Investing in real estate, especially in a rapidly developing country like India, can be fulfilling yet complex. For many, it represents a financial commitment and a lifetime aspiration of owning a home. However, delays in project completion—a common occurrence in India’s real estate market—can quickly turn dreams into distress. Buyers face many concerns when construction is stalled or postponed, including financial strain, ongoing EMIs, and legal battles. This article covers the key steps a buyer can take if invested in a delayed or stuck project, exploring legal rights, compensation options, and ways to safeguard their interests.
Why do real estate projects get delayed?
Project delays in real estate can arise from various factors, including financial strain on the developer, supply chain disruptions, labour shortages, regulatory hurdles, or even unforeseen economic conditions. While the Real Estate (Regulation and Development) Act (RERA) has streamlined processes and added transparency, delays still need to be solved. Regardless of the reason, project delays lead to significant hardships for buyers, who are often left paying equated monthly instalments (EMIs) for a home they cannot occupy or sell.
Legal options for buyers in a delayed project
Multiple legal recourses are available if a buyer finds themselves trapped in a delayed project. Understanding these options can empower buyers to make informed decisions and recover losses.
1. Filing a Complaint with RERA
The Real Estate (Regulation and Development) Authority (RERA) is the most popular route for buyers seeking recourse. Under RERA, buyers can either claim interest on the delay or request a full refund with interest. Filing a complaint with RERA can pressure the developer to expedite the project or arrange a satisfactory settlement. Moreover, RERA mandates that developers compensate buyers for delays by paying monthly interest, which can ease the financial burden on buyers during the wait.
Buyers can file a complaint with RERA if they face unreasonable project delays, and, if needed, they can appeal the RERA decision with the Real Estate Appellate Tribunal (REAT). If REAT’s decision doesn’t satisfy the buyer, they can take their case to the High Court, making RERA an accessible yet structured route for redressal.
2. Approaching Consumer Courts
Another effective option is filing a case in consumer courts, an alternative to RERA for buyers seeking refunds. Buyers can approach consumer courts at the district, state, or national levels based on the property’s value:
- District Commission for properties valued up to Rs. 20 lakh.
- State Commission for properties valued between Rs. 20 lakh and Rs. 1 crore.
- National Consumer Disputes Redressal Commission (NCDRC) for properties valued over Rs. 1 crore.
Consumer courts provide a platform for buyers to seek compensation or refunds. Even though RERA exists, the Supreme Court of India has clarified that consumer courts are valid forums for aggrieved homebuyers. This choice allows buyers flexibility, enabling them to pursue the option that best suits their situation.
3. Filing a Petition with the NCLT
If a project is delayed due to the financial insolvency of the developer, buyers may consider filing a case with the National Company Law Tribunal (NCLT). Under the Insolvency and Bankruptcy Code (IBC), buyers can collectively initiate insolvency proceedings if the developer defaults on payments worth over Rs. 1 crore. The NCLT then appoints a resolution professional to restructure the project. If two-thirds of creditors (including homebuyers) approve the resolution plan, it is adopted; otherwise, the developer’s assets may be liquidated. However, individual buyers cannot file cases alone—they must work together to reach the Rs. 1 crore threshold.
4. Filing a Complaint with the CCI
In rare cases, buyers may file complaints with the Competition Commission of India (CCI) if they believe the developer is engaging in anti-competitive practices. While this was more common before RERA’s establishment, CCI complaints remain an option for buyers affected by a developer’s monopolistic behaviour or unfair practices. However, pursuing this route may require strong evidence of anti-competitive behaviour, and it’s often less effective than RERA or consumer courts.
Financial Options for Buyers
Besides legal routes, buyers can seek financial assistance or compensation to ease the burden of project delays.
1. SWAMIH Fund
The Special Window for Affordable and Middle-Income Housing (SWAMIH) Fund was launched by the Indian government in 2019 to provide last-mile funding to stalled projects. However, SWAMIH’s stringent eligibility criteria limit the number of projects that qualify for this aid, making it accessible to only a fraction of delayed developments.
2. Compensation and Interest for Delays
Under RERA, developers must pay buyers monthly interest for every month of delay. RERA regulations determine the interest rate and vary by state, but this compensation can help offset EMIs and other financial obligations while buyers await possession.
Practical Considerations: Should You Sell the Property and Move On?
Some buyers may consider selling their unit to recoup funds when a project faces significant delays. However, selling a property in a delayed project can be challenging due to reduced demand and potentially lower resale values. Incomplete infrastructure, partially constructed buildings, and the project’s reputation can deter potential buyers, making it difficult to find interested parties or receive a fair price.
Continuation of EMIs: Essential but Challenging
One of the most challenging aspects of a delayed project is the ongoing EMI payments. Even though buyers have not received possession, they are legally obligated to continue paying EMIs to their banks or financial institutions. Failure to make timely payments could damage their credit score and lead to penalties. In some instances, courts have instructed banks to adjust creditworthiness for delayed project buyers, but these cases are exceptions rather than the rule.
Expert Advice: Do Not Stop EMIs
Legal experts advise that buyers in stalled projects continue paying their EMIs to avoid additional complications. Stopping EMI payments can result in penalties, and banks have the right to initiate proceedings against the borrower. Buyers must also be vigilant in maintaining a good credit score, especially when delays are outside their control.
Buyer Vigilance: Tracking Progress and Financial Health of Developers
Beyond legal and financial actions, buyers must stay actively involved in tracking the progress of their investments. Buyers should request regular construction updates, review the developer’s economic arrangements, and form associations with fellow buyers to monitor the project closely. If the developer is unwilling to share updates, it could signal financial trouble, prompting buyers to escalate their complaints or seek legal intervention.
Forming a Buyer Group
A collective group of buyers can have more influence over the developer and strengthen the case in legal settings. Unified actions, such as filing joint complaints or organising collective representation, increase the likelihood of favourable outcomes.
Housing.com POV
Investing in real estate requires diligence, especially when dealing with delays. Buyers facing delays must take proactive steps, including filing complaints with RERA, approaching consumer courts, and monitoring project progress closely. Though legal avenues and financial assistance options can provide relief, buyers should prepare for a potentially long process to resolve.
By understanding their rights, staying vigilant, and collaborating with other affected buyers, homebuyers can maximise their chances of navigating a challenging situation and, hopefully, securing the home they initially invested in.
FAQs
If the buyer has taken a home loan, are they still required to continue EMIs despite the delay?
Yes, buyers are generally required to continue paying EMIs despite delays. Missing payments can lead to penal interest charges and harm the buyer’s credit score. Buyers should communicate with their banks if they face financial hardships, though banks are unlikely to pause EMIs solely due to project delays.
Can the buyer claim compensation or interest on the delayed possession?
Yes, under RERA, buyers are entitled to monthly interest for every month of delay. This compensation alleviates some financial burdens, such as EMIs and alternative rent expenses, while awaiting project completion.
What is the legal process for withdrawing from the project and claiming a refund?
To withdraw from a project and claim a refund, buyers can file a complaint with RERA, consumer courts, or NCLT (in insolvency cases). Buyers may receive a refund with interest, though this process can be lengthy, depending on the forum chosen.
Can the buyer resell the property in a delayed project?
Yes, buyers may attempt to resell their units in delayed projects. However, selling may prove difficult due to compromised property value and limited buyer interest. The resale price may also be lower than the original investment.
