In recent years, the real estate sector in India has witnessed a surge in disputes between homebuyers and builders, with delayed possession and fraudulent practices emerging as some of the most pressing concerns. Homebuyers often invest their life savings based on promises made by developers regarding timely delivery, specifications, and legal approvals. However, many builders fail to deliver possession within the stipulated time or engage in malpractices such as selling disputed properties, altering project plans without consent, or misappropriating funds. These delays not only cause financial strain but also emotional and psychological distress to buyers. The legal framework in India, through legislations like the Real Estate (Regulation and Development) Act, 2016 (RERA), seeks to protect consumers, yet challenges persist in enforcement and redressal mechanisms. Understanding the nature, implications, and legal remedies related to delayed possession and builder fraud is essential for safeguarding buyer rights in a rapidly expanding yet volatile real estate market.

This article examines the legal remedies available to allottees or buyers in cases of delayed project possession under three key legislations:

1. The Real Estate (Regulation and Development) Act, 2016 (RERA),

2. The Consumer Protection Act, 2019 (CPA), and

3. The Insolvency and Bankruptcy Code, 2016 (IBC).

These laws empower homebuyers to file complaints with the appropriate consumer forum or the concerned Real Estate Regulatory Authority, or to initiate insolvency proceedings against defaulting developers who fail to deliver housing units within the stipulated project timelines.

Available Legal Remedies

The Real Estate (Regulation and Development) Act, 2016 (RERA) provides a comprehensive legal framework to safeguard the interests of homebuyers and regulate the real estate sector.

• Under Section 3, it is mandatory for all promoters to register their real estate projects with the RERA authority before advertising or selling any unit. Non-compliance with this requirement attracts strict penalties under Section 59, including a fine of up to 10% of the project cost and, in case of continued default, imprisonment up to three years.

• To ensure accountability for project delays, Section 18(1) entitles buyers to either a full refund with interest and compensation or continued possession with monthly interest for the delayed period. If the promoter fails to complete the project or is unable to hand over possession of the apartment or building, the allottee has the right to:

  1. Withdraw from the project.

  2. Receive a refund of the amount paid for the apartment, plot, or building, along with the prescribed interest and compensation, as provided under the RERA Act.

• The Act also provides a structured complaint mechanism. Under Section 31, aggrieved buyers can file complaints before the RERA Authority or Adjudicating Officer For any breach or non-compliance with the provisions of the RERA Act, or the rules and regulations framed under it, action may be initiated against the concerned promoter, allottee, or real estate agent, as applicable.

• while Section 71 empowers the Adjudicating Officer to determine and award compensation. The RERA Authority may appoint one or more judicial officers, as deemed appropriate, to conduct an inquiry, ensuring that the concerned person is given a fair opportunity to be heard.

• Section 72 outlines key factors the adjudicating officer must consider while determining compensation or interest, including the extent of unfair gain, loss caused, repetitive nature of the default, and any other relevant factors.

• Section 79 bars civil courts from hearing matters under RERA's jurisdiction but permits consumer forums to entertain related complaints.

• Moreover, Sections 60 to 68 outline penalties for various defaults, including dissemination of false information and non-compliance with orders, reinforcing the regulatory authority's power to discipline errant builders.

The Consumer Protection Act, 2019, homebuyers are explicitly recognized as consumers under Section 2(7), since they purchase housing services for a consideration. Correspondingly, builders and developers fall within the ambit of service providers under Section 2(42). In cases of deficiency in service (Section 2(11)) or unfair trade practices (Section 2(47)), such as failure to deliver possession on time, making false assurances, or substandard construction, homebuyers can file a complaint before the appropriate Consumer Commission.

• The Act provides for a three-tier dispute redressal mechanism based on the value of the claim. Section 34 allows consumers to file complaints before the District Consumer Disputes Redressal Commission if the value of goods or services and compensation claimed does not exceed ₹50 lakhs. For claims between ₹50 lakhs and ₹2 crores, complaints may be filed before the State Consumer Disputes Redressal Commission as per Section 47. For claims exceeding ₹2 crores, the appropriate forum is the National Consumer Disputes Redressal Commission (NCDRC) under Section 58.

• As per Section 39, the Consumer Commission may grant various types of relief to aggrieved homebuyers, including a refund of the amount paid, payment of interest for the delay, compensation for mental agony, inconvenience and litigation expenses, and directions for the completion and timely delivery of the property. This framework ensures that homebuyers have access to a cost-effective, efficient, and specialized legal remedy against builder fraud or delay in possession.

The Specific Relief Act, 1963 serves as an important legal remedy for homebuyers, especially in cases where monetary compensation is insufficient to address the harm caused by the builder’s default.

• Under Section 10 of the Act, a buyer can seek specific performance of the agreement to sell, meaning the court may compel the builder to fulfill their contractual obligation and deliver the property as promised. This remedy is particularly relevant in real estate transactions where the property has unique value to the buyer and cannot be replaced with monetary compensation alone.

• Furthermore, under Section 6 and Section 34, the buyer can obtain a decree for possession, allowing the court to direct the builder to hand over the property in accordance with the original terms of the agreement.

• Additionally, the Act empowers buyers to seek injunctions, legal orders under Section 36 to 42 to restrain the builder from unlawfully transferring, selling, or altering the property during the pendency of the case. These injunctions safeguard the buyer’s interests by preserving the subject matter of the dispute until final resolution. The Specific Relief Act, therefore, plays a crucial role in ensuring that contractual obligations in the real estate sector are enforced in a fair and equitable manner.

The Insolvency and Bankruptcy Code, 2016 (IBC) provides a significant legal remedy for homebuyers in cases where builders default on their contractual obligations, such as failing to deliver possession or refund payments. Following an amendment in 2018, homebuyers are recognized as financial creditors under Section 5(8)(f) of the IBC.

• This section empowers them to initiate insolvency proceedings against defaulting builders before the National Company Law Tribunal (NCLT) under Section 7, provided the minimum default amount meets the threshold of ₹1 crore (as per the latest notification).

• Once admitted, the builder company undergoes a Corporate Insolvency Resolution Process (CIRP), during which an Interim Resolution Professional (IRP) is appointed to take control of the company's assets and operations.

• Homebuyers, as part of the Committee of Creditors (CoC), get a say in approving a resolution plan for revival of the stalled project. If revival is not feasible, the builder may go into liquidation, allowing homebuyers to recover dues from the sale of assets. Though not always resulting in full recovery.

• IBC offers a structured and time-bound mechanism to hold builders accountable and seek relief in cases of large-scale defaults or insolvency.

Judicial Safeguards Against Unfair Builder Practices

In the case of Arifur Rahman Khan & Ors. v. DLF Southern Homes Pvt. Ltd. & Ors.[2020 INSC 503], the Supreme Court held that flat buyers are entitled to compensation for delays in possession and for the developer’s failure to deliver promised amenities. The Court emphasized that when a contract is heavily one-sided, it becomes arbitrary and unfair to the other party, necessitating judicial intervention to ensure fairness. Additionally, the Court overturned the decision of the National Consumer Disputes Redressal Commission (NCDRC), clarifying that the mere execution of a conveyance deed does not bar a consumer from pursuing claims against the builder.

In Pioneer Urban Land and Infrastructure Ltd. v. Govindan Raghavan [2019 INSC 458], the Supreme Court ruled that a builder cannot force a buyer to take possession of a property if there are deviations from the originally agreed construction plan. Highlighting the importance of fairness in builder-buyer agreements, the Court directed the builder to refund the amount paid along with interest, affirming that consumers should not be bound by one-sided contractual terms.

The State Consumer Disputes Redressal Commission (SCDRC) of Uttar Pradesh [SC/9/C/2011/142], in Veera Srivastava v. Parsvnath Developers Ltd. (2017), took a firm stance by ordering the builder to refund the entire amount paid by the buyer with interest, due to an unjustified delay in delivery. The Commission held that delay in possession adversely affects the financial and emotional well-being of buyers.

Measures to Avoid Fraudulent Real Estate Investments and Delayed Possession

1. Check RERA Registration: The foremost safeguard for a homebuyer is verifying whether the project and the developer are registered under the Real Estate (Regulation and Development) Act, 2016 (RERA). Registration under RERA ensures legal compliance, transparency, and accountability on the part of the builder. Buyers should visit the respective state’s RERA portal to cross-check key details like project timelines, regulatory approvals, litigation status, and the builder’s past performance.

2. Verify Builder’s Track Record: It is important to thoroughly research the builder’s reputation and delivery history. Buyers should examine the developer’s previous projects to assess quality, timeliness, and customer satisfaction. Any ongoing legal disputes or complaints on platforms like RERA, the National Consumer Disputes Redressal Commission (NCDRC), or other judicial forums should be taken seriously.

3. Scrutinize the Builder-Buyer Agreement: Before signing any agreement, buyers must closely examine the terms related to possession timelines, penalty clauses for delays, promised specifications, and provision of amenities. Agreements that are overly favorable to the builder or contain ambiguous clauses should be avoided, as they can later disadvantage the buyer in legal proceedings.

4. Insist on Clear Title and Legal Due Diligence: A comprehensive title search is crucial to ensure the property is free of encumbrances and the developer has legal authorization to carry out construction. Engaging a qualified property lawyer to review the documentation can help avoid future disputes related to ownership or land rights.

5. Check for Approvals and Sanctions: Buyers must ensure that the builder has secured all necessary statutory approvals, such as the Commencement Certificate, Environmental Clearance, sanctioned building plans, and, in case of ready properties, the Occupancy Certificate. These approvals are critical in establishing the legality and safety of the project.

6. Opt for Completed or Near-Completion Projects: To reduce the risk of delayed possession, buyers should consider investing in projects that are either ready for possession or nearing completion. These projects often come with lower uncertainty and allow the buyer to verify the physical status and infrastructure before purchase.

7. Use Escrow-Based Payment Plans: Choosing a payment structure where funds are deposited in a RERA-mandated escrow account ensures that the money is utilized solely for the specific project and not diverted elsewhere by the developer. This increases financial security and project accountability.

8. Avoid Cash Transactions: For transparency and to ensure proper legal records, all monetary transactions should be carried out through cheques or bank transfers. Cash transactions are not only illegal in most property deals but also put the buyer at legal and financial risk.

9. Engage in Site Visits and Monitor Progress: Regular site visits are recommended to personally assess construction progress and verify that the work aligns with the builder’s claims. If unavailable to visit, buyers can appoint a trusted person to do the monitoring on their behalf.

10. Check Online Reviews and Consumer Forums: Online platforms like MagicBricks, IndiaProperty, MouthShut, and various legal forums often provide real-time reviews and feedback from previous customers. These platforms can offer valuable insights into the builder’s conduct, construction quality, and delivery practices, helping buyers make an informed decision.

By following these precautionary measures, homebuyers can significantly reduce the chances of falling prey to real estate frauds or delayed project deliveries.

The real estate sector, while offering promising opportunities for homeownership and investment, also poses significant risks due to instances of builder fraud and delayed possession. To safeguard their interests, buyers must adopt a proactive and informed approach. Legal frameworks like RERA, the Consumer Protection Act, the Specific Relief Act, and the Insolvency and Bankruptcy Code provide robust remedies, but preventive vigilance remains paramount. Conducting thorough due diligence, verifying legal compliance, insisting on transparent agreements, and actively monitoring project progress can help mitigate risks. Ultimately, a well-informed and cautious buyer is the best defense against exploitation in real estate transactions.