Major causes of litigations on builders under RERA

Major causes of litigations on builders under RERA
  • Tuesday 21st November 2017
  • Author: Yash Verma

Highlights

  • The only way homebuyers can get out from a buyers trap is to take a legal action. Litigations are a common when it comes to real estate, but not much effective.

  • This is the most concerning issue with the homebuyers as it tends to create a lot of trouble for them.

  • There are also many a number of infamous cases where builders have not delivered projects even after collecting amounts from buyers.

The only way homebuyers can get out from a buyers trap is to take a legal action. Litigations are a common when it comes to real estate, but not much effective. Just as our legal system is, you need to be patient if you decide to take legal action against your builder or real estate agent. However, things have started to take a turn as the implementation of the Real Estate Act, RERA has been of immense help to homebuyers all across the country. The Act calls for formation of a Real Estate Regulatory Authority for each state, which will stand responsible for all the matters concerning homebuyer’s dispute with builders. The Act was implemented on 1st May 2017 and has been notified by majority of the states till now.

Since the establishment of the Act, the numbers of complaints against builders have increased drastically due to support from the RERA Act and the builders of the country have been taken aback. Builders need to be more disciplined now as the Authority is going to administer the new projects and ones still in construction.

 Here are five major reasons which could lead to litigations against a builder –

  1. Delays in delivery of project

The most common reason for complaints filed under the new Real Estate Act is the delays in project’s delivery. This is the most concerning issue with the homebuyers as it tends to create a lot of trouble for them. With the help of RERA, it is now easier for buyers to file a complaint and in contrast, inflexible for builders to divert from the delivery date of their project. Builders should be aware of this as there can be heavy penalties and other consequences issued against them by the Authorities.

       2. Hiding identity of co-promoter

Real Estate builders are now mandated to provide details of their co-promoters. Keeping it out of sight of RERA Authority can lead to severe actions upon builders by the Authority. The co-promoters of a project are allowed to file a complaint to the Authority against promoter of the same project if, information regarding a co-promoter is obscured by the promoter while registration of the project. In few of the similar cases in Maharashtra, builders have been found guilty and orders have been passed favoring the co-promoters. Therefore, information regarding co-promoters should be well defined by builders or promoters.

3. Not disclosing carpet area      

Another change that has been brought in by the RERA Act is the disclosing of carpet area to the homebuyers by the builders. This was not a compulsion for builders before the implementation of RERA. As the buyers are now more aware of certain things due to the Act, one of the clearly is carpet area. Not disclosing the correct carpet area could lead to a lot of trouble for builders.

       4. Misusing funds

Builders have always been accused of misusing funds collected by buyers from booking of property. There are also many a number of infamous cases where builders have not delivered projects even after collecting amounts from buyers. RERA has a big impact on the controlling of funds. Now, builders are required to transfer 70% of the funds received into a separate account which will be supervised by the Authority itself to make sure they are exploited right.

       5. Not updating quarterly compliances

To track the builder’s activities for a project, the new Act has introduced a simple method to update the details of a project with the Authority. The builders after registering their projects will have to update these details every quarter of a year. If the builders are found not updating the information or even uploading false information, the Authority may penalize the builder with heavy fines. So, builders must regularly update their project’s progress to avoid litigations.

 

Although the Act has not been implemented in all the states yet, but it has surely alarmed all the builders throughout the country to stay disciplined and follow the rules of the new Real Estate Act to avoid consequences. 

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