Bombay HC Orders Builder to Pay 10.05% Interest for Delayed Home Deliveries

With the hope of having their own roof over their heads in Mumbai, several homebuyers booked flats in a housing project launched in 2005-2006. Nearly two decades later, they are still awaiting possession, which was originally promised between 2008 and 2010.

The Bombay High Court, however, recently offered some relief to these distressed homebuyers, many of whom have already paid 50-60% of the amount to the developer for the flats. “Even after a period of almost 20 years of execution of agreement and after lapse of about 16 years from the agreed date of handing over possession, the possession has not been given,” the HC observed.

The Bombay High Court, in its ruling, said a builder can’t indefinitely retain purchasers’ money while failing to deliver homes. For the delay, the HC ordered the Mumbai-based builder to pay interest at 10.05% per annum from February 1, 2014, to the buyers until the possession is handed over.

In addition, the Bombay HC imposed costs of Rs 1 lakh each on the developer in two appeals and Rs 10,000 each in eight other appeals, directing the amount to be paid within four weeks.

High Court rules in favour of Mumbai homebuyers: What is the case about?

The case pertains to delay in possession of flats in a housing project in Nahur, Mulund (a Mumbai suburb). Several allottees had booked flats in the project between 2005 and 2007, costing from Rs 36.32 lakh to Rs 60.75 lakh.

While homebuyers were promised possession between 2008 and 2010, the flats are yet to be handed over to them even after nearly two decades.

Amid the delay, homebuyers first approached the MahaREAT, and consequently, they moved to the Bombay High Court.

Hearing the case, the Bombay High Court dismissed the builder’s contention and highlighted that “under Section 18(1) and its proviso, the homebuyers, who chose not to withdraw from the project, are unconditionally entitled to interest for every month of delay until possession is actually delivered.”

The HC explained how the homebuyer is in a very vulnerable position as he borrows money to pay for a house and “simultaneously plays the role of a financer as building projects collect money upfront.” This makes the buyer the weakest stakeholder with a high financial exposure.

Interest payment to homebuyers for delayed possession

In this case, the Bombay HC upheld the MahaREAT’s 2018 order, which ordered the developer to pay 10.05% annual interest to homebuyers for delayed possession. The Tribunal had directed the builder to pay interest to buyers from February 1, 2014, until actual possession was handed over.

The high court held that homebuyers have an unqualified right to get interest every month for delayed possession under the Real Estate (Regulation and Development) Act (RERA).

Forest land behind the 20-year delay?

According to the developer, forest land and other issues were the primary reasons for the delay in project completion. The builder’s lawyers argued that large areas of Mulund had come under forest reservation in 2006 and indicated that they had filed a writ petition before the Bombay HC challenging the mutation entry inserted by the City Survey Officer in the property card register.

As per the City Survey Officer’s entry, “the land is the forest land, and no development/construction will be allowed unless NOC from the forest department is obtained in respect of the said land.”

For now, the Bombay High Court has ruled in favour of the homebuyers who have been waiting to secure possession of their flats booked nearly two decades ago. HC further underlined that RERA was enacted with an object to ensure greater accountability towards consumers, significantly reduce fraud, delays, and the high transaction costs, and balance the interests of consumers and promoters by imposing certain responsibilities on both.

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