One-Sided Builder Buyer Agreement Clauses Courts Strike Down

Is a buyer bound by every clause in a builder buyer agreement?

No. A builder buyer agreement is a standard form contract drafted by one side and offered on a take it or leave it basis. Indian courts have long held that terms in such contracts, between parties of very unequal bargaining power, will not be enforced where they are unfair and unreasonable. The principle goes back to Central Inland Water Transport Corporation v Brojo Nath Ganguly (1986), and the Supreme Court applied it squarely to flat purchases in the cases discussed below.

The test is not whether you read the clause. It is whether the clause is so tilted that no buyer with a real choice would have accepted it, and whether you actually had a choice. Courts look at practical facts: you had already paid a booking amount, the form was non-negotiable, every builder in the market used similar terms, and refusing to sign meant losing money. Where those facts exist, the signature carries much less weight than the builder suggests.

That does not mean every inconvenient clause disappears. A clause that is reasonable, clearly disclosed and applied equally to both sides will usually be enforced. The cases that succeed are the ones where the buyer points to a specific term, shows why it is one-sided, and asks for a specific consequence: refund, interest at a fair rate, or a declaration that the term does not bind.

What did the Supreme Court decide in Pioneer Urban Land v Govindan Raghavan?

In Pioneer Urban Land and Infrastructure Ltd v Govindan Raghavan (2019), a Gurugram buyer sought a refund after years of delay. The agreement let the builder charge 18% interest for late payment by the buyer, while the builder paid only 9% if it was late. The builder could cancel for the buyer's default and forfeit money, but the buyer had no matching right to cancel for the builder's default except on the builder's terms.

The Court held that these clauses were wholly one-sided and that the buyer could not be bound by them. It said a term of a contract will not be final and binding if it is shown that the flat purchaser had no option but to sign on the dotted line on a contract framed by the builder. Using such clauses was an unfair trade practice under the consumer protection law then in force. The buyer got a refund with interest.

Two other points from that judgment still matter. A buyer cannot be made to wait indefinitely for possession; if the delay is unreasonable, refund is a right. And the RERA remedy is in addition to the consumer remedy, not a replacement for it, which the Court later confirmed in Newtech Promoters v State of UP (2021). Our post on choosing between RERA and consumer court explains how that choice plays out.

Which later judgments built on it?

In Wg. Cdr. Arifur Rahman Khan v DLF Southern Homes (2020), concerning a Bengaluru project, the agreement fixed delay compensation at ₹5 per sq ft per month. The Supreme Court held that buyers were not confined to that figure, because a clause that gives the builder 18% for the buyer's delay but a fraction of that for its own is not a fair estimate of loss. It awarded compensation at 6% a year on the amounts paid. In DLF Home Developers v Capital Greens Flat Buyers Association, decided in December 2020, the agreement offered ₹10 per sq ft a month; the Court again refused to treat the contractual figure as a ceiling and allowed interest-based compensation.

In IREO Grace Realtech v Abhishek Khanna (2021), the Court examined a Gurugram apartment buyer's agreement clause by clause and found many of them wholly one-sided, including terms on possession, cancellation and compensation. It held that a buyer cannot be compelled to accept such terms, and upheld relief for the buyers.

Most recently, in Godrej Projects Development v Anil Karlekar (February 2025), the builder sought to forfeit 20% of the price after the buyer cancelled. The NCDRC allowed forfeiture of only 10% of the basic sale price and ordered refund of the rest with interest. The Supreme Court upheld that, holding that forfeiture must be a reasonable sum and not a penalty, and that inserting one-sided clauses of this kind is an unfair trade practice.

The law courts use to strike down a clause

Judges do not rely on a general sense of unfairness. These are the provisions that do the work, and your complaint should cite the ones that fit.

One-sided clauses and how courts and RERA treat them

The wording differs from builder to builder, but the same clauses come up again and again. This is how they have generally fared.

The last column describes the general pattern, not a promise for every case. Facts matter: when the agreement was signed, whether the project is RERA registered, what the buyer did, and what exactly was disclosed.

Why 18% one way and 9% the other does not survive

The interest asymmetry is the clearest example of a one-sided term, and RERA has now removed it by statute. Section 2(za) says the rate the promoter pays on its default must equal the rate it charges the allottee. State rules fix that rate by reference to the State Bank of India's marginal cost of lending rate. Under the Uttar Pradesh agreement for sale rules of 2018, for example, both sides pay SBI's home loan MCLR plus one per cent.

For agreements signed before RERA, or for complaints in consumer commissions, the forum decides what is fair. The 18% charged to the buyer does not set the rate for the builder, and the 9% or token rupee figure offered by the builder does not limit the buyer either. Commissions have commonly awarded interest in the range of 6% to 9% a year on the amounts paid, depending on the length of delay and whether the buyer is asking for refund or for compensation while keeping the flat.

A practical point: if the builder has already charged you 18% on a late instalment and adjusted it from your payments, include that in your claim. When Advocate B.K. Singh goes through a buyer's ledger, the first thing he matches is the interest the builder debited to the buyer against the interest it ever credited, because that comparison often shows the one-sidedness more clearly than the clause itself.

Is the ₹5 per sq ft delay compensation clause valid?

It is valid as a minimum the builder must pay, not as the most you can recover. On a 1,500 sq ft flat, ₹5 per sq ft per month comes to ₹7,500 a month, which may be a small fraction of the rent the buyer pays while waiting or the EMI on the home loan. The Supreme Court in Arifur Rahman Khan and again in Capital Greens refused to hold buyers to such figures.

What the forum awards instead depends on the remedy. If you keep the flat, compensation is usually calculated as interest on the amount paid, for the period from the promised possession date to the date of a valid offer of possession. Under section 18 of RERA, an allottee who stays in the project gets interest for every month of delay at the prescribed rate. Any amount the builder already paid or credited under the contract clause is adjusted against the award.

Do not refuse the contractual compensation if it is offered as a credit at possession, but do not sign a document saying it is in full and final settlement. Accept it under protest and keep your claim alive.

How much of the booking amount can a builder forfeit if you cancel?

Usually a reasonable sum, and commissions have settled on about 10% of the basic sale price as the reasonable earnest money in most cases. The Godrej Projects judgment of 2025 confirms that a 20% forfeiture is excessive. Section 74 of the Contract Act limits the builder to reasonable compensation, and a clause that lets it keep a fifth of the price, plus brokerage, taxes and interest, is a penalty.

The prescribed forms under RERA are more precise. The Uttar Pradesh format lets the promoter forfeit the booking amount when the allottee withdraws without the promoter's fault, but requires it to return half of the balance within 45 days and the rest on reallotment or after one year, whichever is earlier. If your builder is holding the entire amount, check which form your agreement follows and whether the project is registered.

Forfeiture is only fair where the buyer is actually at fault. If you cancel because possession is already late, the builder has no right to forfeit anything; you are entitled to a refund with interest. Many disputes turn on this point, and the order of letters matters: a buyer who writes asking for a refund because of delay is in a very different position from one who writes saying he no longer wants the flat.

Possession dates that never arrive: grace periods and force majeure

A common clause promises possession within 36 or 42 months from the date of sanction of building plans, environmental clearance or some other approval, whichever is later, plus a grace period of six months. The buyer has no way of knowing when those approvals came, so the possession date is effectively whatever the builder says. Courts read such clauses against the party who drafted them and ask what a reasonable time would have been.

Force majeure clauses in older agreements often list everything from labour shortages to court orders on other projects to changes in government policy. In the Capital Greens appeals, the builder argued that delays in plan approval and stop-work orders after accidents were force majeure. The Supreme Court rejected both: approvals are a normal part of construction, and the stop-work orders followed the builder's own safety failures. For registered projects, section 6 of RERA confines force majeure to war and natural calamities.

The COVID-19 period is the one widely accepted exception. RERA authorities, including UP RERA, extended registration and completion timelines for that period, and many orders exclude part of 2020 and 2021 from delay calculations. Check the specific extension your state authority granted before you calculate the months of delay.

Does an arbitration clause stop you from going to consumer court or RERA?

No. In Emaar MGF Land v Aftab Singh (2018), the Supreme Court held that an arbitration clause in a builder buyer agreement does not oust the jurisdiction of consumer commissions. The consumer remedy is a public remedy created by statute, and a buyer can choose it despite having signed an arbitration clause. The same reasoning applies to complaints before RERA authorities, which exercise statutory powers.

If the builder files an application under section 8 of the Arbitration and Conciliation Act asking the commission to refer the matter to arbitration, it should be opposed on this ground. Clauses that name a sole arbitrator chosen by the builder are weak for a separate reason: the courts have held that a party with an interest in the dispute cannot unilaterally appoint the sole arbitrator. Our page on arbitration practice explains when arbitration does suit a dispute.

Exclusive jurisdiction clauses work similarly. A clause saying only courts at the builder's head office will have jurisdiction does not stop a consumer complaint where the consumer resides or works, which the 2019 Act allows. RERA complaints go to the authority of the state where the project is.

Can the builder change the layout, plans or specifications after you sign?

Not on the strength of a blanket clause. Many older agreements say the buyer consents in advance to any change in the layout plan, building plan, specifications or area. Section 14 of RERA requires the promoter to develop the project according to the sanctioned plans and specifications as approved. Any change to the plans and specifications of the apartment needs the allottee's prior written consent, and other alterations to the building need the consent of at least two-thirds of the allottees, not counting the promoter.

Consent given in advance, before the buyer knows what the change is, is not the informed consent the section contemplates. RERA authorities and courts have acted on complaints where green areas became additional towers or where the number of floors went up after buyers signed. Act early in such cases: once the extra tower is built and sold, undoing it is far harder than stopping it.

Changes in area are a related problem. Where the builder uses a change in the plan to increase the super area and raise the demand, or delivers a smaller carpet area than promised, the rules are specific. Our post on carpet area, super area and extra charges disputes covers that ground.

Which clauses usually survive?

Being honest about this saves time and money. A clause that charges the buyer interest for late instalments at the same rate the builder pays for delay will be enforced. A forfeiture of around 10% of the basic sale price, where the buyer withdraws for his own reasons, is generally accepted. A buyer who stopped paying instalments for two years while the project was on schedule will not get far by calling the cancellation clause unfair.

Disclosed charges are another area where buyers are often disappointed. In Capital Greens, the Supreme Court set aside the NCDRC's direction to refund car parking and club charges, relying on Arifur Rahman Khan, because the charges had been agreed. A charge that was clearly priced and accepted is different from one invented at possession. The question is always what the agreement and the price list said at the time of booking.

Finally, a clause can be unfair and still not matter. If the remedy you need is a refund for a two-year delay, you may not need to attack the forfeiture clause at all. A good complaint challenges the clauses that stand between the buyer and the relief, and leaves the rest alone.

How to challenge a one-sided clause, step by step

There is no separate case to strike down a clause. You raise it inside the complaint where you claim your relief.

1. Find the exact clauses

   Read the agreement, the allotment letter and the application form, and mark every clause the builder relies on or is likely to rely on. Note the clause numbers; the builder's reply will quote them.

2. Check the project's RERA status

   Look up the project on the state RERA portal. Note the registration number, the declared completion date and any extension. If the project is registered, compare your agreement with the prescribed format under the state rules.

3. Work out what you actually want

   Refund with interest, delay interest while keeping the flat, return of an illegal charge, restoration of a cancelled allotment, or possession with compensation. The relief decides the forum and which clauses you must attack.

4. Send a written demand

   Write to the builder setting out the default, the relief and the clauses you do not accept, with a reasonable deadline. This is not legally required before a consumer or RERA complaint, but it fixes the dates and often draws an admission.

5. Choose the forum

   A RERA complaint goes to the authority of the state where the project is. A consumer complaint goes to the District Commission, State Commission or NCDRC according to the value paid. If you want a term formally declared void, it must be the State Commission or the NCDRC.

6. Plead the unfairness specifically

   For each clause, say what it provides, why it is one-sided (compare the buyer's obligation with the builder's), which provision it offends (s.2(46) or 2(47) CPA, s.2(za), s.13 or s.14 RERA, s.74 Contract Act) and what you want done about it.

7. Answer the builder's defences

   Expect arguments that you signed voluntarily, that you are an investor, that the delay was force majeure and that the arbitration clause applies. Have the answers ready in the rejoinder, with documents.

Our post on filing a RERA complaint in Delhi, UP and Haryana covers the portal, fees and hearing process. For consumer complaints, the value limits are set out in our post on which consumer commission to approach.

Documents to collect before you file

The strength of an unfair-clause argument depends on showing the imbalance on paper. Collect these first.

Does it matter whether you signed before or after RERA?

Yes, in how the argument is framed, though not in whether you can make it. For projects registered under RERA, the agreement for sale should follow the form prescribed by the state rules, which already contains balanced clauses on interest, area variation, cancellation and possession. Terms added by the builder that conflict with the Act or the rules do not prevail. A buyer can simply point to the statute.

For agreements signed before RERA in projects that were still ongoing when the Act came into force, the Supreme Court in Newtech Promoters held that the Act applies to the project, so the RERA remedies are available. The old agreement's clauses are then tested against both the Act and the consumer law principles in Pioneer Urban Land and IREO Grace.

For completed projects and old disputes, the consumer law route and the Contract Act are the main tools. Limitation is the main risk. A consumer complaint must be filed within two years of the cause of action, though in continuing delay cases commissions have often treated the cause as continuing until possession is offered or the refund is paid. If yours is an old dispute, get the dates checked before anything else.

Mistakes buyers make with one-sided clauses

• Signing a no-claims letter at possession. Builders often hand over keys only after the buyer signs an indemnity or undertaking waiving claims. If you must sign to get possession, write that it is signed under protest and send a separate email the same day.
• Writing the wrong cancellation letter. A letter saying you no longer want the flat invites forfeiture. A letter saying you are withdrawing because the builder has failed to deliver on time, and asking for refund with interest, does not.
• Attacking every clause. A complaint that calls forty clauses unfair reads as a grievance list. Pick the clauses that block your relief and argue them properly.
• Ignoring the RERA format. If the project is registered, compare your agreement with the prescribed format. The difference between the two is often the strongest argument you have.
• Waiting for the builder's offer. Buyers often hold off for years hoping for a settlement. Meanwhile the builder's finances deteriorate, and in some cases the company goes into insolvency, which changes everything; see our post on what homebuyers can do when the builder is under insolvency.

What to do this week

• Find your complete agreement, allotment letter and application form, including annexures.
• Download the builder's ledger or ask for your statement of account in writing.
• Look up the project's RERA registration and note the declared completion date and any extension.
• Mark the clauses on interest, delay compensation, cancellation, force majeure, arbitration and changes in plans.
• Total the interest the builder charged you and the compensation it has paid or credited.
• Decide what you want: refund, delay interest, possession or return of a charge.
• Do not sign any undertaking, indemnity or settlement without reading it and recording a protest.
• Calculate two years from the relevant date if you are thinking of a consumer complaint.

Getting the agreement read before you file

Whether a clause will be struck down depends on its wording, the rest of the agreement, the project's RERA history and what you have written to the builder so far. A point Advocate B.K. Singh often makes to homebuyers is that the builder's agreement is usually less dangerous than the buyer's own letters, because a careless email asking to exit can turn a refund case into a forfeiture case.

If you want an advocate to read your agreement and tell you which clauses matter and which forum fits, the team of Advocate B.K. Singh at B.K. Singh & Associates can look at the papers. Send them through our online enquiry, and see our consumer court practice in Delhi for how builder complaints are handled before the commissions.