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Real Estate and Consumer Protection


The Real Estate Industry is one of the most important and profit-centric industries in the country. It is that aspect of Indian economy which is indeed driving the economic growth of our country at a ever-growing rate. One of the fastest growing markets of the world today, Real estate Industry has come a long way in India and now, has become one of the most crucial industries of the country. It comprises of 4 sub-sectors, i.e., Housing, Retail, Commercial and Hospitality, out of which, housing forms the largest and the most successful. The fast-growing pace of Real Estate Industry in India shall contribute to the development of Indian economy to a large extent. The Government has also been undertaking steps to improvise the industry and bring out higher amount of investment in all the sub-sectors of Real Estate.

Like any other industry, Consumers hold a vital position in the sector. Real Estate agents carry out deals with the sole purpose of luring the consumers into buying what they sell, just as it happens in any other industry. Consequently, the consumers of this sector are equally vulnerable to dishonest businessmen and their unfair practices regarding the selling of property. There are innumerable chances for such agents to indulge in certain malpractices at the cost of fidgeting with the safety of the consumers. They may lure the consumers into buying a plot of land which is below the agreed standards by means of misrepresentation or flashy advertisements in the print or electronic media. Consumers may even become victims of fraud or deception at the hands of real estate agents. There are often incidents when such agents, with the motive of making more money and employing fewer resources, indulge in fraudulent activities and take advantage of the lack of knowledge on part of consumers. Consumers are mostly prone to exploitation owing to their ignorance towards the rights they possess. On the other hand, consumers of the real estate sector are far more affected by fraud because it involves massive magnitudes of money. This article will be aimed at presenting the readers with the information that they need.

It will be an entirely misguiding thing to say that consumers of the real estate sector in India have no legal protection. What can be said is, the status quo does not provide sufficient protection. Under the provisions of the existing statutes, an aggrieved consumer can rightfully claim relief and compensation, though the legislations require amendments to suit the modern day requirements of the realty sector. Consumers are given legal protection with respect to real estate sector by means of the following legislations:

  1. The Consumer Protection Act, 1986: The Act defines the term ‘service’ which includes ‘housing construction.’ Therefore the realty sector falls within the ambit of this Act and an aggrieved consumer can approach the Councils set up under this Act and claim relief. However, there is a limitation here that the Act only provides for pecuniary damages and compensation. Thus, the recourse available to an aggrieved consumer is real estate industry is only curative and not preventive.
  2. The Indian Contract Act, 1872: The recourse available to an aggrieved person under this Act does not stipulate specific performance. Just like the Consumer Protection Act, 1872, the relief granted is only curative and not preventive. In case of breach of contractual obligations, the Act doesn’t provide for specific performance but pecuniary compensation for damage caused.
  3. The Special Relief Act, 1963: Though it is only limited to situations where “there exists no standard for ascertaining actual damage caused by the non-performance of the act agreed to be done” or “when the act agreed to be done is such that compensation in money for its non-performance would not afford adequate relief”, a person dispossessed of immovable property without his consent (other than in due course of law) can recover possession by a suit filed within six months from the date of dispossession.
  4. The Indian Penal Code, 1860: Under criminal law, namely, the Indian Penal Code (IPC) the recourse available to a realty consumer is to file a criminal complaint for criminal breach of trust, which if established, entails punishment but does not provide any preventive provisions.
  5. The Competition Act, 2002: While the Competition Law in India is gaining momentum in the real estate industry, it does not provide for making good any loss suffered by individual consumers. It prohibits specific offences like abuse of dominant position, monopoly, etc., but doesn’t lay down the provisions for prevention or specific performance by agents in real estate industry.
  6. The Real Estate (Regulation and Development) Act, 2016: This Act has provided for the creation of a Real Estate Regulatory Authority and an Appellate Tribunal that will act as a watchdog for the housing sector, primarily towards protecting consumer interests while creating an alternative redressal mechanism for any disputes that may arise. This Act also aims to provide a uniform regulatory environment in the real estate sector which is totally ridden with black money, red-tapism, land mafias and corruption. The core objective of this Act is twofold: firstly, to ensure sales of immovable properties in an efficient and transparent manner and secondly, to protect the interest of consumers in the real estate sector.

Thus, we notice, that until 2016, there was no preventive measure in the real-estate sector. All one could do was to seek cure. Although, laws have been made for the all round rectification of the sector, it is to be understood that presence of laws alone shall never suffice. Practice of those laws is to be ensured.

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Real Estate and Consumer Protection


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