Developers who collect payments from home buyers without entering into a construction or sale contract are in violation of the TNRERA Act, the state property regulator has determined.

Tamil Nadu Real Estate Regulatory Authority, in a recent order noted that partial payments with “expression of interest” with a promise of refund/repayment were misleading and were intended to circumvent legal proceedings.

The complaint concerns “The Goodwood Residence” in Cenotaph Road area of ​​Chennai, developed by Cenotaph Developers LLP and Olympia Tech Park Chennai Pvt. Ltd. 

The complainant’s or buyer documentation stated that Rs 3.63 crore had been paid to developers. It was a part of a “non-binding expression of interest” for the purchase of an apartment in a housing project in 2016. A year later, the complainant/buyer decided to withdraw from the project and demanded compensation from the developer. 

The developer after deduction of almost Rs 12.8 lakh returned only Rs 3.5 crore. The developer returned Rs 3.5 crore after deduction of almost Rs 12.8 lakhs as service taxes. However the complainant/buyer filed a complaint to TNRERA and demanded a refund of the amount withheld.

In statements, the developers rejected the allegations, declaring that the claim was prima facie not maintainable for want of jurisdiction.

Collected 80% amount without entering into sales agreement

TNRERA, after listening to the views of both parties, said that developers charged about 80% of the cost without entering into a sales or construction agreement. This is a clear violation of Article 13 of the RERA Act. In 2016, the developers received two cheques of Rs 95 lakhs from the complainant as “expressions of interest”. G. Saravanan, TNRERA Judge said that the receipt of the payment with the promise of compensation was intended to circumvent the legal procedure.

Furthermore, the developers failed to demonstrate that they provided taxable services to the complainants, which was registered with the tax authorities in the service for the implementation of the specified payment in relation to the project. The complainant thus is entitled to a deductible amount together with an interest rate of 10.2% in accordance with the order of the real estate regulator’s.

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