Karnataka RERA orders developer to refund entire amount despite project completion. Here's why

The developer had promised to deliver the project within 2019, according to the sale agreement signed with the homebuyer.

Despite having completed a project as per the construction timeline, the Karnataka Real Estate Regulatory Authority (KRERA) has ordered the listed developer Sobha Limited to refund the entire amount with an annual interest of 9 percent to a homebuyer.

"The respondent is directed to pay Rs 2.5 crore towards refund with 9 percent interest per annum," the order dated September 14 said.

While the developer claimed to have completed the project on time, it could not execute the sale deed as the project was attached by the Income Tax Department under the Prohibition of Benami Property Transactions Act.

The Act defines a benami transaction as a transaction where a property is held by or transferred to a person but has been provided for or paid for by another person.

The case

Related stories

Souptik Datta

Sub Editor|Moneycontrol

• 
  If illegal floors can't be razed, demolish the building, says Karnataka High Court
• 
  Karnataka RERA asks Ozone Group to repay homebuyer's home loan, clears all liabilities on buyer
• 
  India turns 2nd fastest-growing data center market in Asia-Pacific with 28% growth in capacity

In this case, homebuyer Hemambika Subramani booked an apartment in the Sobha Valley View project in south Bengaluru for Rs 1.5 crore.

The developer had promised to deliver the project within 2019, according to the sale agreement signed with the homebuyer.

However, the homebuyer claimed before KRERA that the developer failed to hand over possession as per the agreement as the project land was attached by the income tax authorities.

The developer denied all allegations and said that the project was completed before the agreed completion date of February 2019, and the completion certificate was obtained in January of the same year. The occupancy certificate was obtained in October, it added.

"Thus, the promoter had completed the project and was ready to hand over possession to the homebuyer as per the agreement," the KRERA order noted.

However, at this juncture, due to ongoing land litigation, the Deputy Commissioner of Income Tax attached the project land, which prohibited the owners from transferring, converting, or dealing with the property in any manner.

The developer further claimed before the Authority that it had offered possession to the homebuyer upon completion of the project, who rejected the same.

A list of questions has been sent to the developer, and Moneycontrol will update the story after receiving a response.

KRERA finding

The Authority noted that the developer had completed the project in 2019 but failed to register the sale deed and hand over the project due to the ongoing litigation. However, it also added that the developer had failed to complete and hand over possession as per the agreement signed with the homebuyers.

Quoting a Supreme Court judgment in Newtech Promoters and Developers Pvt Ltd vs Uttar Pradesh Government in 2021, KRERA said that if the developer fails to give possession of the apartment within the stipulated timeline, regardless of the circumstances, it is the unqualified right of the allottee to seek a refund with interest under sections 18 and 19 of RERA Act.

"The homebuyers are willing to withdraw from the project that has several litigations ongoing, and the project land will always be a threat to her. Such litigations will not only shatter the dreams of the investor but also incur heavy investment as well as legal expenses," the order said.

Thus, KRERA added that the developer is liable to refund the entire amount with interest to the homebuyer.