Consumer Connect: ‘Demand Of 18% Interest Over Installments Is Illegal, Violates RERA Act,' Says Expert

Consumer Connect: ‘Demand Of 18% Interest Over Installments Is Illegal, Violates RERA Act,' Says Expert

The questions are answered by Adv. Shirish V. Deshpande, Chairman – Mumbai Grahak Panchayat.

FPJ News ServiceUpdated: Monday, January 01, 2024, 11:24 AM IST
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Consumer Connect | FPJ

I booked a 1BHK flat in Vikhroli in January 2018 and have a registered agreement to this effect. There was a delay on my part in payment of two installments and hence the developer issued me a notice calling upon me to pay these installments with interest @18% pa. The developer is relying on a clause in the agreement providing 18% interest. Can he demand interest @18 % pa on delayed payment?

Akbar Illyas Sheikh, Kurla

If there is a delay on your part in payment of the instalments, the developer is entitled to call upon you to pay the outstanding instalments with interest. However, the demand of interest @18 % per annum is contrary to RERA provision and hence illegal. RERA has come into effect from May 1, 2017, and thereafter no developer can demand interest at the rate exceeding the rate prescribed in the RERA Rules framed by each state.

Sec 19 (7) specifically states: “The allottee shall be liable to pay interest, at such rate as prescribed, for any delay in payment towards any amount or charges to be paid.”

Rule 18 of MahaRERA (Registration of Real Estate Projects, Rates of Interest) Rules, 2017 reads: “The rate of interest payable by the promoters to the allottees and by the allottees to the promoters, as the case may be, shall be the SBI’s highest Marginal Cost Lending Rate (MCLR) plus 2%.”

The RERA Act has curbed this practice of builders charging exorbitant interest rates to home buyers and has stipulated it shall be the same for builders as well as homebuyers. I am surprised to note that the agreement for sale post-RERA still provides for an 18 % interest rate and the builders have the audacity to demand such an exorbitant rate in gross violation of RERA Act & Rules. You may therefore bring it to the notice of your developer that in view of Rule 18 of MahaRERA Rules, his demand of 18% interest is illegal and in gross violation of the RERA Act & Rules and that he should withdraw such illegal demand. If he doesn’t accede to your demand, you may complain to MahaRERA by invoking Sec 61 of RERA, which provides for penalty up to 5% of the project cost in case of violation of RERA Act, Rules or Regulations. In the meantime, you may pay your outstanding instalments with interest @ present MCLR rate plus 2%.

I had purchased a flat in an SRA project in Kandivali and was given possession in December 2019. In August 2023 I noticed leakages in my flat and hence complained to the society and the developer. However, the developer has denied his liability to rectify the defects at his cost pointing out that the defect liability period as per SRA rules is only three years. I believe that RERA provides defect liability period of five years. Is RERA not applicable to SRA projects? Can MahaRERA set right this condition in SRA agreement? Is wrong on part of any developer or any legal authority like SRA to stipulate the defect liability period lesser than what is provided by RERA?

Shrikant Phansalkar, Andheri

Sec 14 (3) of RERA provides that “In case structural defects or any other defect in workmanship, quality or provision of services are brought to the notice of the promoter by the allottee within a period five years from the date of handing over the possession, it shall be the duty of the promoter to rectify such defects without further charge and within 30 days.” If your builder does not comply with your demand to rectify the defects at his own cost, you may carry out the necessary repairs and claim the same from him. If he refuses to pay this amount incurred by you, you can file a proper complaint against him in MahaRERA to claim this amount with interest.

To answer your question whether RERA is applicable to SRA projects, I invite your attention to Sec. 3 (2) of RERA Act which exempts only following projects from mandatory RERA registration where: (A) the area of the plot to be developed does not exceed 500 sq. meters or the number of apartments do not exceed eight, (B) the promoter has received completion certificate before May 1, 2017 or (C) for the purpose of renovation or repair or redevelopment which does not involve marketing, advertising, selling or new allotment of any apartment.

I also invite your attention to the definition of a “promoter” under Sec 2 (zk) (iii) which states that the promoter includes any development authority or any other public body in respect of allottees of a building or apartments constructed by such authority or body on lands owned by them or placed at their disposal. As such even SRA projects, MHADA projects, CIDCO projects are covered by RERA Act and they ought to be registered with MahaRERA.

(The author is the chairman of the Mumbai Grahak Panchayat)

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