UPRERA Standardizes Possession Letter Format to Protect Buyer Interests

CA Abhishek is a practicing Chartered Accountant specializing in real estate matters, predominantly RERA. He helps homebuyers in litigation with builders and resolves disputes at RERA and REAT. Apart from that he also handles RERA compliance for developers in Uttar Pradesh region.

For a homebuyer, taking possession of their dream home is one of life's greatest milestones. However, the journey to possession often entails additional payments without the actual handover of keys.

Historically, real estate developers have used varying formats, terminologies, and languages in possession letters, leading to confusion and disputes. Buyers frequently struggle to understand whether they have indeed been given possession. Recognizing the lack of uniformity in possession letter issuance, UPRERA has made a significant move to standardize the process, enhancing clarity and consistency. 

Key Changes by UPRERA

Developers have traditionally used terms like ‘demand notice’, ‘final demand notice’, and ‘final demand for possession’, which mislead buyers into thinking they are notices of possession when they are merely payment requests. UPRERA now deems the use of such language illegal and will take action against developers violating this directive.

UPRERA has established the following process for issuing possession letters:

Post-Certification Notice: Once a completion certificate (CC) or occupancy certificate (OC) is obtained, developers must notify allottees in writing about the receipt of the OC/CC and the offer of possession.

Standardized Title: The possession letter must be titled ‘Offer of Possession’ and clearly state the intention to hand over possession of the building, plot, or apartment.

Completion Details: The letter must specify any remaining finishing work and the time required to complete it.

Pending Dues: If the allottee has pending dues, these can be mentioned in the letter, but they must fall within the scope of the builder-buyer agreement.

The possession letter standardization is not only a guideline to be followed by developers, but also by buyers to ensure a smooth delivery process for the real estate project. According to section 19(10) of the RERA Act, 2016, allottees must take physical possession within two months of the OC issuance. Failure to do so results in holding charges: Rs. 2/sqft per month for apartments and Rs. 1/sqft per month for plots, starting two months post-OC until possession is taken.

Concerns from Homebuyers

Homebuyers have expressed concerns regarding this order. Linking possession to the OC means developers must first clear land dues to obtain the OC. In regions like Noida and Greater Noida, many developers have pending land dues as they purchased land when installment payments were permissible. Consequently, buyers of such projects may be unable to occupy their flats despite having fully paid the builder, leading to compounded financial burdens from rent and EMIs.

Not only this, certain other sports city sectors have issues other than land dues. For instance, in Sector 150 of Noida's sports city, the Comptroller and Auditor General (CAG) investigated the area in 2021, finding that only 63% of the land was reserved for sports facilities and recreational green space, contrary to the required 70%. This discrepancy led to a sub-lease ban, and the issue remains unresolved in the Noida Authority's board meetings. Even if developers clear their land dues, they cannot obtain an OC, leaving buyers in a difficult position due to the recent UPRERA order.

Suggested Amendments

I propose that this order should apply only to new projects where all land dues are paid within 90 days of land allotment. This approach would ensure the order serves its intended purpose of protecting homebuyers' interests.

Additionally, sectors like Sector 150, under the jurisdiction of multiple authorities and ongoing investigations, should be exempt. Since RERA does not control the issuance of OCs (a task handled by local authorities), it is unfair to penalize buyers and developers in such sectors. By making these adjustments, UPRERA can better safeguard homebuyers while ensuring developers adhere to fair and transparent practices.