West Bengal Tribunal: Banks Cannot Seize Flats from Homeowners for Builder’s Default

In a landmark judgment, the West Bengal Real Estate Appellate Tribunal has ruled that banks cannot seize or auction flats from homeowners due to a developer’s loan default. This decision comes as a major relief to homebuyers, ensuring their rights remain protected even when builders fail to repay loans taken for real estate projects.

Case Background

The ruling was prompted by a case involving Yes Bank, which sought to take possession of nine apartments in the Ideal Exotica project in New Alipore, Kolkata. The bank’s move followed the developer’s failure to repay a massive ₹320 crore loan. However, the tribunal upheld a previous order by the West Bengal Real Estate Regulatory Authority (WBRERA), reinforcing that homeowners who legally purchased and took possession of their flats cannot be penalized for a builder’s financial mismanagement.

Legal Implications and Key Takeaways

The tribunal emphasized that the developer had violated Section 15 of the Real Estate (Regulation and Development) Act, 2016 (RERA), by mortgaging unsold flats without obtaining prior approval from both the regulatory authority and two-thirds of the allottees in the project. This breach was critical in establishing the homebuyers’ legal protection over the claims made by the financial institution.

Furthermore, the tribunal underscored that RERA provisions take precedence over the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) Act when it comes to protecting homebuyers. This sets a significant precedent, ensuring that banks cannot unjustly claim property rights over legally owned and occupied homes.

A Victory for Homebuyers

This decision is a major milestone in reinforcing legal safeguards for property buyers. It ensures that individuals who have invested in real estate are not at risk of losing their homes due to the financial irresponsibility of builders. The ruling is expected to strengthen consumer confidence in the real estate sector and provide much-needed clarity on the rights of homebuyers versus banks.

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