Model buyer agreement can protect buyers: Consumer affairs secy

A simple, model buyer agreement could help to streamline the homebuying process and protect consumers from potential abuses, says consumer affairs department secretary Rohit Kumar Singh. “This agreement could help to reduce disputes between homebuyers and builders and ensure that consumers have access to effective, speedy, hassle-free, and inexpensive grievance redressal mechanisms,” Singh said.

Singh made the observation while a round-table conference on how to effectively redress the grievances pertaining to real estate sector in Mumbai on April 18, 2023. Singh also highlighted that out of the over 5.5 lakh cases currently awaiting resolution in consumer panels, over 54,000 cases were related to the housing sector.

“This backlog of cases highlights the importance of providing speedy justice and streamlining the process for homebuyers,” he said.

While highlighting the significance of the Consumer Protection Act 2019 (the law recognises housing construction as a service and categorises developers as product sellers), Singh said that this helped to ensure that homebuyers have access to the same consumer protection that they would receive when purchasing any other type of product or service.

During the conference, NCDRC member Binoy Kumar underscored the importance of the builder-buyer agreement as the fundamental document governing transactions in the sector. He suggested that the agreement should be made more efficient and in line with the Supreme Court orders, which would subsequently reduce the number of cases filed by homebuyers.

During the conference, several key takeaways emerged as crucial points of discussion. The prevalence of real estate cases in consumer commissions led to suggestions for utilising similar judgments to expedite the legal process and encouraging parties to engage in discussions to resolve disputes amicably. The success of conciliation in resolving disputes was emphasized, urging for better cooperation between consumer courts and RERA to prioritize conciliation over litigation. The importance of completing and distributing incomplete projects, rather than opting for insolvency under IBC, was stressed, along with a call for transparency among all stakeholders.

Insights were also provided on misleading advertisements in the sector, emphasising the need for enhanced transparency between buyers and developers to avoid future legal disputes. Lastly, recommendations were made to improve the agreement, including disclosing additional charges, outlining issue redressal processes, ensuring legal compliance by developers to keep consumers informed about project progress, and implementing initiatives to resolve minor issues through phone calls. These takeaways aim to enhance transparency and consumer protection in the real estate sector.

Problems areas

1. Delay in delivery of projects.
2. No compensation for delay in possession to homebuyers.
3. Biased, one-sided and unfair builder-buyer agreements.
4. Amenities not provided to homebuyers as per the agreement.
5. Misleading advertisements by developers and influencers to lure buyers.
6. Non-adherence to RERA’s model builder-buyer agreement.

Solutions

1. Sending the draft agreement to buyers before execution.
2. Clearly mentioning permissions and sanctions obtained from competent authorities on the first page of the agreement.
3. Prohibiting builders from launching projects before obtaining all necessary permissions and sanctions.
4. Including an exit clause for buyers in all agreements, valid till the completion certificate is obtained, possession is offered.
5. Including a schedule of additional charges beyond the cost of the unit/apartment in all agreements.
6. Mandatory declarations on no-dues and all necessary legal sanctions and approvals from competent authorities.
7. Taking strong action against unfair and misleading advertisements by developers and endorsers.
8. Forming a committee to effectively deal with the issue.
9. The consumer affairs department to collaborate with other relevant entities to ensure effective implementation, monitor their impact.