After stories involving builders like DLF and the Vatika group in tussles with consumers over delays and refunds, it is time to look at consumer rights in the home building business.
In these days of economic turbulence where delays in housing projects could become endemic, consumers need to be better protected through just and equitable agreements with builders that give them an exit option with full refund and interest. And consumer courts have set solid precedents for this.
Delays are a common malaise in the housing construction sector. Projects do not get completed within the stipulated time, causing consumers who would have paid for the projects with borrowed money, considerable hardship. The problem is exacerbated in the present economic scenario. Unfortunately, the agreements drawn up by the builders are so one-sided that they offer no relief.
In fact, most of them impose on consumers high interest charges as penalties for delayed payment, but remain silent on the relief that the consumer ought to get when projects get delayed from the side of the builders. Tough forefeiture clauses, too, bind the buyer to the contract, closing all exit options.
The consumer court orders have made it clear that inordinate delays in the execution of projects or handing over possession constitutes ‘deficiency’ in the service rendered by the builder and consumers have the right in such cases not only to a refund, but also to interest on the amount.
In the case of Lucknow Development Authority Vs MK Gupta (1990) the Supreme Court held that “….When possession of property is not delivered within the stipulated time, the delay so caused is denial of service.”
More recently in the case of PUDA Vs Shakuntala Devi Saini, (2008), the National Consumer Commission held that a service provider who has not fulfilled his part of the contract cannot bind the consumer to the forefeiture clause.
So the right to a refund and interest in case of unreasonable or inordinate delays in completion of housing projects should be in-built into the agreement between the builder and the consumer, so that consumers can exercise that option without having to enter into a protracted correspondence with the builder or having to go to the consumer court.
In the absence of a regulator for the housing sector, the National Real Estate Development Council (NAREDCO) and the Union ministry of consumer affairs should take the initiative and together draw up a standard contract that is fair to both the parties and forms the basis for all contracts drawn up by builders. Such an agreement providing for an exit clause in case of delays will not only ensure a fair deal to consumers, but will also force builders to hand over possession within the promised period.