Developers failing to transfer the benefits of GST reduction to homebuyers may end up compensating them with penalty in case the homebuyer withdraws from the project.

 In the Matter of Rajesh Vs. M/s Alliance Villa Pvt. Ltd Complaint no. 189 of 2019 decided on 22.11.2019 before Tamil Nadu Real Estate Regulatory Authority

• The Tamil Nadu Real Estate Regulatory Authority (TNRERA) directed a promoter to refund the booking amount with fine, after the latter refused to reduce the GST rate from 12% to 5%.

• The case relates to a complaint filed by Rajesh over booking a villa developed by Alliance Villa Pvt. Ltd at Thaiyur on Old Mahabalipuram Road (OMR) on the outskirts of the city. 

• The homebuyer entered an agreement with the developer for land and construction of a row villa in a project named ‘Alliance Humming Gardens‘ by paying Rs 4.18 lakh of the total villa price estimated as Rs 55.67 lakh. 

• While the agreement was entered with a GST rate of 12% at the time, the Centre revised the GST rate from 12% to 5%, two months later. 

• The complainant submitted to the realty regulator that the developer insisted he pay GST at old rates against the government notification, committing a breach of trust. Following this, the homebuyer withdrew from the project.

• As the developer did not refund the amount paid for booking the villa, the home buyer filed a complaint with the TNRERA. G Saravanan, adjudicating officer of TNRERA, said that for the ongoing projects, the promoter has an option to pay GST at old rates (12%), avail permissible input tax credit and pass on the benefit of the availed credit to homebuyers.

•  When the homebuyer questioned the developer, the latter stated that the 12% GST was compulsory, the order added. As per Section 19(1) of the RERA Act, the allottee has a right to all information regarding the villa intended to be purchased by him. 

• Taking all this into consideration, the adjudicating officer said the complainant was entitled for refund of the entire amount paid with an interest rate of 10.15%, besides Rs 25,000 and Rs 15,000 as compensation and for legal expenses.

If the Redevelopment project involves the Sale of flats to outside parties, then the builder becomes promoter under the act and the project is to be registered

 In the Matter of Indira Nagar Kaveri Apartments Owners Welfare Association v/s Navin Housing & Properties Pvt. Ltd. Complaint number 433/2019 ,

The Hon’ble Tamil Nadu  Real Estate Regulatory Authority observed that 

• an Agreement between existing flat owners and Builder intending to do redevelopment of the Society where the sale of flat to outside parties are also involved., “Very much constitute the standard joint development agreement for redevelopment  which is entered into between the existing flat owners and the promoter builder for demolition of the existing flats and construction of new flats in the said property. Therefore the day existing flat owners sign the deed of agreement with the promoter builder, the existing flat owners become an allottee and the respondent builder becomes the promoter under this act.”

• The Hon’ble Tribunal further added that it is the responsibility of the promoter to get the consent from the remaining flat owners to take up the redevelopment project.

• The Hon’ble Tribunal further declined to transfer the matter for arbitration adding that  “after the commencement of the Real Estate (Regulation and Development) act, 2016 the real estate disputes and complaints will have to be adjudicated by the authority constituted under the act.” 

Land Owners can’t be Punished in Joint Ventures – Tamil Nadu RERA

 In a complaint filed by Shankari Sundararaman (“Complainant”) against Sree Vardhana Builders Private Limited (“Company”), 265 of 2020 its directors and landowners of the Project named ‘Vardhana Constellation’ in Coimbatore, for claiming refund of amounts paid towards the purchase of the flat under Real Estate (Regulation and Development) Act, 2016 (“Act”), the Tamil Nadu Real Estate Regulatory Authority, Chennai (“TNRERA”) stated that since directors are actively involved in the affairs of the Company and have received money and corresponded with the Complainant, they would be liable for violations under Section 69 the Act which deals with offences by companies and people responsible for the conduct/business of the company. 

However, with respect to landowners of the project site (being the other respondents), TNRERA stated that the landowners had just entered into joint venture agreements and had executed general power of attorney with the Company. The sale deeds for the undivided share of land was only executed by the Company and not the landowners. 

Further, it was stated that it was the Company that had launched the project and had entered into various agreements with the Complainant for construction and delivery of the constructed apartment on receiving consideration. 

Henceforth, the landowners would not come under the definition of “promoter” and only the Company would fall under the definition of “promoter” to be made liable for contravention under Section 31 read with Section 71 of the Act