MahaREAT Says RERA Has No Jurisdiction Over Banks Lending to Homebuyers, Refuses to Stay SARFAESI Recovery
Case Title: Kamlesh Valji Balsara & Anr. v. M/s Shree Siddhivinayak Infrastructure and Realty & Ors.
Case No.: Appeal No. AT06/01035/2025 and connected appeals
The Maharashtra Real Estate Appellate Tribunal (MahaREAT) has held that the RERA authorities do not have jurisdiction to adjudicate disputes between homebuyers and financial institutions that have extended loans to the homebuyers.
The Tribunal consequently declined to stay recovery proceedings initiated against the homebuyers under the SARFAESI Act, 2002, while restraining the promoter from creating third-party rights in the flats concerned.
Dispute Arising From Subvention Scheme
The appeals arose from disputes involving Kamlesh Valji Balsara and other homebuyers and Shree Siddhivinayak Infrastructure and Realty.
The homebuyers had booked flats in the developer's project under a subvention scheme, under which the promoter was required to bear the pre-EMI obligations until possession of the flats was handed over.
To finance their purchases, the homebuyers obtained loans from a non-banking financial company. The loans were subsequently assigned to an asset reconstruction company.
After the project was delayed and the promoter allegedly failed to fulfil its obligations under the subvention arrangement, recovery proceedings were initiated against the homebuyers under Section 13(2) of the SARFAESI Act.
Homebuyers Approached MahaRERA
The homebuyers had separately approached the Maharashtra Real Estate Regulatory Authority alleging delay in possession and seeking appropriate relief against the promoter.
By a common order dated July 31, 2025, MahaRERA allowed their complaints and directed the promoter either to refund the amounts with interest or pay interest for the delay in possession.
The homebuyers thereafter approached MahaREAT in connection with the recovery proceedings initiated by the financial institutions.
Tribunal Holds RERA Cannot Adjudicate Claims Against Lending Institutions
MahaREAT declined to interfere with the recovery action undertaken by the financial institutions.
The Tribunal distinguished cases where a financial institution lends money directly to a promoter. In such circumstances, RERA authorities may have jurisdiction in appropriate cases, including situations where a lender steps into the shoes of the promoter following a default.
The Tribunal noted that the present case was different because the loans had been advanced to the allottees and not to the promoter.
It therefore held that the contractual arrangements between the homebuyers, promoter and lending institution could not be enforced under the provisions of the RERA Act.
SARFAESI Recovery Not Stayed
The Tribunal consequently refused to grant a stay against the recovery proceedings initiated by the financial institutions under the SARFAESI Act.
However, while declining to interfere with the recovery action, MahaREAT directed that the promoter should not alienate the flats or create any third-party rights in respect of the properties involved until final disposal of the appeals.
RERA Remedy Against Promoter Distinct From Bank Recovery
The decision draws a distinction between remedies available to homebuyers against a real-estate developer under RERA and disputes arising from their independent loan arrangements with financial institutions.
While the homebuyers could pursue their RERA remedies against the promoter for issues such as delayed possession, the Tribunal held that the RERA framework could not be used to adjudicate or restrain contractual recovery proceedings undertaken by lenders against the borrowers.
Key Takeaway
The ruling reinforces the jurisdictional limits of RERA authorities in disputes involving home-loan lenders and borrowers. Where the loan has been advanced to the homebuyer rather than the promoter, disputes arising from the lending arrangement cannot ordinarily be enforced through RERA proceedings.
At the same time, the Tribunal's direction restraining the promoter from creating third-party rights in the flats preserves the homebuyers' interests in the underlying real-estate dispute while the appeals remain pending.
