In a major ruling that strengthens homebuyer protection in Maharashtra, the Maharashtra Real Estate Regulatory Authority (MahaRERA) has held that homebuyer rights take precedence over banks’ SARFAESI claims, sending a clear message that lenders must verify third-party rights before issuing loans against real estate projects.
The order—passed in the long-running Ashish Sea View dispute—clarifies that financial institutions cannot enforce security interests under the SARFAESI Act if the property is already burdened with registered agreements for sale or third-party claims from homebuyers.
The ruling is expected to have wide implications for banks, NBFCs, and developers operating in Maharashtra’s residential property market.
⭐ Why This Case Matters
The Ashish Sea View matter involved a situation where:
- Homebuyers had registered agreements for sale.
- The developer defaulted on loans.
- The bank attempted to take possession under SARFAESI.
- Homebuyers objected, claiming their rights were prior and protected under RERA.
MahaRERA has now sided firmly with homebuyers, calling them the “lifeline of the real estate sector,” and stating that banks must not override homebuyer rights merely because a project is mortgaged.
Homebuyer Rights Override SARFAESI: MahaRERA’s Key Finding
MahaRERA ruled that:
- Registered homebuyers’ rights are superior to the mortgage rights of banks.
- Banks must exercise due diligence before granting loans.
- A lender’s failure to check existing agreements cannot prejudice homebuyers.
- RERA, being a special social-welfare legislation, supersedes SARFAESI where homebuyers’ rights are concerned.
- Banks are considered “financial creditors” only for the developer—not for the homebuyers.
This means banks cannot auction flats allotted or sold to homebuyers if agreements were executed before the mortgage or even if executed afterward but disclosed in RERA records.
Banks Must Check Third-Party Rights Before Lending
MahaRERA strongly criticised lenders for granting loans “mechanically” without proper checks.
The order notes that:
- RERA records are public and accessible.
- Project details clearly show registered homebuyers’ names.
- Banks have a duty to verify title, encumbrances, and buyer allotments.
The ruling emphasises:
“Financial institutions must conduct thorough due diligence before creating a charge or mortgage on project properties. Failure to do so cannot harm legitimate homebuyers.”
This sets a new compliance benchmark for lenders.
Developers Cannot Use Mortgages to Evict or Ignore Allottees
The authority also made it clear that:
- Developers cannot hide behind SARFAESI actions to delay or deny possession.
- Mortgage disputes between builders and banks cannot cancel homebuyers’ rights.
- RERA’s primary objective is timely delivery and protection of allottees.
The ruling promotes accountability in developer-banker dealings.
Direct Impact on Homebuyers
✔ Your registered agreement is your strongest protection
✔ Banks cannot evict you even if the project is mortgaged
✔ SARFAESI cannot override RERA where allottee rights are established
✔ You can challenge bank possession notices before RERA authorities
What This Means for the Market
For Homebuyers:
- Greater confidence in buying under-construction flats
- Assurance that their investment is protected even if developers default
For Banks:
- More rigorous due diligence required
- Need to check RERA records before issuing loans
- Higher compliance costs
For Developers:
- Pressure to maintain clean titles
- Increased transparency expected
Also Read: MahaRERA fines 12 developers Rs 5.85 lakh for printing advertisements without MahaRERA number
