HC backs homebuyers, upholds RERA with some leeway for builders

In what is seen as a victory for homebuyers, the Bombay High Court on Wednesday upheld the constitutional validity of the Real Estate Regulation Act (RERA) and its applicability to ongoing projects across states. The law intends to make home buying a transparent and speedy transaction, with avenues of redressal.

It was at the Supreme Court's behest that the Bombay High Court was hearing the numerous challenges mounted on the fledgling legislation. Perhaps this was in recognition of the fact that Maharashtra by far heads the tables in registration under RERA - 13,000 projects at last count.

The judgment offers relief to builders too. It expanded powers under RERA to grant more time in exceptional cases to a builder to complete a project. The additional time can be granted in compelling circumstances on a case-by-case basis.

For harried buyers of property, the most important feature of the law is 10 per cent per annum compensation for delays beyond one year from the date of handing over of possession as mentioned in the sale agreement.

A division bench of Justices Naresh Patil and R G Ketkar gave separate but concurrent judgements. The pronouncement is the first verdict in the country on challenges raised by builders in various HCs.

The court reiterated that the interest was compensatory in nature and not penal. The relatively stiff interest would prevent dilatory tactics and diversion of funds by builders.

It has vested power on the authorities constituted under the RERA to condone delay beyond one year.

The main legal challenge from builders was against Section 3 of the RERA, which requires registration of not just new but even ongoing constructions that were yet to get completion certificates by 1 May. Builders objected to this saying they were being made retrospectively liable for delays and default on schedules set in the past.

They also sought quashing of certain provisions, including one which requires builders to deposit 70 per cent of funds paid by buyers.

The HC held that these provisions were regulatory or compensatory, not penal, agreeing with the stance taken by the Centre's counsel, Anil Singh, state advocate general Ashutosh Kumbhakoni, Darius Khambata as amicus curiae and Shiraz Rustomjee, who appeared for a home buyers' body.

The HC rejected the constitutional challenge raised by builders on all but one count pertaining to appointment of members on a tribunal for appeals under RERA; it partly struck down this clause which required judicial members on tribunals to be bureaucrats from the Indian Legal Service.

The HC accepted the builders' plea that "judicial members" must mean "judicial officers" or judges, as the tribunal has powers to order imprisonment up to three years.

Following Wednesday's ruling, home buyers in several states like Telangana, UP, Haryana, Maharashtra, Karnataka, Andhra Pradesh and Madhya Pradesh will be able to challenge the rules that had been diluted by the state governments to keep most delayed and "ongoing projects" out of RERA's ambit.