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A real estate lesson from the Unitech case

LiveMint logoLiveMint 10-04-2017 Ashwini Kumar Sharma

The large number of court cases filed by aggrieved homebuyers against real estate developers shows the sorry state of affairs. It seems there aren’t many developers who have not defaulted on promises or not broken rules. However, the recent arrest of managing directors of Unitech for not delivering a housing project on time, can be considered a big achievement for the homebuyers who are fighting the case against the developer. Not only the arrests, the Unitech case has witnessed many other landmark decisions as well.

In June 2015, the National Consumer Disputes Redressal Commission (NCDRC) had ordered the company to pay a penalty of 12% per annum for delay in delivery of flats, which itself was a path-breaking order. Unitech approached Supreme Court against the NCDRC order in August 2015, but the apex court upheld the decision in 2016.

There were many cases filed by homebuyers of different housing projects of Unitech. However, the above order was delivered under the case filed by group of homebuyers of the project named ‘Vistas’ by Unitech in Gurgaon. The project was launched in 2009; and initially the delivery was promised in December 2012. However, those who bought units in the project in 2010, were given a delivery date of 36 months from the signing of the builder’s buyer agreement—which means the apartments were to be delivered in 2013. However, “Out of five towers with about 1,300 apartments under the project, structure of only two towers has been constructed so far. For rest of the towers, even the foundation work has not been done,” said Rajendra Kumar Chopra, who has an apartment in the Vistas project. This is not an isolated case. Many other housing projects throughout the country are way behind schedule. And many homebuyers, like buyers of apartments in Vistas, are fighting cases against their developers for various reasons. However, there are also many who don’t know how to proceed against errant developers. Here’s a look at what the Unitech homebuyers did right to reach this stage in the dispute against their developer.

Mostly, even if the developers are at fault, homebuyers hesitate to take legal action. This is primarily because of the notion that builders have money and muscle power, and one should stay away from getting into trouble with them.

This belief is strengthened when one sees bouncers and gunmen as part of some the developers’ entourage, especially in the National Capital Region. There have been instances of clashes between protesting homebuyers and security personnel of developers. Builders can also afford to appoint big lawyers to defend them in court. Even in case of Unitech, lawyers like P. Chidambaram and Kapil Sibal (both former Union cabinet ministers in the earlier government) have represented Unitech.

But in this case, “Proactive homebuyers went ahead and filed the cases,” said Pawan Shree Agrawal, the advocate who represented Unitech homebuyers in one of the cases. “They also kept pursuing the case, even when the decision of the consumer court was challenged by the developer in the Supreme Court,” added Agrawal.

When you notice any discrepancy between what the developer has committed and the real situation “bring it to the notice of the developer by agitating,” said Harsh Pathak, a practicing advocate at the Supreme Court. “If a builder does not pay heed to your objections, take legal recourse immediately by sending a legal notice, followed by filing a case,” he added.

The Unitech homebuyers formed a group and approached the authorities together. Many other homebuyers, who were not the part of initial group, joined in due course. “A large number of complainants helps push the case,” said Agrawal.

In some cases, lawyers representing developers objected and requested the court to dismiss the cases, saying that homebuyers cannot form a group to fight the case as a single entity. However, “Recently, in M/s Amrapali Sapphire Developer Pvt. Ltd versus M/s Amrapali Sapphire Flat Buyers Welfare Association, the Hon’ble Supreme Court of India passed an order inter alia allowing allottees to form an association and directly approach NCDRC on the basis of aggregate value of individual sale consideration, bypassing the usual hierarchy of forums,” said Amit Kolekar, associate partner, Rajani Associates, a Mumbai-based law firm. Based on this, Kolekar’s advice to homebuyers is to form an association and then file a case.

However, Chopra is fighting the case as an individual. “The group of Unitech homebuyers were demanding return of the money with compensation, whereas I want possession of the house along with compensation,” he said. At present, his case is in NCDRC, which incudes demand for compensation, at the rate of 24% per annum; for mental agony, and loss of rental and legal expenses. Chopra booked the flat in Vistas in 2010 and possession was promised in 2013. By 2012 he made 95% payment to Unitech. “I took loan to finance the house, and so far I have paid lakhs of rupees in interest,” said Chopra.

In their case, Unitech homebuyers allege that the money received from them for the particular project was diverted elsewhere by the developer. The accusation was backed by documents of payment received by the developer, versus the status of construction, which did not match the money collected. Taking cognizance of this, the Economic Offence Wing (EOW) of Delhi Police booked the developer under a case of cheating, said Agrawal.

So, if you are in a similar situation, gather all the facts and documents starting from the advertisement brochures, and down to the booking receipts, all details of all payments, any letter sent by the developer, signed agreements, emails exchanged, photographs, and anything that can strengthen your case. These documents help in drafting a strong case.

The EOW is a special cell of the police force in most places, which “deals with cases related to deviations in financial transactions,” said Pathak. EOW’s expertise in this field means that cases get processed faster. Unitech homebuyers formed a group and filed a case jointly, which was referred to the EOW. But this does not happen with all the cases.

For example, “Homebuyers in Mumbai can lodge a complaint with the EOW, against respective unscrupulous developers for violation of regulations on economic or financial operations falling within the category of socioeconomic offences and involving money and/or assets having value of Rs3 crore and more. These prerequisites may differ in other states of India,” said Kolekar.

While decisions have so far been in favour of Unitech homebuyers, the case has been going on for long. They are still waiting for all their money to be returned along with the appropriate amount of compensation.

However, given that a real estate regulator is set to take charge soon, many homebuyers are hoping that they will not have to undergo the legal process that Unitech homebuyers have had to suffer. “There is more clarity in laws under the Real Estate (Regulation and Development) Act compared to the current situation. I believe this will help homebuyers a lot,” said Agrawal.

Since under-construction projects will also come under the purview of the real estate regulator, faster respite can be expected.

The Act also stipulates that developers should have all the required approvals before launching the projects. “The Unitech case clearly reflects the nexus between the authority and the developer; the authority gave a freehand to construct the building even when the developer did not have the proper permissions that were required,” said Chopra. Besides that, with mandatory obligation under RERA to open an escrow account for each project, diversion of fund—which is typically the main cause of problem—can be checked.

Typically, homebuyers approach the developers as individuals and they usually have lesser bargaining power because the developer faces them as a unified and strong entity. But when things go wrong, the homebuyers need to be able to organise themselves if they want to successfully battle and organisation. If there is one lesson that the dissatisfied buyers of apartments in the long-delayed Vistas project have to teach us, this is it.

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