Why SC Ruling On Builder Liability Is A Shocker For Homebuyers

If your housing project is delayed by years, should you still be paying interest on the home loan? If the builder fails to deliver, should not that person bear the financial burden caused by the delay? And if the Supreme Court itself had to bring in the National Buildings Construction Corporation (NBCC) to complete stalled projects, does that not reflect a deeper structural failure, not just buyer impatience?

- SHEKHAR SINGH @New Delhi

In a judgment that has rattled homebuyers across India, the Supreme Court has now said developers cannot be made to reimburse interest paid on home loans, even if they failed to hand over the property on time. Buyers are entitled only to a refund of the principal amount, along with contractual compensation, nothing more.

A bench of justices Sanjay Karol and Prasanna B Varale observed that there cannot be multiple heads for awarding damages or interest beyond what is contractually agreed upon. The court further held: "A perusal of the judgment and orders of the commissions does not reveal any exceptional or strong reasons for the interest on the loan taken by the respondents to be paid by GMADA (Greater Mohali Area Development Authority). That apart, whether the buyers of the flat do so by utilizing their savings, taking a loan for such purpose or securing the required finances by any other permissible means, is not a consideration that the developer of the project is required to keep in mind. For, so far as they are concerned, such a consideration is irrelevant."

The case was triggered by a complaint filed by Anupam Garg, who had booked a 2-BHK + Servant Room (Type II) flat under the 'Purab Premium Apartments' scheme launched by the GMADA in 2011. Garg paid ₹5.5 lakh as earnest money, which was 10% of the ₹55 lakh flat price.

Following a successful allotment through a draw of lots on March 19, 2012, GMADA issued a Letter of Intent (LOI) on May 21, 2012, outlining the flat's price, payment schedule, layout, ownership conditions, and possession date, which was May 2015. The LOI clearly stated that in case of delay, a refund with 8% interest would be given.