What is the Compensation for delayed delivery of flat to the purchaser by a developer?

What is the Compensation for delayed delivery of flat to the purchaser by a developer?

The Court is extending its hand to give some relief to the affected home buyers, whose possession of the flat is delayed to an unreasonable extent. The Court levied certain penalties on the developers through the recent judgements, to bind the developers to act as per the commitments made.

Through a judgement passed by the Supreme Court on August 2020, it said the builders must pay the home buyers an annual interest on the principal cost of the flat bought, for the period it has caused delay without a logical reason. Added to this, a small amount is levied as a penalty dependent on the per square feet subject to the buyer's agreement.

With the introduction of RERA, the real estate problems are getting buyer satisfactory solutions, otherwise, delay in possession extended to long periods of 6-10 years or more. This is nothing but mere harassment to the home buyers.

The recent judgements will give a better idea of how the builders are being penalized for not acting as per the commitment to the buyers.

Recent Judgement on delay in possession

Case 1: Wg. Cdr. Arifur Rahman Khan and Aleya Sultana vs. DLF Southern Homes Pvt Ltd, dated 24.08.2020

The bench of Justices DY Chandrachud and KM Joseph held in the matter, where 339 flat buyers brought a complaint against the delayed possession, that the affected flat buyers are entitled to get compensation for the suffering they are facing because of the failure of the builder.

To brief that matter, the 339 buyers had booked residential flats in Westend Heights at New Town, DLF, BTM Extension at Begu, Bengaluru. The builder was supposed to give possession to the buyers within 36 months. The Court held that –

• All the respondents, or the flat buyers, shall receive compensation, except 11 flat buyers who had already settled the matter with the developers and three flat buyers, who had sold their right, title and interest regarding the flat. The compensation shall be an amount calculated at the rate of six per cent simple interest per annum on the total amount paid for the purchase of the flat, levied from the date of expiry of 36 months, and shall continue till the date of delivery of possession along with the occupancy certificate.

• Additionally, another penalty shall be payable at the rate of Rs 5 per square feet per month calculated from the date of expiry of 36 months till the date of drawing the final amount, to the buyer by the developer.

• In case the developer fails to pay the penalty amount mentioned above within one month of passing the order, the developer has to pay another penalty of an amount at the rate of nine per cent per annum on the total amount till the date of payment being made.

Case 2: Pioneer Urban Land and Infrastructure Ltd. vs. Govindan Raghavan, dated 02.04.2019

It was held by the Supreme Court that the clauses of the buyer agreement were one-sided, which enabled the builder to charge interest at the rate of 18 per cent for the delayed payment, but the builder was not made liable to pay an equivalent amount as penalty or compensation when there is a delay in possession.

The Court passed an order enabling the flat buyers to get compensation at the rate of nine per cent per annum calculated till the date of giving possession along with the occupancy certificate, starting from the date of expiring the scheduled time of delivery.

The buyer agreements are often are one-sided, where the builders are profiting in case of the buyer's default, whereas the buyer is not getting much when the builder is causing any delay or not complying with the agreement in any way.

The Court, being lenient towards the buyer, not only enabled them to get compensated for the loss they face but also created pressure on the builders to comply with the terms and conditions, they had agreed to.