Demand compensation from builders for construction delays

  • Pushpa Girimaji, New Delhi
  • |
  • Updated: Dec 03, 2011 22:51 IST

Most agreements that you sign with builders stipulate a hefty rate of interest for delayed payments from your side. But search for a similar penalty clause for delays on the part of the builder in handing over possession, and you will find none.

Fortunately, despite such one-sided clauses in the agreement,  consumers can get compensation from builders for construction delays. Under the Consumer Protection Act, a consumer is entitled to compensation for any service that turns out to be ‘deficient’. Since delays in the delivery of any service constitutes ‘deficiency’, one can demand compensation for such delays.     

The Supreme Court (SC), in the landmark judgement in the case of Lucknow Development Authority vs MK Gupta, made it clear that “when possession of property is not delivered within the stipulated period, the delay so caused is denial of service” and a consumer who is a victim of such delay is entitled to compensation.

Another important point that the SC made in this case was that compensation awarded by the consumer courts in such cases should serve the dual purpose of recompensing the individual while simultaneously bringing about a qualitative change in the attitude of manufacturers and service providers towards consumers.

Rajiv Kumar Agarwal: I booked a plot in Faridabad with a private developer in 2006. They are yet to give me the possession. In mediation proceeding at the direction of Consumer Forum, they agreed to give possession by March next year. Can one get compensation for delayed possession in this case? The developer charged 18 % per anum interest for delayed payment.

Answer: You certainly can and you should demand it. But before doing that, I would suggest that you please go through the order of the National Consumer Disputes Redressal Commission in the case of Shri JL Sethi Vs Senior Citizen Home Complex Welfare Society decided on August 21, 2006). It would help you in your case. You can find the order on the Commission’s Here, the National Consumer Disputes Redressal Commission has dealt in detail with the question of payment of interest to consumers in cases of delayed construction and the percentage of interest that can be paid.

In this case, the District Consumer Disputes Redressal Forum had awarded 18% interest on the ground that the builder was charging 18% for delayed payment from consumers.

While upholding this, the National Commission quoted two SC orders: In the case of Sovintorg India Ltd vs State Bank of India, (1999), the apex court had held that interest can be awarded in lieu of compensation or damages in appropriate cases. It can also be granted on equitable grounds.

Of course, you have to show that the builder delayed the possession process much beyond the stipulated time, on the basis of the time-frame given by the builder (or the promise made by the builder) towards completion of the project and handing over the property. You also need to show the loss suffered by you as a result of such delay in terms of the loss of interest on the amount deposited with the builder (beyond the stipulated time ) and also the amount being spent by you on a rented accommodation.


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