Will the Supreme Court’s order in the Supertech demolition case help reform the real estate sector?

a tall building: Will the Supreme Court’s order in the Supertech demolition case help reform the real estate sector? © Megha Mishra Will the Supreme Court’s order in the Supertech demolition case help reform the real estate sector?

The Supreme Court’s order to demolish the twin towers at Supertech Emerald Court in Noida has been lauded by the homebuyers and consumer rights activists. The reaction from the built environment real estate sector, however, is that of caution. The narrative is that this is a malaise from the pre-RERA days and much water has flown since then. (RERA is The Real Estate (Regulation and Development) Act, 2016.)

It is being said that the Supreme Court order would set a precedent, and such violations would become a thing of the past.

The larger question, however, is whether the Supreme Court demolition order would actually set a precedent. Will it act as a deterrent in the future, will builders mend their ways and not indulge in any wrongdoing? There are more questions than answers as far as the demolition order acting as a deterrence in future is concerned.

A close look at the way the sector operates indicates that the ground reality is different from what is being anticipated post the judgment. The court order has dealt with some grey areas like the “long and expensive legal battle” that buyers have to go through. This is the primary cause of homebuyers’ suffering in silence at the hands of the builders.

There are many instances, particularly in the Delhi-NCR, where the builder has made changes in the floor-area ratio (FAR)/layout unilaterally. The buyers are later coerced to give their consent at the time of possession lest the handover is delayed. Since a majority of homebuyers are under the dual burden of paying both rent and EMI, they succumb to the builders’ arm twisting. The builder manages to get consent of two-third buyers before any victim drags him to court.

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The Supreme Court order, therefore, may encourage builders into devising new methods to dodge the due process of law.

There are three major pain points for homebuyers. Unless these are addressed, a Builder Penal Code – more than the Indian Penal Code – will continue to decide the fate of homebuyers.

1. No entry barrier for starting a real estate business

The first pain point is that there is no entry barrier for starting a real estate business. It is still a safe haven for black money. Anyone with a financial backing and without a real estate background can get into the business. RERA was expected to act as an entry barrier, but has failed to tame the builders. Some of its orders have failed to get executed.

2. No fast track courts to settle real estate disputes

The issue of RERA’s ineffectiveness and additional legal layers has only lengthened the battle for harassed homebuyers. There is no fast track court to settle real estate disputes even when property disputes form nearly two-thirds of consumer grievances in India. The Supreme Court has rightly pointed out that buyers are being pushed to a lengthy and expensive legal battle. Unless there are fast track courts to settle real estate disputes, builders will continue to have a upper hand.

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3. Real estate is sold when the product is not even ready

The third pain point is that real estate, life’s most expensive purchase, is sold when the product is not even ready. The buyer has no choice but to buy a promise rather than a product. What makes the entire exercise painful is that the promise of delivery of the said property comes without any sovereign guarantee. The government agencies, banks and financial institutions that approve the project, wash their hands off in the event of delays and defaults. They are not even accountable to the real estate regulator.

The Supreme Court has taken a stern view against the Noida Authority in this case. But the larger question is about fixing accountability and culpability. Will heads roll this time? Will the Supreme Court take suo moto cognizance of non-compliance of its order if no action is taken against the officials who colluded with the builder to give sanctions in violation of its own prescribed norms? These are the real questions that would decide whether the landmark judgment of the apex court would change the real estate sector’s ecosystem.

Also, if there is no accountability attached to the property that is sold, it should be sold under the Build and Sale model rather than the Sale and Build model. After all, majority of real estate defaults are due to fiscal mismanagement of builders. If a homebuyer purchases a ready property, he can evaluate the product before taking a decision.

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