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The Backstory
The Haryana RERA in Madhushree Khaitan v. Vatika Limited had clarified that RERA would have the power to adjudicate on assured return schemes that real estate developers offered through agreements executed before 2016.
However, will RERA in other states accept this view and also cover such schemes post-2016? We will come to that in a moment but first. . .
What is the assured income scheme?
Among many other schemes post the 2008 financial recession, for example, chit funds, developers in the real estate industry started the income assurance scheme to attract investment for projects that were under construction.
The scheme would offer a fixed percentage of return to the investor, without any collateral till they had possession of their property, or even after possession in some cases, making it extremely popular among developers, as it helped them raise money at lower interest rates compared to loans offered by banks and NBFCs.
What the HRERA said?
The HRERA said that developers cannot shy away from a contractual agreement made before the existence of the RERA Act, 2016, simply because the agreement to sell was not in accordance with the format prescribed under RERA - an argument often made by erring builders in court.
What It Means For Investors
✅ It means that they can approach RERA if their money is stuck in an assured return scheme, even though, it only includes agreements executed before RERA 2016.
😐 And that's because there is no clarity yet on whether RERA would have jurisdiction over such assured return transactions that took place after 2016 without using the RERA prescribed agreement format.