Didn't sign an agreement for sale with builder? Not a buyer under RERA

Real estate regulators may not give relief to home buyers if the agreement is not executed

If you want to benefit from the Real Estate (Regulation and Development) Act or RERA, ensure that you sign the agreement for sale with the developer as soon as you buy the property. There are chances that the real estate regulator in your state may not consider you a buyer in the absence of it.

A buyer and developer usually sign an agreement for sale at the time of payment of stamp duty and registration of property. It's a legal document that states details of property and payment schedule.

Recently Maharashtra real estate regulator (MahaRERA) dashed hopes of around 2,500 home buyers who have bought flats from projects a developer in Mumbai -- Bhagtanis, the promoter of Jaycee Homes. Between 2012 and 2013, the developer sold around six projects at the pre-launch stage in various parts of Mumbai. “Those who booked flats were given allotment letters as work had to commence. But the projects are still under initial development stage,” says Vipul Saxena, a buyer in Bhagtani Serenity at Powai.

The developer also listed properties with MahaRERA after it was formed. But buyers claim that the information was either incorrect or the realtor didn’t disclose complete details. Around 15 buyers approached MahaRERA to get their money back along with compensation. MahaRERA dismissed their complaints as the buyers had not signed the agreement for sale. It ruled that in the absence of a registered agreement for sale, the provisions of section 18 of RERA do not apply. The section deals with compensation for delays.

“The plain words of Section 18 clearly indicate that there must be an agreement for sale for invoking section 18. The allottee gets right to get the refund of his money only when the promoter fails to complete apartment in accordance with the terms of agreement for sale or he is unable to give possession on the date specified in the agreement. Therefore, in the absence of any agreement for sale, section 18 has no role to play,” said the order. It also mentions that the issuance of allotment letter is first stage and execution of the agreement for sale is the subsequent stage.

Lawyers feel that other regulators can also “strictly” interpret the law in the same manner. It would add to buyers' woes in case of under-construction projects after all that they have gone through in the past many years. “Considering the fact that intent of RERA is to safeguard the interests of the buyers, a more liberal interpretation should have been adopted by the Maharashtra RERA authority, including taking into consideration the fact that the project was an ongoing project,” says Vivek K Chandy, Partner at J Sagar Associates. 

Lawyers feel that developers in ongoing projects can use this ruling to escape the law by only signing allotment letter, and not executing an agreement of sale. Under the RERA, a developer is allowed to collect only 10 per cent of the house cost with an allotment letter. If a buyer pays anything beyond that, the two parties need to execute an agreement of sale. If you are a buyer in an ongoing project, ensure that you and developer have signed an agreement of sale. Getting relief under RERA is much easier and faster compared to other options.

Contentious Issue

- Section 18 of RERA deals with compensation for delays.

- It sates that developer can be penalised if it violates terms of agreement for sale.

- Maharashtra regulator order says that no agreement for sale means no relief.

- Other state regulators can interpret the law in the same manner.

- Developers can also misuse it by issuing only allotment letters.