Failure To Pay Pre-EMI For 4 Years, Karnataka RERA Orders Builder To Refund Amount Paid By Homebuyer

A Subvention Scheme is a tripartite arrangement involving the Homebuyer, Builder, and the bank, where the buyer is exempted from paying interest on the loan for a subvention period. Instead, during this period, the builder pays interest to the bank.

Background Facts

The homebuyer (Complainant) purchased a flat in Block K of the Urbana Avenue project, which is a part of the Ozone Urbana project developed by the builder (Respondent). The homebuyer and builder signed a sale agreement and construction agreement on June 21, 2016. The payment scheme was 10:80:10, meaning 10% down payment, 80% funded by the bank, and 10% at the time of registration and handover. Out of the total cost, the homebuyer paid Rs. 89,37,132/- to the builder.

The homebuyer contended that according to the subvention scheme, the builder was supposed to bear the Pre-EMI costs until the flat handover, which was scheduled for August 2018, with a grace period until February 2019. However, the builder stopped paying the Pre-EMIs in June 2019, violating the subvention scheme's terms and passing the financial burden to the homebuyer.

Further, the homebuyer discovered that other residents in the project had not received their occupancy certificates from the builder. Despite receiving payments, the builder has not completed the work, and the bank is recovering the loan from the homebuyer instead of the builder.

Therefore, aggrieved by the builder's conduct, the homebuyer filed complaint before authority seeking a refund of the entire amount with interest and the closure of the loan.

Observation and Direction by Authority

The authority observed that despite accepting substantial payment from the homebuyer, the builder has failed to deliver the flat to the homebuyer and has not fulfilled their obligation to pay pre-EMIs to the bank. Therefore, the homebuyer has the right to seek a refund of the entire amount with interest.

The Authority rejected the builder's contention that the homebuyer is entitled to receive a refund only for their own contribution and interest, and that the builder should be allowed to make payments of disbursed housing loan amounts directly to the bank to facilitate the loan closure.

The authority noted that when the builder stopped paying pre-EMIs to the homebuyer for 4 years, the homebuyer filed a writ petition (No. 14509/2023 GM-RES) before the Karnataka High Court. The Karnataka High Court, through an order dated July 13, 2023, granted interim relief to the homebuyer by directing the bank not to take any action to recover the pre-EMIs and restrained them from initiating recovery actions.

The Authority referred to Section 18(1) of the Real Estate Regulation and Development Act 2016, which states:

18. Return of amount and compensation.

(1) If the builder fails to complete or is unable to give possession of an apartment, plot, or building—

(a) in accordance with the terms of the agreement for sale or, as the case may be, duly completed by the date specified therein; or

(b) due to discontinuance of his business as a developer on account of suspension or revocation of the registration under this Act or for any other reason, he shall be liable on demand to the homebuyers, in case the allottee wishes to withdraw from the project, without prejudice to any other remedy available, to return the amount received by him in respect of that apartment, plot, building, as the case may be, with interest at such rate as may be prescribed in this behalf including compensation in the manner as provided under this Act:

Provided that where an allottee does not intend to withdraw from the project, he shall be paid, by the builder, interest for every month of delay, till the handing over of the possession, at such rate as may be prescribed.

Therefore, the Authority directed the builder to pay Rs. 1,40,30,451 as a refund to the homebuyer for their failure to provide possession of the flat as per the agreement for sale.

Case – Vijayanand Paulraj Versus Ozone Urbania Infra Developers

Citation - COMPLAINT NO: 00875/2023