Builder has to pay compensation if project is delayed

Building projects are often delayed due to disputes between a builder, land owner and developer. Builders try to term these as force majeure, which means due to circumstances beyond their control, to avoid being held liable for deficiency in service. In a recent ruling, the National Commission has held that such disputes cannot be termed force majeure, and a consumer would be entitled to claim a refund along with interest and compensation when the builder is unable to complete the housing project in time. However, a builder can neither unilaterally extend the date of possession nor insist on allotting alternate flat or plot to escape refunding the amount.
Case Study: Shahin Mulla wanted to purchase a residential unit in “Amar Prem”, a housing project in Goa, to be developed by Utopia Projects. The entire consideration of Rs 30 lakh was paid in two instalments of Rs 15 lakh each.
The agreement for construction and sale was executed thereafter on February 24, 2012. It stipulated that possession would be given by September 2013, but the builder would be entitled to a grace period of four months, i.e. till January 2014.
When Mulla visited the site in August 2013, she found that even the foundation had not been laid. She got a legal notice issued to the builder, which was ignored. So she filed a complaint before the Goa State Commission.
The builder contested the complaint, explaining that they had been assigned development rights by RPC Builders and Developers, who had later committed various breaches and were also demanding extra payment for the property. As a result of the dispute, work could not commence. The builder termed the dispute as force majeure and not due to any wilful default. Utopia Projects also pointed out that the complaint was premature as it had been filed prior to January 2014, which was the date of possession inclusive of the grace period.
The state commission observed that the agreement provided that in case of any delay beyond the grace period, the builder would pay the purchaser a monthly compensation at Rs 50 per sq.ft. The defence of force majeure cannot be invoked as the agreement had not been terminated due to inability to perform it.
The state commission concluded that there was deficiency in service and ordered the builder to refund the amount of Rs 30 lakh along with 5% interest from the date of payment of each instalment till the extended date of possession. For the delay, the commission directed payment of a monthly compensation of Rs 50 per sq. ft. from February 1, 2014 till the date of payment. For mental agony, a further amount of Rs 1 lakh was awarded, which would carry 9% interest if not paid within 30 days.

Utopia Projects appealed to the National Commission, contending that the company had formulated a revised schedule, but Mulla was not willing to accept it. In its judgment of April 1, 2015 delivered by M Shreesha for the Bench along with Justice DK Jain and Vinay Kumar, the National Commission held that a consumer is not concerned with the internal disputes between the landowner, developer or contractor. A builder cannot take shelter by wrongly terming internal disputes as force majeure. It ruled that Mulla was well within her rights to demand possession within the stipulated time or else seek a refund along with compensation. Accordingly, the National Commission rejected the builder’s appeal, holding that the state commission had rightly allowed Mulla’s claim.

 Conclusion: The consumer has the right to refund along with compensation when a builder delays possession beyond the agreed time.


4 Home Loan rules most of the investors don’t know about

Can you claim tax deduction for your under-constructed house? Can you claim tax for the home loan taken from your friend and not from Bank ? These are some of the questions which are not generally discussed over and lot of investors have no idea about actual rules. In the video below I will talk about four not so known rules of home loans . Keep reading ! . Readers on email can watch the video on this article.

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eTutorial – TDS on sale of property

Click here to download eTutorial – TDS on sale of property-HOW TO PAY TDS ON PURCHASE OF NEW PROPERTY

1% TDS rule on sale of property explained:The 1% TDS rule on sale of property was introduced in the 2013-14 Budget to put a check on underhanded property deals.

In effect since June 2013, the regulation mandates that on sale of property exceeding Rs. 50 lakhs in India, a tax of 1% has to be deducted on the total sale consideration before making the payment to the seller.

The buyer must then deposit this 1% TDS to the Government. PAN of both the buyer and seller must be compulsorily specified while filling out Form 26QB to ensure that sellers don’t avoid taxes on the capital gains they make.This rule does not apply on sale of agricultural land.

What is the procedure to deposit TDS?

  1. Calculate 1% TDS on the total sale consideration. For a property getting sold for Rs. 60 lakhs, the seller would receive Rs.59,40,000 after tax.
  2. Make the payment online on Form 26QB. A challan is generated. Note that this must be done within 7 days from the end of the month in which TDS is deducted.
  3. The payment is reflected on the seller’s Form 26AS under the head Part F within 7 days.
  4. The buyer is then required to furnish a TDS certificate called Form 16B to the seller. This can be downloaded from the TRACES website.
    -For this, register on the TRACES website with your PAN and challan number.
    -Click on “Application for request of Form 16B” from the header.

Read Ahead:TDS rule on sale of property