the relieves claimed under various heads came to Rs 73,81,023. The state commission referred to the National Commission’s judgement in Ambrish Kumar Shukla & Ors versus Ferrous Infrastructure Pvt Ltd case and observed that the aggregate value of refund claimed and the value of the flat would exceed state commission’s pecuniary limit of Rs 1 crore. So it asked for filing of case before the appropriate forum having jurisdiction.

Seth then filed the same complaint before the National Commission The National Commission stated that the value of the flat would have to be added only when the complaint is in respect of possession, construction, or defects in a flat. Since Seth’s dispute was restricted to the claim for refund of the amount along with interest, compensation, and costs.
Accordingly, by its judgement on November 13 delivered by Prem Narain, the Commission concluded that the claim for refund of the deposit along with interest, compensation and costs aggregating to Rs 73,81,023 was below its pecuniary jurisdiction and would have to be adjudicated by the state commission. The National Commission asked Seth to a fresh complaint or revive her earlier complaint before the Delhi State Commission.
Source – TOI

‘Price of flat not relevant in case of claim for refund’

Ruhi Seth had booked an apartment in a housing projected to be constructed by Ireo Grace Realtech, a private construction company. Out of the total agreed consideration of Rs 1,84,44,568, Seth had paid Rs 33,56,942.
When the builder sent the draft of the agreement, Seth objected to certain clauses, refused to sign the agreement and sent it back to the builder, who revised the agreement, which too was not accepted. So Seth refused to pay further instalments till the dispute about the agreement clauses was resolved. Taking umbrage, the builder cancelled the flat allotted to her, and forfeited the entire amount paid by Seth.
Seth filed a complaint before the Delhi State Commission seeking a refund of the amount of Rs 33,56,942 paid by her together with interest amounting to Rs 34,24,081 computed at 24% per annum from Match 20, 2013 till May 20, 2017. She also claimed compensation and costs. The sum total of all the relieves claimed under various heads came to Rs 73,81,023. The state commission referred to the National Commission’s judgement in Ambrish Kumar Shukla & Ors versus Ferrous Infrastructure Pvt Ltd case and observed that the aggregate value of refund claimed and the value of the flat would exceed state commission’s pecuniary limit of Rs 1 crore. So it asked for filing of case before the appropriate forum having jurisdiction.

Seth then filed the same complaint before the National Commission The National Commission stated that the value of the flat would have to be added only when the complaint is in respect of possession, construction, or defects in a flat. Since Seth’s dispute was restricted to the claim for refund of the amount along with interest, compensation, and costs.
Accordingly, by its judgement on November 13 delivered by Prem Narain, the Commission concluded that the claim for refund of the deposit along with interest, compensation and costs aggregating to Rs 73,81,023 was below its pecuniary jurisdiction and would have to be adjudicated by the state commission. The National Commission asked Seth to a fresh complaint or revive her earlier complaint before the Delhi State Commission.
Source – TOI

RERA has revived home sector demand

SBI is seen to be among the major gainers from the government’s move to inject equity into state-run banks to enable them to lend more and spur economic activity. In an interview with TOI, Rajnish Kumar, the newly-appointed chairman of the country’s largest bank, talks about signs of change in the economic situation and expects a pick-up in demand after Tuesday’s Rs 7-lakh-crore package for the road sector. At the same time, he says, the bank may reduce interest rates in some basket, given the low credit demand. Excerpts:The government announced a major recapitalisation plan on Tuesday. What is your fund requirement?

We will work out our numbers and estimate the capital requirement. But we are better than the Basel III estimate. Given that we account for one-fourth of the banking system, I am sure the government will prioritise our requirement.

The government has also talked about monetisation of non-core assets. What is your plan, including on the real estate assets?

That programme will continue. It’s a separate exercise.Our properties will be handled by SBI Infrastructure Management but hiving it off is not a very tax-efficient option and there are complications.

How do you see the overall economic situation?

The India story remains intact, which is a view that is shared by everyone. There is no real slowdown in con sumption. In manufacturing sector, things can be better.But the government’s announcements for the infrastructure sector will give a major boost to employment and given the linkages with other sectors, higher government spending will help a lot of industries. I see major gains for cement and steel. Higher manufacturing activity may not see as much increase in jobs as in the past due to automation, which has reduced the employment potential. But more construction will mean more employment and the sector will have a cascading effect on other sectors.

Given the slowdown in growth and inflation remaining below 4%, do you expect RBI to cut rates?

We don’t see an immediate reduction in rates, especially in the December review.

Is there scope for banks such as yours to reduce deposit rates and also lending rates, especially for housing and other retail loans?

It will depend on individual banks. But given that credit growth is muted, there is scope for some further reduction in interest rates in certain baskets. While the overall decision will be taken by the assetliability committee, but some changes may happen.

One of the problems for low demand for loans is over-capacity in the system. Have you seen an improvement in the situation?

There is a problem in sectors such as power, where a lot of capacity is idle or under-utilised. The demand for loans from generation projects is not there. In other sectors such as steel, there is a balance between production and consumption. There will be more demand from the engineering sector in the coming months and I also expect demand from defence production and railways. With the latest thrust on infrastructure, the investment cycle will pick up. Automobiles are doing well with car sales being strong and light commercial vehicles also doing well. There was some disruption due to RERA but now all developers are marketing RERA-approved projects, which has reduced the trust gap between the buyer and the builder. Now buyers feel assured and the residential sector demand has revived. The thrust on affordable housing is also positive for the sector. These are pointers to things turning around (in the economy).

The finance minister spoke about indiscriminate lending between 2008 and 2014, creating problems for banks. Going forward, how do you prevent that?

When we do business, the risk management department has to be very strong, something that is a focus for us. We need to strike a balance between business growth and the risk appetite. Pricing of risk is a very crucial element. In the past, the problem was excess liquidity, which meant that pricing of the risk was not proper. If the risk is higher, then the reward has to be adequate. Due to higher liquidity , everyone was chasing few assets and the risk was underpriced. We need to get the riskreward framework right and the anxiety for growth should not upset that.

GST is seen to have created pressure on SMEs. What is your feedback?

The steps announced by the government should help clear some of the problems as most of them have concerns related to timely realisation of receivables. The move for electronic registration of public sector companies will help clear the dues of MSMEs on time. I hope the private sector also responds in a similar fashion.

Source – TOI

ACT PROTECTS HOME BUYERS – Booking amt capped at 10% under RERA: PM

rotecting home buyers’ interest and their life time savings is one of the top priorities of government, PM Narendra Modi said. He added prior to the enactment of real estate regulation law consumers waited for years to get possession of their homes as they would fall prey to unscrupulous builders.“There used to be ambiguity regarding the area of the flat. Now after Rera, only registered developers can seek bookings only after getting all the required permissions. Moreover, booking amount has been fixed only at 10%,“ The Prime Minister said. He added earlier builders would go to the extent of taking up to 50% as advance amount.

Section 13 of Rera specifies that no builder shall accept amount more than 10% of the cost as an advance payment or an application fee without first entering into a written agreement for sale and register the said agreement for sale.

Modi said builders now need to keep 70% of the payment received from buyers in an escrow account and this amount will be spent on that project only.

 Source – TOI

HC sets 2021 deadline for builder in Powai

MUMBAI: The Bombay High Court on Tuesday directed Lakeview Developers run by the Hiranandani group to construct around 2,398 affordable houses in Powai before June 1, 2021, according to the undertaking given by them. The developer will have to build around 887 flats of 861 square feet each and 1,511 flats of 430 square feet each.A specified number of flats would have to be sold to the Maharashtra government at a rate of Rs 135 per square feet. A division bench of Chief Justice Manjula Chellur and Justice Nitin Jamdar said if the developer fails to meet the deadline, they would have to earmark an additional 10% of the flats for sale to the state government.

 The court was hearing an application by the developer over a 2012 order that restrained it from constructing buildings on its Powai land without permission.The court’s orders had come on a PIL that alleged violation of lease conditions. Hiranandani had signed a lease for the 230 acres of land in 1986 in a tripartite agreement with the state and MMRDA. As per the agreement, the builder was to construct 50% of the flats admeasuring 430 square feet and the remaining of 861 square feet. Instead, according to the petitioner, flats were allowed to be merged to as large as 4,000-5,000 sq ft and sold at prices touching Rs 7 crore. One of the important conditions was that around 15% of the floor space index consumed would have to be sold to the state government at a rate of Rs 135 per square feet. These flats would be used by the state to house its staff. The PIL had claimed MMRDA initially imposed a fine of around Rs 2,000 crore on the builder, which was brought down to Rs 89 crore and finally the state further slashed it to Rs 3 crore. As per the 2012 HC order, the builder has to construct 2,200 flats admeasuring 431 square feet and another 2,200 flats admeasuring 861 square feet.
Earlier this year, the HC appointed a committee to inspect and verify the affordable flats constructed and the remaining ones that need to be built. The flats will be in six residential towers.While some flats would be ready by December 2018, the rest have to be constructed before June 1, 2021. The court has allowed the developer one month to apply for permissions and around six months for the BMC to grant approvals. The builder will also have to open a joint account with the proto-notary of the HC, where the proceeds from around 207 flats would be deposited.
Source – TOI

Insolvency rules tweaked, home buyers get cover

NEW DELHI: The Insolvency & Bankruptcy Board of India has amended rules to mandate that any resolution plan for a company has to explicitly state how it has dealt with the interest of all stakeholders.

This move is aimed at protecting the interests of home buyers of real estate players such as Jaypee Infratech+ and some of the entities of Amrapali Group+ .

The revised rules were notified by the regulator for insolvency and bankruptcy+proceedings last week and will ensure that banks and other creditors do not get away by protecting their own interests at the expense of others who are impacted by the action.

Banks are part of the creditors’ committee, the key decision-making body after a company is admitted for bankruptcy.

“The change in the rules has plugged a gap as flat buyers are of the view that there is nothing to protect their interests,” said a lawyer specialising in bankruptcy cases.

The new law, enacted last year, aims to speed up the resolution process in a period of 180 days, with a possible extension of 90 days, by appointing insolvency resolution professionals who will take charge of the company’s operations and prepare plan. Under the law, if the creditors’ committee agrees, it will call for applications from other interested companies to take over the company after finalising an information memorandum.

Insolvency experts said the law provided for the plan being binding on the corporate debtor (the company) and its employees, members, creditors, guarantors and other stakeholders involved in the resolution plan.

But there was no obligation in the rules to give any treatment to the stakeholders other than the financial creditors (the banks) and operational creditors, which includes vendors and others who may have dues.

Based on the comfort provided by the revised rules, the National Company Law Tribunal will decide on the final resolution plan, based on bids that are received. “The tribunal will not clear the resolution plan without giving notice to all stakeholders and the flat buyers can raise objections at that point of time,” said a lawyer.

The government and IBBI have been trying to come up with solutions to ensure that the interests of home buyers hit by a spate of insolvency proceedings against builders are fully protected.
It has already eased the process to file for claims and is thinking of other steps.
Source – Times of India