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Refund under real estate laws for non-completion or delay

The buyers of real estate assets have been most concerned about the delay in receiving ownership of their residences. For many homeowners in various areas and with practically all builders, the wait has now lasted over six years or more, with no sign of ownership in sight. The builder-buyer struggle looked to be one-sided in the absence of a regulator and no regulations in place.


Since May 1, 2017, when the Real Estate (Regulation and Development) Act, 2016 (RERA) went into force across the country, the real estate industry has had its own regulator. Each state will have their own Regulatory Authority (RA), which will draught regulations and guidelines in accordance with the Act.

What is RERA ACT?

Let’s explore what RERA has in store to guarantee that houses are delivered on schedule. In the case of continuing projects that have not yet acquired a completion certificate, the developers must also register them. They, too, will be required to obey the state RA’s laws and regulations after they have been registered.

Promoters promise

RERA has six key measures that may prohibit builders from delaying projects and committing to deadlines rather than defaulting.

1. Written affidavit: The promoter’s guarantee will now be legally enforceable. Along with all of the needed papers, the promoter must make a statement, backed up by an affidavit, indicating the time frame for completion of the project or a specific phase.

2. Possession date will be sacrosanct: Furthermore, the ‘agreement of sale’ must include the date of possession as well as the rate of interest in the event of a default. Keep in mind that the time duration may vary depending on the builder. The promised date of delivery for new projects is at the discretion of the developer, therefore consumers will need to make a decision if the planned date of delivery is too far away.

3. Clear title of the land:  Occasionally, the property on which the project is to be built is embroiled in a dispute, causing construction and delivery to be delayed. If the property on which the development is planned is owned by another person, the promoter must produce a written statement that the legal title to the land on which the development is proposed possesses legally valid papers with authentication of such title.

4. Free from encumbrances:  Several projects have been known to be delayed as a result of encumbrances that prevent the promoter from transferring ownership to the land. The promoter must produce a notarized affidavit stating that the land is free of all encumbrances.

5. Maintaining separate account: The most prevalent problem in the business has been diversion. According to RERA, 70 percent of the money collected from purchasers for a real estate project must be put in a separate account to be kept in a scheduled bank to pay the cost of building and land, and it must be used solely for that purpose.

The account will be withdrawn in accordance with the scope of the work performed once it has been confirmed by an engineer, an architect, and a chartered accountant, and it will be audited every six months. Such methods are likely to reduce, if not eliminate, money diversion to a considerable extent.

6. Making it an offence : If the builder does not follow the regulations, he or she may face not only the loss of the project’s registration, but also imprisonment for up to three years or a fine of up to ten percent of the project’s projected cost, or both. Some states, on the other hand, have made the offence more serious in order to keep the deviant out of prison.

“The condition that allows for reimbursement to the flat purchaser in the event of a delivery delay is the most effective deterrent to delivery delays.” Furthermore, going beyond the project’s agreed delivery date as stated in the registration requires going back to the authorities and answering questions justifying the delay.

What if still there are defaults?

RERA has taken efforts to hold promoters responsible, including requiring them to pay compensation and penalties if they violate any of the regulations. The implementation of these may still be a question unresolved, and it will be up to the state RA to do so.

In the event that the builder defaults and fails to deliver the home in accordance with the ‘agreement of sale,’ the buyer has the right to a return of the money paid, plus interest. Even if the promoter’s registration is cancelled, the purchaser is entitled to a refund.

If the buyer does not wish to withdraw from the project and does not want a refund, the promoter must pay interest for each month the project is delayed until possession is handed over. Even if these practises may already exist, when combined with the possibility of a refund amount under the supervision of a regulator, the delay process may be significantly reduced.

Delayed period interest.

Both the buyer and the builder must charge the same rate of interest in the event of default. As a result, whether the buyer fails to make timely payments to the builder or the builder fails to give possession within the agreed-upon time frame, the rate of interest due will be the same.

“The grant of compensation is via an adjudication procedure involving the regulatory authority and an adjudicating person who will be nominated by the state government, thus, it will be decided on a case by case basis,” said the regulatory authority.

How much of interest rate?

Many states set the rate of interest paid by the promoter to the allottee, or by the allottee to the promoter, at the State Bank of India’s highest Marginal Cost of Lending Rate + 2%.

In the event of a default, the interest % and compensation amount (must be specified in the agreement of sale at the time of booking) may vary by state. “In the event of any defaults by the builders, the state governments are endowed with the right to fix the rate of interest,”. In the event of de-familiarization, each state government is obligated to inform the appropriate rate of interest.


It’s critical that the Act isn’t watered down by the states. Even the centre, if necessary, should get involved in the situation. Even though the laws are in place, state RAs are required to maintain a close eye on their execution and take suo moto action (as allowed under section 5 of the RERA Act) against builders who engage in unfair practises or fail to follow the Act’s requirements.

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