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RECENTLY, I came across a consumer who is trying to get back his money from a builder. The three-bedroom flat, for which he has paid over Rs 60 lakh, should have been ready and handed over to him two years ago, but till now, the construction is not complete, and every time the builder comes up with a different excuse for the delay. Since this is a case of delayed construction, under the Consumer Protection Act this constitutes deficiency in the service provided by the builder, and the client is entitled to not just a full refund, but also interest on the amount and compensation for the suffering undergone. In the case of Lucknow Development Authority vs MK Gupta (CA No 6237 of 1990), the Supreme Court made it clear that "when possession of property is not delivered within the stipulated time, the delay so caused is denial of service". I must also mention here the case of PUDA vs Shakuntala Devi Saini (RP No 1490 pf 2008), where the national consumer commission held that a service provider who has not fulfilled his part of the contract cannot bind the client to the forfeiture clause. In other words, a builder who has failed to hand over the construction within the stipulated time, cannot point to the forfeiture clause and say that the consumer would forfeit his money if he withdrew from the project. Obviously, the customer is not fully aware of his rights, while the builder knows the law too well. So when the consumer demanded his money back, the builder pointed to the forfeiture clause in the agreement signed by him, and said he would not get back any money if he withdrew at this stage. However, he would ignore the agreement as an exception in this case, if the client gave a letter expressing his full satisfaction with the progress of the project, and said that he needed to withdraw from the project on account of a very serious financial crisis, the builder told him. Needless to say that the consumer signed on the dotted line, thereby giving away his right to a full refund and compensation. Once he had the letter in hand, the builder offered to return only 80 per cent of the amount paid by the client. And there would be no interest on the amount, he was told. This is just one of the many problems that consumers today face vis-a-vis the slowdown in the real estate sector. It’s not as if builders always stuck to project deadlines before the onset of the economic crisis. Most often, projects did not get completed on time, thereby causing customers, who would have paid with borrowed money, considerable hardship. But now, given the economic turbulence, such problems have become endemic, exacerbating the hardship of the people. But what makes matters worse for clients is the one-sided agreement drawn up by the builders. In fact most of them impose on consumers high interests as penalties for delayed payment, but remain silent on the relief that the clients ought to get in case of delayed projects. Tough, one-sided and unfair forfeiture clauses too bind the buyer to the contract, closing all options for exiting. The government has been trying to help builders tide over the difficult times. Equal attention needs to be paid to the plight of consumers, and immediate measures need to be taken to protect the interests of customers, particularly in respect of the agreements that are drawn up by the builders. Such agreements should be just and equitable and provide for an option to consumers who wish to exit a delayed project, without having to go through a protracted legal battle with the builder. In the absence of a regulator for the housing sector, the National Real Estate Development Council (NAREDCO) and the Union Ministry of Consumer Affairs should take the initiative and together draw up a standard contract that is fair to both the parties and forms the basis for all contracts drawn up by builders. Such an agreement providing for an exit clause in case of delays will not only ensure a fair deal to consumers, but will also force builders to hand over possession within the promised period.
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