Karnataka RERA Orders Casagrand To Compensate Buyer For Premature Demands Without Proof Of Construction

The Karnataka Real Estate Regulatory Authority (KRERA) has held that a developer cannot raise construction-linked payment demands without substantiating the stage-wise progress with architect or engineer certificates, faulting Casa Grande Garden City Builders Pvt Ltd for issuing premature demand letters without any such proof.

Adjudicating Officer Maheshwari S. Hiremath found that the developer had failed to produce “a single iota of evidence” to show that the payment demands were backed by certified construction progress, making it “difficult to know the exact stage wise progress of the project.”

The Authority allowed a complaint filed by Mohammed Iqbal Khan, who had booked Flat No. 310 in the “Casagrand Keatsway” project in Geddalahalli, Bengaluru, and entered into an agreement of sale dated January 8, 2024 for a total consideration of Rs.80,01,440.

Despite the project being at an earlier stage of construction, the developer issued multiple demand letters between April and August 2024 claiming completion of various stages, prompting Khan to pay ₹69.66 lakh. The Authority noted that payments amounting to ₹12 lakh were made well in advance of the actual construction stage based on such representations.

It recorded that the progress of other units had been shown as if it related to the complainant's apartment, leading to premature payment demands.

Rejecting the developer's defence that the demands were raised as per the agreed payment schedule and overall project progress, and that buyers were given an 18% interest benefit for early payments, the Authority held that no supporting material such as architect or engineer certificates had been placed on record.

Referring to Section 11(3)(b) of the Real Estate (Regulation and Development) Act, 2016, it reiterated that promoters are required to make available the stage-wise schedule of completion and adhere to it.

The Authority further underscored the impact on homebuyers, noting, “To have a cosy house is everyone's dream. To fulfil that dream, one could take the risk of investing all lifetime savings and raising loans in terms of lakhs or crores, which could take the rest of life to repay. That being so, if the developer resorts to using the hard-earned money of investors in a reckless manner, it would not only shatter the dreams of investors, but also make them run from pillar to post by incurring heavy investment as well as legal expenses.”

Taking into account the factors under Section 72 of the Act, including the loss caused and the nature of the default, the Authority held that the complainant was entitled to compensation.

Accordingly, it directed the developer to pay compensation for mental agony and for the premature demand of payments, along with Rs 7,000 towards litigation costs, within 60 days, failing which the amount will carry interest at MCLR plus 2% per annum until realisation.

For Complainant (Mohammed Iqbal Khan): In person.

For Respondent (Casa Grande Garden City Builders Pvt Ltd): Advocate Amaresha.