BHUBANESWAR: The Odisha Real Estate Appellate Tribunal (OREAT) has overturned a decision made by the Odisha Real Estate Regulatory Authority (ORERA), declaring the cancellation of an apartment allotment in a prominent housing project in Kalarahanga as illegal. This cancellation occurred after the buyer had already made a payment to the builder.
The tribunal’s recent ruling instructed the builder to issue a revised demand for delayed interest, rather than canceling the allotment. The dispute originated from a flat booked by the buyer in December 2017 for ₹91.36 lakh, of which ₹10 lakh was paid upfront. A sale agreement was subsequently executed in March 2022.
The buyer experienced delays in obtaining a housing loan, partly due to restrictions on new property registrations caused by proceedings in the Orissa High Court related to a public interest litigation. The loan was finally approved in January 2023, and the remaining balance of ₹81.36 lakh was transferred to the developer that same month.
By that time, however, the developer had already issued a cancellation notice and demanded over ₹1.23 crore, which included delayed interest calculated at a rate of 10.35% from December 2017, along with a penalty for alleged delayed possession. Following this, the allotment was canceled, and the amount paid by the buyer was returned.
The tribunal criticized both aspects of the developer’s claim, determining that charging delayed interest from the date of allotment in 2017 was inappropriate, as the builder had previously allowed extensions for payment up to December 31, 2022. Thus, the tribunal ruled that interest could not be applied during the period when extensions had been granted.
Furthermore, OREAT dismissed the developer’s reliance on a clause that stipulated a penalty of ₹5 per square foot per month for delayed possession, noting that it was only applicable when the allottee had completed payment but failed to take possession. Since this situation did not apply in this case, the penalty was deemed unjustified.
In a decisive move, the appellate tribunal annulled ORERA’s July 2023 directive, ruling that the cancellation from February 2023 was illegal and mandating the developer to issue a new demand calculating delayed interest at 10.35% solely for the period between April 1, 2022, and January 18, 2023. The buyer was given one month to settle the payment.
This ruling carries significant implications for the Odisha real estate market, addressing ongoing issues with delays in sale agreements, possession, conveyance deeds, and disputes stemming from interest calculations. Legal experts assert that the OREAT decision reinforces the idea that builders cannot exploit extensions granted to allottees.
