The Maharashtra Real Estate Regulatory Authority (MahaRERA) has ruled that a registered sale agreement is necessary for a home buyer to seek interest on delay by the real estate developer in granting possession.
The ruling is significant as many home buyers, particularly investors, still continue to rely on letter of allotment even after making a significant payment to the developer and do not enter into an agreement to delay paying stamp duty, goods and service tax (GST) and other charges.
The verdict was delivered in a complaint filed by home buyers Niraj Sanghia and Ami Trivedi, who approached MahaRERA against developer Unique Shanti Realtors. The buyers had purchased a flat in the developer's residential project in Mira Road through a letter of allotment dated July 16, 2013.
The complainants alleged that even after having paid substantial amount towards the price, the developer failed to execute and register the agreement for sale. They said the developer had promised to hand over possession by 2017, but failed to do so. The complainants prayed that the respondent be directed to register and execute the agreement for sale and pay them interest for the delay in handing over possession.
The counsel representing the developer assured MahaRERA his client was willing to register agreement for sale. MahaRERA chairperson Gautam Chatterjee pointed out that as per Section 18 (1) of the Real Estate (Regulation & Development) Act, 2016, if the developer fails to give possession of an apartments, plot or building in accordance with the terms of agreement for sale and the allottee is interested in withdrawing from the project, he can get the amount paid so far returned with interest.
If the home buyer is not looking to withdraw from the project, then the developer is expected to pay interest for every month of delay till the possession, Chatterjee said at the hearing.
The rate of interest is prescribed at 2% above State Bank of India's marginal cost of lending rate (MCLR).
"Accordingly, since no agreement for sale has been executed and registered between the parties, provisions of Section 18 of the said act does not apply to the present case," the order said.
Chatterjee then directed both the parties to execute and register the agreement for sale. He even advanced the date of possession by a year, and even if then the builder failed to hand over possession then he will be liable to pay interest to the home buyers.
The ruling is significant as many home buyers still continue to rely on letter of allotment and do not enter into a registered agreement.