‘Real’ Developments

Each sector has its own unique place in the overall economy. Traditionally an unorganised sector, real estate is embarking upon the path of becoming organised for the betterment of all stakeholders. The year 2021 has been a mixed bag for the economy and the real-estate sector was no exception. And the advent of the second wave of COVID-19 exacerbated the situation.

In 2021, the judiciary played a pivotal role with its rulings generally having ramifications for society at large. In this article, we discuss some pathbreaking rulings by the Apex Court to understand the extent of judicial involvement in the real-estate sector and its efforts to provide justice to all stakeholders.

As recently as November 2021, in Newtech Promoters and Developers Pvt Ltd v. State of UP & Ors. [Civil Appeal Nos. 6745 to 6749 of 2021] (Newtech judgement), among other questions of law, the Apex Court decided on the issue whether the Real Estate (Regulation and Development) Act, 2016 (RERA) is retrospective or retroactive in its operation and thus applicable to ongoing projects that have not obtained their occupation certificate. In the Newtech judgement, it was stated that Parliament intended to bring within the fold of RERA ongoing real-estate projects in its wide amplitude, including every kind of developmental activity either existing or upcoming in future under the provisions of RERA. It was further stated that the intention of the legislature by necessary implication and without any ambiguity is to include those projects that were ongoing and in cases where completion certificate has not been issued within the fold of RERA. As the application of the scheme of RERA is retroactive in character, it can safely be observed that projects already completed, or to which the completion certificate has been granted, are not under its fold and, therefore, vested or accrued rights, if any, are in no manner affected. At the same time, the Apex Court held that RERA would apply after getting the on­going projects and future projects registered under RERA to prospectively follow its mandate. In addition to the above, several other questions with regard to the jurisdiction of the authority to direct return/refund of the amount to the allottee, or whether the jurisdiction exclusively lies with the adjudicating officer to direct return/refund of the amount to the allottee, were answered by the Apex Court, thereby alleviating the misery being caused to the allottees and making the system robust.

Similarly, Bombay High Court, in a bunch of appeals tagged together with the lead matter Bombay Dyeing Manufacturing and Company Ltd v. Ashok Narang and other allotees [Second Appeal (Stamp) No. 4996 of 2020 with Interim Application 3383 of 2020] held that RERA is a retroactive statute as held in Neelkamal Realtors v. Union of India. It is interesting to note that the Bombay High Court judgement was delivered prior to the Newtech judgement. The Bombay High Court upheld the Maharashtra Real Estate Appellate Tribunal order, which granted refund to the allotees as there was delay in granting possession of the apartments 

by the promoter. The year of possession was specified by the promoter in the brochure of the project, which was issued at the time of booking of the apartment.

Another landmark judgement was passed in Forum for People’s Collective Efforts v. The State of West Bengal and Ors. ([2021]8SCC 599)], wherein the Supreme Court inter alia held that the West Bengal Housing Industry Regulation Act, 2017 (a state enactment) (WB-HIRA), is repugnant to the Real Estate (Regulation and Development) Act, 2016, a central enactment, and hence unconstitutional.

The proactive stand taken by the judiciary is clearly evident from the recent landmark rulings passed by the Supreme Court and the respective High Courts, however, over and above the same, the legislature is also contributing to resolve the grievances of the reprieved parties in the sector which is evident from one such legislation i.e. The Consumer Protection Act, 1986 ("CPA 86") that was repealed by the Consumer Protection Act, 2019 ("CPA 19").

Among focusing on and addressing a new set of issues arising from digitisation, with the aforesaid new legislation there will not only be transparency and accountability but the same will also help consumers/property buyers to get possession of properties booked easily and in a timely manner, or enable them to file complaints against the builder or any ‘real-estate’ firms. The consumers/homebuyers may even expect early and fair judgements and can seek relief without much difficulty within the framework of three months, unlike earlier when it took years and years to adjudicate a case. Under CPA 19, the pecuniary jurisdiction and the mechanism for appeal have been modified and are different from those under CPA 86. However, one needs to wait and watch for effective adjudication of disputes referred under CPA 19.

In some cases, the Supreme Court and Bombay High Court have made stringent observations against builders who have brazenly and intentionally defrauded homebuyers and do not appear to have made progress in their projects or refund the hard-earned monies received from the homebuyers while adopting all sorts of delaying tactics.

Another development in the real-estate space is the increase in floor space index (FSI) in the coastal zone in the country that has been approved by the Central Government and is awaiting confirmation from the states. Once confirmed by them, the increase in FSI will definitely boost the viability and profitability of builders.

Owing to the outbreak of the COVID-19 pandemic, the real-estate sector was among the worst hit, thereby affecting the Indian economy as a whole. Despite the extension given to completion of projects under RERA and other aid and assistance from the Government, many developers are still facing multiple challenges that have genuinely affected their projects. Besides financial and cash flow issues, they are also plagued by massive labour migration issues and increase in costs of raw materials and labour.

About the author: 

Aradhana Bhansali is a Partner at Rajani Associates. She handles cases pertaining to civil litigation and arbitration.