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Rajasthan RERA has ruled that banks and financial institutions cannot claim ownership rights over flats booked by homebuyers before any loan was created. This decision came in the case of the Avalon Royal Park project in Bhiwadi, where over 700 flats were sold and around INR 300 crore was collected, yet the project remains largely incomplete. The authority clarified that insolvency proceedings do not prevent action against the builder's directors or the landowner. The ruling reinforces that mortgage charges created after allotment cannot override the rights of existing allottees and strengthens buyer protections under RERA.
The Rajasthan Real Estate Regulatory Authority (RERA) has clarified that banks cannot enforce claims on flats booked by allottees before a loan was created on the project. The order, issued by RERA chairperson Veenu Gupta, protects homebuyers in the Avalon Royal Park housing project in Bhiwadi, where over 700 units were sold, and nearly INR 300 crore was collected. Despite these sales, most buildings remain at the structural stage, and the project is largely incomplete. Advertisement
The project was launched in 2012 by M/s G R J Distributors and Developers, with possession initially promised by 2017. Between 2012 and 2016, more than 700 flats were sold, and approximately 90% of the sale amount was collected from buyers. In 2018, the developer mortgaged the entire project to ECL Finance Limited to raise a loan of INR 50 crore. Following defaults in repayment, insolvency proceedings were initiated before the National Company Law Tribunal through Invent Asset, representing the lender.
The builder subsequently requested termination of RERA proceedings, citing ongoing insolvency. The allottees association strongly opposed this, arguing that mortgaging units already sold was illegal and amounted to misuse of buyers funds, possibly in collusion with the lender. RERA upheld these objections, noting that the landowner had been actively involved in the project and benefited financially from it.
The authority confirmed that insolvency proceedings do not prevent regulatory action against the former directors of the builder company or the landowner. Most importantly, RERA stated that the bank's mortgage charge cannot override the rights of allottees and cannot be enforced on pre-sold flats. This ruling reaffirms that the interests of homebuyers remain protected and that financing arrangements made after allotment cannot compromise their rights.
The decision aligns with previous legal interpretations emphasizing that RERA proceedings and remedies remain accessible to buyers even when banks act as secured creditors. It highlights that homebuyers have the right to seek regulatory action if developers misuse funds or mortgage pre-sold units, and that RERA's framework continues to prioritize consumer protection in real estate transactions.
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