Ahmedabad: The Gujarat Real Estate Regulatory Authority (GujRERA) cited a Supreme Court ruling in a recent order to establish that the Real Estate (Regulation and Development) Act (RERA) supersedes the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act (SARFAESI), and a bank cannot take possession or sell a property booked by a buyer. During proceedings on a case from Vadodara, GujRERA said that a Supreme Court judgement had ruled that property buyers were secured creditors. The developer in this case failed to repay a loan from SBI and the bank took possession of the scheme, leading the customer to move GujRERA, which passed its final order in the customer’s favour. Dharmesh Lohana had booked four shops for Rs 86 lakh in a project called Crystal Pramukh Commercial Hub in Vadodara in 2017. He got allotment letters and registered an agreement to buy. He paid Rs 70,53,700 of the Rs 86 lakh and affirmed that he was prepared to pay the remainder. In 2022, he visited the site and saw a notice announcing that possession had been taken by the SBI as the developer had failed to repay part of the project loan. GujRERA ordered the bank not to auction off or transfer the shops booked by Lohana. Chartered accountant Vijay Ramnani said, “This is a significant judgment by Gujarat RERA which restricts SBI from initiating recovery under SARFAESI Act against units bought by allottees due to default by the builder. GujRERA had earlier passed an interim order in the customer’s favour, but the bank challenged it in the high court. The high court then directed the authority to dispose of the matter. GujRERA has now passed its final order. This establishes that the RERA Act supersedes SARFAESI Act in case of conflict.” “For RERA authorities, the allottees’ interest is of utmost importance. This will boost investor confidence in RERA and the real estate sector. Developers must follow RERA rules and not create a lien on booked units for which an agreement to sell has been entered. Bankers, NBFC and lenders should do their due diligence before and after sanctioning loans and monitor their borrower in keeping with RERA rules,” he added. According to Section 11(4) of the RERA Act, after the promoter executes an agreement to sell an apartment, plot or building, they may not mortgage or create a lien on such apartment, plot or building, and if such mortgage or charge is created it shall not affect the right and interests of the allottee who has taken or agreed to take such apartment, plot or building. Another chartered accountant, Manan Doshi, said, “The direct impact of these orders on the interplay of RERA and SARFAESI will create a situation where the resources available to financial institutions in the event of default by a promoter will have to be considered in light of the rights of homebuyers. In the event of enforcement under SARFAESI, the financial institution will be put in the shoes of the promoter, under the jurisdiction of RERA.”
