There will be no coercive action to recover EMIs for stalled real estate projects: Delhi High Court

The Delhi High Court has stepped in to help hundreds of “beleaguered” homebuyers by prohibiting banks/Housing Finance Companies (HFCs) from taking coercive action to recover EMIs for unfinished projects.

Justice Rekha Palli recently granted an interim stay of proceedings in favour of homebuyers who invested in projects where the builders were supposed to pay EMIs until possession but stopped doing so midway.

“The balance of convenience at this interim stage is in favour of the beleaguered homebuyers, keeping in mind that they are being penalised despite not being at fault,” Justice Palli observed, adding that “grave and irreparable loss will be caused to the petitioners if no interim protection is granted.”

The petition, according to the court, “brings to light the well-known sorry state of affairs that has recently occurred in the construction industry.”

Advocate Aditya Parolia, appearing on behalf of some of the petitioners, stated that after booking their flats by paying the initial advance instalments from their hard-earned income, the petitioners were now being asked to pay EMIs despite the fact that none of the projects had been completed or the builders had gone bankrupt while the homebuyers were still waiting for possession of their dream house.

The petitioners emphasised that banks and financial institutions had disbursed loans to the builders all at once without verifying the actual status of the projects, resulting in a situation in which the banks were demanding EMI payments from the buyers despite the fact that the builders had agreed to discharge this liability until possession.

The court stated that the petitioners “appears to have been left in the lurch,” and that “despite paying the advance amount and investing their hard-earned money to purchase their own residential homes, the construction of the residential flats/apartments has not been completed to date.”

According to the court, “prima facie, it appears” that the loans were disbursed without regard for the Reserve Bank of India’s and National Housing Bank’s advisories. According to the report, the banks and HFCs disbursed the loan when the construction was still incomplete and are now requiring homebuyers to pay the amount originally required to be paid by the developers. It further said that the petitioners should not be forced to bear the consequences of this apparent collusion between banks/HFCs and developers.