If you bought a flat and the builder is dawdling over completing the project, you have just been empowered.
To ensure that real estate projects are completed on time and developers adhere to construction milestones in the builder-buyer agreement, the Real Estate (Regulation & Development) Agreement for Sale Rules, 2016, lay down rights and obligations for both builders and buyers.
So now you can stop making further payment to the builder without fear of attracting interest if he is not keeping up with the schedule. Moreover, you — or the developer — can terminate the agreement in case either of you defaults on any clause.
The Agreement of Sale Rules were notified by the ministry of housing and urban poverty alleviation on October 31, along with the general rules to implement RERA 2016.
These rules are immediately applicable in the union territories of Andaman & Nicobar Islands, Dadra and Nagar Haveli, Daman and Diu, Lakshadweep and Chandigarh. In the states, the governments will need to notify them. RERA comes into force on May 1, 2017.
The new rule clearly states that if the allottee stops making payment, the builder will have to “correct the situation by completing the construction milestones and only thereafter the allottee be required to make the next payment without any interest.” Currently, buyers are wary of stopping payment to builders in case there is a delay as some builders charge a penalty of 18%.
The house purchase agreement rules notified by the Centre this week under RERA allows for automatic termination of the sale agreement if the builder delays giving possession. The builder will have to make the refund within 45 days of the termination of the agreement, and in case the buyers does not wish to withdraw from the project, he will be entitled to interest payment for the period of delay.
In case the buyer defaults, the boot is on the other foot. Then the builder can terminate the agreement, and will also have the right to deduct the booking amount and the interest accruing on it.
Homebuyers have welcomed the new rules. “This is a balanced agreement of sale but the biggest challenge is to see if all states will incorporate the rules or continue to allow builders to draft agreements,” said Abhay Upadhyay, national convenor, Fight For RERA.
Builders say that while the ‘stop payment’ rule is “fair”, buyers can misuse the exit option. “They may decide to terminate the agreement if property escalation is not as per their anticipation. Or if a person’s financial circumstances change. The builder puts all advances into a project and to refund within 45 days will be a challenge. It should ideally be 120 days,” said Rohit Modi, director Ashiana Homes Pvt Ltd and vice-president, Credai National.