Can RERA protect home buyers from brokers’ misleading claims?

While the Real Estate (Regulation and Development) Act includes brokers in its ambit, this segment is dominated by a large number of unorganised players. We examine what home buyers can do, to protect themselves from unscrupulous agents, under the Act

When Rakshit Punetha bought a house in a newly-launched project, his broker promised that all the woodwork in his apartment would be done, as part of an ‘early bird’ offer. He was also promised referral rewards, for inviting friends to book apartments in the project. Within six months, he realised that he had been deceived, as the referral reward for getting a couple of friends and colleagues to buy apartments, never came. “I suspected it, when the broker stopped taking my calls. I then approached the developer, who told me that there was never any referral programme or promise of interiors in the apartment. Since all the promises made by the broker were verbal, I did not even have the legal option left,” said a dejected Punetha.

Aarti Mahajan, another home buyer, had a similar experience, which made her realise that often, it is not the developers but the brokers who mislead buyers, in their eagerness to sell properties quickly and move ahead. “It is easy for the regulator to catch hold of the big fish, if they do not come forward to get registered with the real estate regulatory authority. However, the real problem is with the small-sized brokers, who are the face of the industry for an average home buyer,” says Mahajan.

 

Impact of RERA, on the unorganised segment of real estate agents

Although the Real Estate (Regulation and Development) Act (RERA) brings the brokers into its ambit, several questions remain unanswered:

  • What if the broker or builder has made verbal promises to the buyer?
  • What would be legal position, if the marketing firm/broker misleads the buyer, without the knowledge of the builder?
  • How can a buyer be compensated, if he has bought a property on the basis of misleading claims?
  • What are the grey zones, which are not defined in the prescribed Act?

See also: What is RERA and how will it impact the real estate industry and home buyers?

Anuj Puri, chairman of Anarock Property Consultants Private Limited, nevertheless sounds optimistic, when he says that the RERA renders brokers and agents punishable, if they do not abide by the rules. Previously, smaller brokers had an unrestricted play on the Indian residential real estate market and many of them thrived on misinforming or under-informing their customers.

“With RERA, home buyers, who use the services of real estate agents and agencies, will be protected and have access to quick legal redressal, in case of faulty business practices. In fact, brokers who made their money out of the ignorance or unwitting trust of clients, will now be eradicated from the marketplace,” Puri maintains.

 

The importance of documentation

Madhurendra Sharma, a Supreme Court advocate, points out that the Act cannot help those buyers, who continue to trust the verbal commitments given by agents. Nevertheless, he admits that it can be tedious to detail all the nitty-gritties, for a product like house, where a lot of promises are subject to various ‘ifs’ and ‘buts’. Consequently, the grey areas in the housing market that were being exploited for long, could still be exploited, if home buyers ignore risk mitigation.

The law can only prohibit a developer or broker, from advertising or making misleading claims in writing. However, false promises are often made without the consent of the developer and unless the claims are documented and signed by both, the builder and the broker, the RERA cannot take the cognisance.

“It is too early to iron out all the grey zones that exist in the housing market. Although the RERA has tried to work upon the loopholes that were being exploited by unorganised brokers and channel partners, a lot will depend upon the home buyers’ education and awareness. As of now, my advice is to get the legal help and have most of the promises documented,” concludes Sharma.

 

Dealing with misleading claims

  • Brokers and channel partners often make lofty promises, without the knowledge/consent of the builder.
  • Many of the misleading claims of the builders and/or brokers, are only verbal.
  • The RERA cannot take cognisance of the misleading claims made by brokers, unless it is documented and signed by the developer and/or broker.
  • Buyers should ensure that promises made, are documented, especially those that are not part of the marketing brochure and advertisements.

(The writer is CEO, Track2Realty)

 

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