MahaRERA: builder responsible for real estate agent’s promises

The MahaRERA on July 4 delivered a landmark judgement after homebuyers Aftab Shaikh and Nilofar Shaikh approached the housing authority with multiple contentions

Mumbai: In a ruling that could well set a precedent for home owners in the state and lead to greater accountability in the real estate sector, the Maharashtra Real Estate Regulatory Authority (MahaRERA) has held that a builder is responsible for the representations made by a real estate agent to a homebuyer, and cannot renege on it at a later stage.

The Shaikhs said that they had bought a flat in South Tower, a property which is being developed at Saat Rasta near Mahalaxmi station (Pratik Chorge/HT PHOTO)

The MahaRERA on July 4 delivered a landmark judgement after homebuyers Aftab Shaikh and Nilofar Shaikh approached the housing authority with multiple contentions, the foremost being that builders Glider Buildcon Realtors Private Limited and Omkar House had reneged on a subvention scheme.

The Shaikhs said that they had bought a flat in South Tower, a property which is being developed at Saat Rasta near Mahalaxmi station, on the representation made to them by a real estate agent who told them that the project was being sold under a subvention scheme.

In a subvention scheme, the buyer doesn’t have to pay the interest amount (this is undertaken by the builder) until an agreed period of time, which could be till possession of the flat or a date decided upon by both parties. In this case, advocate Nilesh Gala, who represented the complainant said that the Shaikhs were given to understand that they scheme extended till possession.

The Shaikhs received a letter of allotment in August 2018 stating that they had booked the flat measuring 1,046.84 sq ft carpet area in the building of which the total consideration was above ₹5 crore.

According to the MahaRERA website, the possession date is set for December 2025.

In 2019, the homebuyers approached MahaRERA with several contentions, the main being that the representation made to them before they purchased the flat was that it would be sold to them under a subvention scheme of 20:50:30, i.e, the homebuyer would pay the amount in parts — 20% to start with; 50% at a specific milestone (like completion of construction); and the remaining 30% of the consideration amount just before taking possession.

Based on this, they booked the flat and paid ₹1.27 crore, but the developer subsequently stated that there was no subvention scheme. The homebuyers sought a refund of the amount they had paid to the developer. The builder told the housing authority that they never gave such a commitment to the homebuyers.

In its 14-page order MahaRERA noted, “Though the respondent no. 1 (Glider Buildcon) has not advertised that the project has a subvention scheme, however, admittedly, the agent who acted and appointed by the respondent no. 1 has given such representation to the complainant (homebuyers). Since the agent acted on behalf of the respondent no. 1, for any such representation made by the said agent the respondent no 1 is responsible for the same. Admittedly, the respondent no. 1 has failed to provide the subvention scheme shown to the complainant.”

MahaRERA also noted that the homebuyers in this case were entitled to seek a refund for violation.

Dr Vijay Satbir Singh, Member-1, MahaRERA directed the builder to refund the entire amount paid by the homebuyers along with interest at the rate prescribed by RERA — the Marginal Cost of Fund based Lending Rate (MCLR) plus 2% within six months. Put simply, the homebuyer would get a refund of the amount he paid to the builder along with an interest of 9.7% from the date of payment.

“The order is a landmark judgement, where promoters via their real estate agents give various commitments to flat purchasers, and thereafter the promoter disowns these commitments. This order will bind the promoter, who through their real estate agents, make commitments. Even under the Indian Contract Act, a principal is bound by the commitment made by the agent. The MahaRERA has applied the same analogy in this case,” Gala said.

Detailed emails sent to Glider Buildcon Realtors Private Limited and Omkar House remained unanswered.