KRERA: Real Estate Developers cannot ask for delayed interest and dues payment if their documents are not valid

KRERA: Real Estate Developers cannot ask for delayed interest

The Karnataka Real Estate Regulatory Authority (KRERA) recently made a decision that developers cannot ask for delay interest from homebuyers if they have not paid their dues unless they provide valid documents like building plans and project clearances. The Authority supported a homebuyer in a case involving a the on-going project in Bengaluru. They explained that most of the documents submitted by the developer, including the Bengaluru Development Authority (BDA) modification plan and elevation plan, are outdated or invalid.

The complainant booked an apartment in the ongoing project and paid Rs 10.35 lakh in November 2019 with a handover date of December 2024. However, the developer could not furnish her with the updated documents, and as a result of which the buyer stopped paying the balance amount. She approached the governing authority KRERA seeking relief. KRERA on investigation found out that the floor plan and elevation plan had lapsed in 2018.

In a written statement to the Authority, the homebuyer stated, “The developer has obtained a commencement certificate from BDA in 2022 that states that the developer has collected advance money as booking of the flat without valid commencement certificate for the project.”

The project developer denies the allegations and claims the project is still ongoing. They state that it is not subject to delayed compensation or any other clauses under the RERA Act.

With regards to the order of the Authority, we have already filed a compliance report submitting details of all valid documents as mentioned by RERA. The same set of documents was also shared with the customer in a compact disc (CD) earlier.

CEO of the Real Estate Developer

“In response to the Authority’s order on not collecting interest, we will go for appeal in this case. As per the sale agreement, a developer is fully entitled to demand and collect all amounts due from the purchaser,” he added.

According to the developers, obtaining development plan and building plan approvals is a crucial prerequisite for registering with RERA and finalizing agreements for sale. It is worth noting that a commencement certificate is not mandatory at the time of signing the sale agreement as long as all plans have been approved by the Authorities, including RERA. However, a commencement certificate is necessary for commencing construction, and its validity lasts for two years. The company has obtained and submitted the necessary commencement certificates for all phases of the project to the Authority.

KRERA finding

Upon reviewing the documents, the Authority determined that a majority of them, such as the building plan, floor plan, elevation plan, and BDA modified plan, had already expired in 2018 due to the developer’s failure to obtain a commencement certificate before that time.

KRERA stated that it was evident that all the documents provided by the developer at the time of signing the agreement in 2019 were already expired. As a result, the promoter needs to extend the validity of the documents before providing them. KRERA also stated that it would be fair for the homebuyer to complete any outstanding payments only after the developer provides her with valid documents.

To ensure fairness, KRERA has ordered the developer to provide the homebuyer with the necessary documents before receiving payment. Until the documents are presented, the developer is not permitted to collect any delayed interest from the homebuyer, as stated by KRERA.

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