In a landmark judgment, the Telangana Real Estate Regulatory Authority (RERA) directed M/s Pagadala Constructions to refund ₹12.1 lakh to a homebuyer. The builder was also fined ₹2.69 lakh for violating Section 13 of the Real Estate (Regulation and Development) Act, 2016. This judgment sets a significant precedent for homebuyers’ rights against arbitrary forfeiture and one-sided terms imposed by builders.
Case Background
The homebuyer paid ₹12 lakh as an advance for booking a flat in a residential project registered under Telangana RERA. The builder issued a confirmation letter via email, outlining terms and conditions heavily skewed in favor of the builder. However, the letter was unsigned by the homebuyer, and no Agreement for Sale (AFS) was executed despite the builder receiving 20% of the flat’s cost.
Upon the homebuyer canceling the booking, the builder refunded only ₹5 lakh, promising an additional ₹3 lakh while deducting ₹4 lakh as cancellation charges. After waiting for five months with no further refund, the homebuyer filed a complaint with Telangana RERA.
RERA Tribunal Findings
Telangana RERA uncovered multiple violations by the builder:
- Non-execution of AFS: Despite receiving 20% of the flat’s cost, the builder failed to execute an AFS, violating Section 13 of RERA, which mandates executing an AFS after collecting 10% of the total property cost.
- One-sided Terms: The confirmation letter included biased terms that were neither signed by the homebuyer nor aligned with the RERA Rules.
- Commercial Misrepresentation: The builder sold units to commercial buyers in a residential project, violating project regulations.
- Lack of Evidence: The builder failed to provide evidence of losses to justify deductions.
Tribunal’s Orders
- The builder was ordered to refund the entire ₹12.1 lakh paid by the homebuyer.
- Telangana RERA imposed a penalty of ₹2.69 lakh on the builder for collecting more than 10% of the flat’s cost without an AFS.
- The builder was directed to comply with RERA norms in future dealings and to refrain from including arbitrary clauses in agreements.
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Expert Insights
Legal experts highlighted the importance of adhering to RERA’s pro-consumer framework:
- Abhilash Pillai, Partner at Cyril Amarchand Mangaldas, noted that RERA regulations require a properly executed agreement to protect the rights of both buyers and developers.
- Alay Razvi, Managing Partner of Accord Juris, emphasized that one-sided agreements and unfair trade practices would not hold up under legal scrutiny.
Implications
This case reinforces the importance of conducting due diligence before making payments for property purchases. Homebuyers should ensure that agreements align with RERA rules and avoid paying over 10% of the flat’s cost without an AFS. Builders, on the other hand, must align their practices with RERA’s fair trade principles to avoid penalties and legal setbacks.
