NCDRC Rules in Favor of Homebuyers: Developer Liable for Delayed Compensation Until Occupancy Certificate Issued

NCDRC Rules in Favor of Homebuyers: Developer Liable for Delayed Compensation Until Occupancy Certificate Issued

Developers are required to compensate homebuyers for project delays until the occupancy certificate (OC) is obtained, even after possession of apartments has been granted. This ruling was recently issued by the National Consumer Disputes Redressal Commission (NCDRC).

The Bengaluru-headquartered real estate firm, Vahe Projects Private Ltd, has been instructed to compensate buyers of Vahe Imperial Gardens with six per cent interest until actual possession is granted, after a seven-year delay.

The court's decision, issued on March 3, clarifies a previous judgement from December 28, 2022, stipulating that actual possession would be deemed as the date when the Occupancy Certificate (OC) is issued, even if homebuyers have already moved into their apartments.

"The homebuyers are entitled to claim compensation delay until the date of the actual possession or the date of OC," the order said.

Vahe Imperial Garden, located in Gunjur in eastern Bengaluru, was due to be completed by 2015. The project consists of two towers with a total of 139 apartments. The construction agreement was signed in 2013, and each apartment currently costs between ₹60-70 lakh (₹6-7 million).

Despite having received 95 per cent and, in some cases, up to 100 per cent of the payment, the developer failed to deliver possession even after the handover date had passed. The NCDRC order pointed out that the progress reports sent by the developer to the homebuyers made no mention of these delays.

Starting from 2016-2017, homebuyers began to move into the complex without getting occupancy certificates.

The homebuyers filed a case with NCDRC in 2018, seeking compensation for delayed possession and a full handover of their apartments. On December 28, the court issued an order directing the developer to compensate the homebuyers for the delay until the date of possession.

Chandrachur Bhattacharyya, the advocate representing the homebuyers, stated that there was ambiguity regarding the possession date, as the homebuyers had already moved in. Consequently, on March 3, the court clarified that the possession date would be calculated only after the issuance of the Occupancy Certificate (OC).

As per the order, the court discovered that in communication with the homebuyers in 2018, the developer had acknowledged that the pending work in the project was still ongoing. The court concluded that this communication indicated that the possession of the flats had been offered to the buyers in an incomplete and unfinished condition.

Additionally, the court observed that the Bruhat Bengaluru Mahanagara Palike (BBMP) had issued a notice to the developer indicating that the essential amenities in the high-rise building, such as electricity, sewerage treatment plant, drinking water, lift facilities, and other civil works, had not been completed.

During the initial proceedings, the developer argued that once the allottees had taken possession, they could no longer be considered a consumer, particularly after two years from the execution of the sale deed. However, the court held that the developer had failed to deliver possession of the flat with a valid OC within a reasonable time, and therefore, the homebuyers were entitled to claim delayed compensation for their apartments, according to the December order.

The court referenced the 2018 Supreme Court judgment in Supertech Ltd vs Rajni Goyal, which held that the offer of possession is valid only when the complete OC has been obtained.

"In this case, the homebuyers are entitled to claim compensation delay until the date of the actual possession or the date of OC," the March 3 order mentioned.

Consequently, the NCDRC ruled that the developer is obligated to pay delayed compensation to the homebuyers at an annual interest rate of 6 percent until actual possession takes place.