Tips for Real Estate Consumer Protection

Real Estate Consumer Protection: Tips to Keep Your Hard-Earned Money Safe

If you buy a property from a developer in haste, there is a likelihood that you may have to repent in leisure later on. 

But how does one avoid such messy situations to ensure no real estate developer takes one for a ride with your hard-earned money?

You can, if you read the fine print of the Flat Buyers Agreement and know how the legal provisions of the consumer protection in real estate may play out against you.

Here are a few important checklists to look out for when you decide to avail of a hefty bank loan adjusted to your manageable EMI for funding your real estate dream. 

Real Estate Regulation Act (RERA):

When you opt for a real estate project approved under the Real Estate Regulation Act (RERA) with its state-specific Rules, remember that it brings along certain automatic checks and balances. This is done to ensure transparency, fair play, and inbuilt protection is given to the investment made by the home buyer. 

The scope for manipulation by the developer too is minimized as all RERA approved projects in India entitle the property buyer to approach the regulatory appellate authority to seek hassle-free justice in case of any fraud. 

Closer home, one might exercise an option from one of the 1500 RERA approved projects in Hyderabad with a uniform safety net in case either a developer or a builder cannot honor the commitment given to a buyer on project completion date or handing over possession of a property.

Force Majeure Event:

There's a ‘force majeure’ exception rule that applies to all builders and developers coming under RERA approved projects in Hyderabad.

It is a legal phrase that classifies an event such as a natural calamity or an Act of God. In other words, a force majeure event creates an unforeseeable circumstance preventing one to fulfil a contract.

Section 6 of the Real Estate Regulation Act specifically provides developers & builders to seek exemption from the legal penalty. It also gives a one-time extension for project completion dates.

However, there is no complete penal immunity for developers and builders under this section as the interests of the buyers are also taken care of. The only change that happens is that project completion timelines get extended.

For the record, the global Covid-19 pandemic has been officially categorized as a ‘force majeure’ under Real Estate Regulatory Authority (RERA) by union finance minister Nirmala Sitharaman on May 13. 

“For real estate projects expiring on or after 25 March, the registration and project completion timelines have been extended by 6 months,” Ms. Nirmala Sitharaman has been quoted as saying by the media. 

Flat Buyer’s Agreement: 

If a project is not approved under RERA, then the Flat/Apartment Buyers Agreement becomes a crucial piece of document in a dispute between the consumer/ property buyer and a developer. Hence, one must carefully read the contents of the Flat Buyer’s Agreement.

The thumb-rule is that the document must ensure application of parity principle that applies equally to both buyer and the developer so that in the event of either of them defaulting, the rule must be applied equally. 

For instance, if the property buyer delays payment of any amount due up to a fixed date and the developer wants to levy an interest @ 18% p.a., the same rule should also apply to the developer if it defaults on the execution & delivery of the unit.

However, there is a rider. A builder may delay handing over possession of the property to a prospective buyer. This may be allowed by law due to unforeseen delays caused by things that may not be under control. Examples include a natural calamity like an earthquake, tsunami, or a widespread pandemic.

In fact, most Apartment Buyers Agreements specifically insert a clause on this point giving the builder certain days of ‘Grace Period’ for project completion beyond the ‘Commitment Period.

Consumer Protection in Real Estate: Key Rule

When it comes to the application of section 2 (1) (d) of the Consumer Protection Act, 1986, a clear distinction has been made to identify a ‘consumer’ from an 'investor'.

It may be noted that both the state and national consumer disputes redressal commissions may favor the developer in a dispute if it is proved that a buyer purchased a unit for a commercial purpose as an ‘investor’.

This is a crucial aspect of effective consumer protection in real estate that cannot be ignored. If not, the refund process from the developer may turn out to be cumbersome in case of a dispute as the developer may stake a claim that the property buyer does not come under the technical definition of a 'consumer' under the Consumer Protection Act.


By: Prabeer Sikdar