A ‘Consumer’ is an individual who buys goods and services for personal consumption in contradiction to manufacturers who produces the goods and services for profit earning.
The Consumer protection Act, 2019 defines “consumer” as a person who buys any goods and hires or avails of any service for consideration but does not include a person who obtains goods for resale or for any other commercial purposes.
Etymologically, purchase refers to the act of obtaining something at a specified price. Similarly purchase of property means obtaining the particular property on a price paid including the amount of acquisition fees and all liens and mortgages on the property but excluding points and prepaid interest.
Purchase of property under Real Estate industry is a one of the fastest growing profitable industries in the world today and it contributes in a quite larger scale in India’s economic growth and it is expected to contribute 13% to country’s GDP by 2025. But with rampant consumption and purchase of property, they have started becoming victims of frauds and exploitations which have compelled our legislators to come up with worried legislators describing law related to purchase of property.
Let us know why do we need consumer laws related to purchase of property.
Consumers have a significant role in management of affairs in this sector and being a bearer in the industry, consumers easily become vulnerable to compromise with their safety in regard to malpractices involving frauds, misrepresentations, fraud etc.
Additionally, there are few prominent reasons for the requirement of consumer laws related to purchase of property :
1)Lack of awareness – Consumers lacking awareness regarding specific knowledge and information about legislations they have for safeguarding their rights, market and the industry leads them to be the victims of misinformation, cheatings and consequently they loose huge amount of money.
2) Control of real estate agents – Real estate industry is represented by real estate agents at the time of formulation of policies by the government in an attempt to revive the real estate industry. In absence of any consumer representative while such formulation, consumers often lack portrayal of this own perspective. As a consequence, this industry deceives both the consumer community and the government.
3) This industry involves a huge amount of money – Purchase of property requires heavy monetary transactions resulting in large amounts of losses for them. Thus, consumer related laws will aid them in their best interests to protect their dimensions in purchasing properties.
Different sources of exploitation :
The real estate representatives or sellers performing malpractices have taken up various means to exploit the consumers which have been stated as follows :-
- Compelling to grant huge amount of money
- False advertisements
- Misleading offers
- Open inspections
- Misrepresented auctions
- False gearing
- Negative and fraudulent advices
Existing consumer laws related to purchase of property
- Real Estate (Regulation and Development) Act (RERA) 2017 – This Act tries to protect home buyers by regulating the industry with standardized business practices and transactions, eradicating delays, quality of construction, price. It empowers the home buyers with their rights in seeking transparency and accountability in real estate and housing transactions. It provides for the establishment of state level regulatory authorities, Real Estate Appellate Tribunals and defines a mandatory registration with the presence of penal interest in case of default.
- Consumer Protection Act, 1986 – This Act describes ‘housing construction’ that is regarded as a significant term being used under ‘service’. This proves that the realty sector comes within the wide scope of this Act and thus the aggrieved consumers can claim relief from the councils set up for providing them compensations and pecuniary damages.
- Indian Contract Act, 1872 – This Act mandates curative relief through pecuniary damages and breach of any contractual obligations between a buyer and a seller. Thus this Act promotes the rights of a consumer being victimized in a real estate industry while purchasing any property.
- Specific Relief Act, 1963 – When non-performance of any act which was previously agreed to be done, remits no specified standards for damages or the damage is such that it would not afford adequate relief, the Act provides for specific performance as one of the reliefs available to the aggrieved consumer.
- Indian Penal Code, 1860 – Although this Act does not provide for any specific performance of contractual obligations, the consumers who are aggrieved in the real estate sector have the provision of filing a criminal complaint on criminal breach which entails punishment on part of the wrong doer.
The Competition Act, 2022 – This Act although does not define any provision for prevention or specific performance by the agents or sellers in real estate industry yet is gaining its significance in India because unlike other Acts, this Act exhaustively prohibits specific offences like abuse of dominant position, fraudulent transactions owing to monopoly in market etc.
Relevant Case Laws
1)In Kewal Krishan (VS) Rajesh Kumar & Ors. Etc, (LL 2021 SC 670) , the Supreme Court held that execution of a sale deed without the payment of price or any future promise of such payment would not constitute a sale at all as an essential ingredient of sale involves payment of price.
2) In M/S Imperia Structures Ltd (vs) Anil Patni & Anr (Civil Appeal No 3581 – 3590 of 2020), the court while giving due significance to the expression “without prejudice to any other remedy” as provided in section 18 of The Real Estate (Regulation and development) Act RERA, 2017, observed that the promoter is liable to return the amount with interest to the allottee on his failure to grant possession owing to the terms and conditions of the agreement.
3) In Aloke Anand (s) M/S Ireo Pvt Ltd & Ors, (Civil Appeal No 268 of 2022)
The National Consumer Disputes Redressal Commission has held that a home buyer can be defined as a consumer under Section 2(1)(d) of The Consumer Protection Act, 1986 unless he intervenes in the act of buying or selling the properties or purchase such property for this specific purpose.
The exploitations suffered by the consumers are not only the government’s or judiciary’s liability. Ignorance and lack of awareness have to be addressed by the motive of self interest on the part of consumers. Additionally, lack of execution of the legislations so framed or lack of attempts in legislating stricter Acts for the smooth purchasing transactions have resulted in the increased number of fraudulent activities in the industry. However, the recent judgements have infused confidence in people for effective transactions. Notwithstanding, to this we need a harmonized system between legislators and executives to eradicate impediments arising in this sector with the motive of both curative and preventive assistance.
- The Consumer Protection Act,1986 Npo.68, Acts of Parliament , 1986 (India)
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