Builder's Burden: AWHO Must Bear Entire Reconstruction Cost & Enhanced Rent for Defective Flats Without Cap, Kerala High Court Rules - 2025-09-18

Kerala High Court Orders AWHO to Bear Full Reconstruction Cost and Enhanced Rent for Defective Army Towers

KOCHI: In a significant ruling providing relief to homeowners, the Kerala High Court has directed the Army Welfare Housing Organisation (AWHO) to bear the entire cost of demolishing and reconstructing two defective apartment towers, setting aside any financial cap and expanding the scope of compensation for displaced residents.

A Division Bench comprising Justice Amit Rawal and Justice P. V. Balakrishnan delivered the judgment, modifying earlier orders in a long-standing dispute between the residents of Chanderkunj Army Towers in Vytila, Cochin, and the AWHO over severe structural defects.

Case Background

The case involves Towers B and C of the Chanderkunj complex, which were plagued by severe construction flaws, including corrosion, seepage, and water leakage due to high chloride content in the concrete. Multiple expert reports confirmed the buildings were unsafe, leading to a decision for their demolition and reconstruction.

A single-judge bench had previously ordered the formation of a committee headed by the District Collector to oversee the process, directing AWHO to pay Rs. 175 crores towards reconstruction and a monthly rent of Rs. 21,000-Rs. 23,000 to displaced residents. In a review, this rent was increased to Rs. 30,000-Rs. 35,000. The present judgment is the result of appeals filed by both the residents' association and AWHO against these orders.

Arguments from Both Sides

The residents (appellants) argued for several modifications. They contended that the rent should be subject to periodical increases, as is standard practice. They challenged a condition that would allow the committee to collect an "extra amount" from them for receiving a new building. Furthermore, they argued that all allottees, including those who had rented out their flats due to official postings, should be eligible for compensation for alternate accommodation. They also sought the suspension of the occupancy certificate to avoid municipal tax liability during the reconstruction period.

The AWHO (respondent) contested the increase in rent granted in the review petition, arguing it was unjustified. They also sought to limit their liability to the initially proposed Rs. 175 crore cap and argued that residents pursuing claims before the Real Estate Regulatory Authority (RERA) should not be allowed to seek parallel remedies.

High Court's Decisive Modifications

The Division Bench meticulously addressed the grievances of both parties, issuing a series of modified directions aimed at ensuring justice for the homeowners. The key rulings include:

• No Cap on Reconstruction Costs: The court removed the Rs. 175 crore cap on reconstruction expenses. It held that AWHO, as the promoter, is "bound to incur all the expenses, which during the period of construction and completion have/or may increase." The judgment noted the latest estimate stands at approximately Rs. 211 crores.

• Periodical Rent Hikes and Expanded Eligibility: While upholding the enhanced rent of Rs. 30,000 (Tower B) and Rs. 35,000 (Tower C), the court introduced a crucial modification. It directed the overseeing committee to approve periodical rent increases based on the lease deeds submitted by the residents. > The court observed: "...we hereby modify the directions contained in clause (k) and direct that on submission of the lease deeds entered into by the occupier and allottees to the committee, the committee will fix the periodical increase, and any direction issued by the committee shall be binding upon the AWHO."

  Significantly, the Bench set aside the exclusion of certain owners. It ruled that personnel who had rented out their flats to pay EMIs while on official duty, or retired officers needing to occupy their homes, are also entitled to rent, subject to furnishing proof to the committee.

• No Extra Cost for Homeowners: The court struck down the provision allowing the committee to collect an extra amount from owners for the new building, stating it would create an "unnecessary multifariousness and burden upon the occupiers and owners, as they have already suffered mental harassment."

• Occupancy Certificate Kept in Abeyance: To relieve residents from paying municipal taxes for uninhabitable flats, the court ordered that the occupancy certificate for Towers B and C "shall be kept in abeyance till towers B and C are reconstructed and occupied."

• Right to Pursue RERA Claims Upheld: The court rejected AWHO's argument against residents seeking remedies before other statutory bodies like RERA. It clarified that approaching RERA for damages is an "additional remedy" and the writ court cannot determine monetary damages, which requires detailed evidence.

Final Decision and Implications

The High Court disposed of the 21 writ appeals with these comprehensive modifications, reinforcing the principle of builder accountability. The judgment places the financial and administrative onus of reconstruction squarely on AWHO, protecting the homeowners who invested in the faulty project. The court directed all residents to vacate their premises by September 17, 2025, to allow the demolition process to begin. The District Collector-led committee has been empowered to resolve any further issues that may arise during the reconstruction process.