What happens when customers cancel bookings due to project disruptions?

Propertypistol

What is the most likely situation if a buyer cancels his flat reservations owing to a delay in project completion? Will he be repaid in full? If so, what about the bank loan he obtained for this purchase? The Karnataka High Court’s most recent decision resolves some of these questions.

In a debt recovery case, the high court barred PNB Housing Finance from pursuing any stringent measures to recover the money from homeowners who had acquired flats from Mantri Developers under tripartite agreements.

Study of a case

All of the petitioners in the case had purchased flats in a Mantri Developers housing complex under a pre-EMI programme through a tripartite arrangement between the purchasers, the developer, and the bank. Unsatisfied with the progression of the construction, all of the petitioners cancelled their reservations, and a notification was also issued to the bank. Subsequently, it was discovered that the bank had already issued the whole loan amount without regard for the project’s building stage, which was contrary to industry standards.

When the purchasers filed a complaint with the RERA, the regulator ordered the developers to repay the buyers’ deposits within 30 days and to “cancel the loan made in the complainant’s name with all its EMI and interest.”

PNB Housing Finance filed the HC for debt recovery after the builder failed to comply with the RERA decision.

The high judge dismissed PNB’s contention that the purchasers and the developer were both obliged to pay the loan, citing the tripartite agreement that the developer will be accountable for the total loan amount given by the bank if the borrower chose to withdraw or fail to pay.

“If a bank makes a mistake in the course of its business and experiences a loss, disadvantaged borrowers who intended to have their own shelter cannot be jeopardised,” it stated.

instructing the respondents, which include the RBI, the National Housing Bank, Punjab National Bank Housing Finance, and TransUnion CIBIL Limited, to process the purchasers’ claim for confirming their CIBIL score and give a no-dues certificate within 60 days.

Disclaimer: The views expressed above are for informational purposes only based on industry reports and related news stories. PropertyPistol does not guarantee the accuracy, completeness, or reliability of the information and shall not be held responsible for any action taken based on the published information.

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