SC calls for uniformity in builder-buyer agreements to protect home buyers

The Supreme Court on Monday highlighted the urgent need for uniformity in builder-buyer agreements across India, noting that property buyers are being defrauded by builders nationwide.

“There has to be some uniformity on what builders can impose on the buyers. Otherwise, buyers across the country are being defrauded by the builders,” remarked a bench led by Chief Justice of India Dhananjaya Y Chandrachud.

The bench, also comprising justices JB Pardiwala and Manoj Misra, made this observation while hearing a public interest litigation (PIL) filed by advocate Ashwini Upadhyay in 2020.

During the brief hearing of the matter, the court was informed by senior advocate Devashish Bharuka, who has been assisting the bench as the amicus curiae, that a final status report and draft builder-buyer agreements have been submitted, incorporating suggestions from state governments.

The bench expressed the necessity to review the amicus report and consider the objections raised by the Confederation of Real Estate Developers’ Associations of India (CREDAI), scheduling the matter for further hearing on July 19.

In January 2022, the court underscored the need for a “national model builder-buyer agreement” to ensure that homebuyers are not subjected to arbitrary and whimsical clauses included by real estate developers. The bench noted the “helplessness” of middle-class homebuyers and urged the Centre to frame a standard form housing agreement, emphasising the importance of certain non-negotiable terms to protect buyers.

The petition filed by Upadhyay, followed by other petitions from individual homebuyers, highlighted the persistent inaction by builders in completing promised amenities. Upadhyay’s petition underscored that many amenities promised at the time of sale do not form part of the registered plan, leaving residents without recourse. This is exacerbated by developers launching projects without securing the necessary approvals, leading to significant delays and financial losses for homebuyers. The plea argued for the Centre to use its authority under RERA to frame a model builder-buyer agreement, emphasising the need for agreements to be available in Hindi and other regional languages as well to ensure accessibility and understanding for all buyers.

Upadhyay also highlighted in his plea that in many cases, the amenities promised in the brochure at the time of sale do not form part of the registered plan and residents are left in the lurch to pursue remedies against the developers and the authorities. This happens as many developers go for “pre-launch” or “soft launch” of a project without securing requisite approvals from authorities concerned, he added.

In October 2021, the court issued notices to the Centre, states, Union territories and the Law Commission of India, referencing sections 41 and 42 of RERA which mandate the central advisory council to recommend the framing of standard agreements to prevent the exploitation of real estate buyers.

Responding to the court notice, the central government filed its affidavit in November 2021, stating that a draft “agreement for sale” was shared with all the states and Union territories in 2016 itself after the implementation of RERA. The Centre put it on the state governments to enforce the terms of any standard form agreement after notifying the rules. Under RERA, the Centre has left it to the states to frame appropriate Rules within six months under Section 84 of the Act for implementing the Act.

The Supreme Court’s intervention comes against a backdrop of widespread issues faced by homebuyers in India, who are often left running from pillar to post for the fulfilment of promises made by real estate firms regarding timely delivery and promised amenities. Consumer courts across the country are also overwhelmed with complaints from homebuyers, who complain of deception by developers.