Consumer Protection: Safeguarding Flat Buyers' Rights in Real Estate

Anshuman Sharma's experience with Orbit Corporation in Mumbai highlights a critical issue in the real estate sector: the rights of flat buyers often go unprotected when developers face financial difficulties. Sharma booked a flat in the Orbit Grand redevelopment project in Lower Parel, paying ₹61,73,973 in instalments. However, the project stalled due to the developer's financial troubles, leaving Sharma and other buyers in a precarious position.

In 2015, Sharma approached the National Consumer Disputes Redressal Commission (National Commission) to seek a refund. The situation worsened when the builder went into liquidation, and the Bombay High Court appointed an official liquidator. The financier, LIC Housing Finance Corporation, took possession of the project site under the Sarfaesi Act, further complicating matters.

Kshitija Infrastructure eventually offered to take over the project for ₹17.5 crore on an “as is where is and no recourse” basis, but this did not resolve the issues for the original flat buyers. The liquidator informed the National Commission that the surplus funds from the project would be used to clear creditors' dues and pay for workmen’s and provident fund obligations, leaving the flat buyers' claims unresolved.

The high court ruled that Kshitija Infrastructure would be immune to prior disputes and claims, effectively sidelining the rights of flat buyers. In its March 25, 2026, order, the National Commission’s Bench of Justice A P Sahi and Bharatkumar Pandya acknowledged the implications of the Bombay High Court’s decision and ruled that Sharma’s complaint was no longer maintainable. However, they granted Sharma the liberty to seek a refund from the appropriate forum.

Unfortunately, courts often overlook the pleas of aggrieved flat buyers, who are the victims of financial fraud by builders. Seldom do they take cognizance of Section 9 of the Maharashtra Ownership Flats Act, which states that no promoter shall mortgage or create a charge on a flat or the land without the consent of the flat buyers. This provision ensures that any such mortgage or charge made without prior consent does not affect the rights and interests of the buyers. Consequently, financiers who advance loans to builders after the agreement with flat purchasers should not have preferential rights to recover dues. The money should be paid to the flat purchasers first.

This case underscores the need for stronger consumer protection laws and better enforcement of existing regulations to safeguard the interests of flat buyers. It is essential for the legal system to recognize and prioritize the rights of consumers who have invested their hard-earned money in property projects.

In conclusion, while the real estate sector continues to face challenges, it is crucial for both the legal and regulatory frameworks to evolve to protect the rights of consumers. The experiences of buyers like Anshuman Sharma highlight the urgent need for a more robust and consumer-friendly approach in the real estate market.