Builder Delayed Possession: Refund or Interest Under RERA

Can you get a refund or interest when a builder delays possession?

Yes. Section 18(1) of RERA says that if the promoter fails to complete the apartment or is unable to give possession in accordance with the agreement for sale, or by the date specified in it, the promoter is liable on demand to return the amount received, with interest at the rate prescribed, including compensation. The proviso then gives the buyer who does not want to withdraw a right to interest for every month of delay, till the handing over of possession, at the same prescribed rate.

The Supreme Court in Newtech Promoters and Developers v State of UP (2021) described the right to a refund under section 18(1) as unqualified. It does not depend on whether the delay was caused by events the builder could not foresee, or on stay orders passed by a court, so long as the delay is not attributable to the buyer. The same judgment held that the RERA authority itself, and not only the adjudicating officer, can order a refund with interest and interest for delay. Compensation is a separate claim for the adjudicating officer.

In practice this means a delayed buyer is not asking the builder for a favour. The builder cannot insist that you wait, cannot force you to accept a refund if you want the flat, and cannot substitute the low penalty rate written in its own agreement for the rate in the rules. What you must do is prove the agreed date, prove what you paid and when, and show that the delay is real.

What the law says: the sections that decide a delay case

These are the provisions an authority will actually look at when it hears your complaint.

When does the delay start? Reading the possession clause

The delay starts on the possession date written in the agreement for sale, after adding any grace period the agreement genuinely allows. Most builder buyer agreements in Delhi NCR say possession will be offered within a stated number of months, often 36 or 42, followed by a grace period of six months. The first job is to find which event the months run from: the date of the agreement, the date of building plan approval, the start of construction, or the date of some environment or fire clearance.

When Advocate B.K. Singh reads a builder buyer agreement in a delay matter, the first clause he marks is the possession clause, and the second is whatever event it hangs on. A clause that runs from "start of construction of the tower" lets the builder argue for a date years later than the buyer assumed, and the authority will want proof of when construction actually began. Where the starting event is vague or entirely in the builder's control, authorities have generally refused to let the builder benefit from that vagueness and have counted from the agreement or the allotment.

If there is no possession date at all, the buyer is not left without a remedy. Courts and authorities have treated possession as due within a reasonable time, and in several decisions about three years from the agreement has been treated as reasonable for an ordinary residential project. Grace periods are a separate question: some authorities allow them automatically, others only where the agreement makes them unconditional and the builder shows why it needed them. Do not count on the grace period being cut, but do check whether it was conditional.

Is an offer of possession without an occupancy certificate valid?

No. An offer of possession is valid only if the builder has obtained the occupancy certificate (OC) or completion certificate from the competent authority, such as the Noida or Greater Noida Authority, GNIDA, the GDA in Ghaziabad, DTCP in Haryana, or the DDA or municipal corporation in Delhi. A letter inviting you to take a "fit-out possession" or "soft possession" before the OC does not stop the delay clock, and you can refuse it without losing your claim.

Builders often send an offer of possession together with a demand for the last instalment, maintenance charges, club charges, electricity meter charges and sometimes an increase in super area. If the OC was obtained, the offer is good even if some demands in it are disputed, and the delay usually ends two months after it under section 19(10). If you think specific demands are not payable, pay under protest or raise them in your complaint, but do not ignore a valid offer for months, because the interest will stop and holding charges may start. Disputes about area and extra charges are covered in our post on carpet area, super area and extra charges.

Refund or delay interest: how the two routes compare

Both routes start from the same delay. They lead to very different outcomes.

Refund or interest: which is better for you?

The better choice depends on three things: how close the project really is to completion, how much the flat is worth today compared with what you agreed to pay, and how solvent the builder is. A refund is a money order. It is worth only what you can recover, and a builder who cannot finish the tower may also be unable to pay. Delay interest keeps you in the project, gives you the flat at the old price and is usually adjusted against the balance you owe at possession, so you see the benefit even if the builder never writes you a cheque.

Go and look at the site before deciding. A tower with plaster, windows and lifts installed, and an OC application on record, is a different proposition from a structure that has stood at the eighth slab for three years. Check whether the project's registration on the state RERA portal has expired or been extended, read the builder's quarterly progress updates, and ask the residents' group what the builder has told them about the OC.

Then do the arithmetic. If prices in the area have risen well above your agreed price, staying gives you that gain, which a refund does not. If prices have stayed flat and the builder is clearly stuck, a refund with interest at the prescribed rate from the date of each payment often comes out ahead. Remember too that the interest you receive is generally taxable as income, and that the question of whether you will be able to collect it is as important as the amount on paper.

What rate of interest will RERA award?

The rate is the one prescribed in the state's RERA rules, not the rate in your agreement. Haryana's rules fix it at the State Bank of India's highest marginal cost of lending rate (MCLR) plus 2 per cent, and Haryana orders routinely apply that formula, calling the monthly amount delay possession charges. Uttar Pradesh's rules use SBI's highest MCLR plus 1 per cent. Delhi's rules also tie the rate to SBI's MCLR; check the current rule and the MCLR on the date of the order, because the figure moves with SBI's rates.

The interest is simple interest. For a refund it runs from the date of each payment until the amount is actually repaid. For delay it runs from the due date of possession on the amount paid till then, and on later payments from the date each was made. Orders usually give the builder a fixed time to pay, for example 90 days in Haryana, and say that interest continues until realisation if the builder does not pay in time.

Agreements that offer ₹5 or ₹10 per square foot per month for delay do not bind the authority. Section 2(za) makes the rate symmetrical, and authorities read that as overriding the contract. If your builder has already credited the contractual delay penalty in its statement of account, ask for that amount to be adjusted rather than treated as full settlement.

Can the builder plead force majeure, COVID or construction bans?

Builders plead force majeure in almost every delay case, and authorities accept it only within narrow limits. After a central advisory in May 2020, most RERA authorities treated the first COVID-19 lockdown as force majeure and extended registration and completion dates by six months, in some cases with a further extension. That extension is usually applied to the possession date, so a project due in mid-2020 or later may get six months added. It does not excuse a project that was already years behind before March 2020.

Construction bans under the Graded Response Action Plan in Delhi NCR, NGT orders, sand and labour shortages and demonetisation are also raised. Authorities generally treat short seasonal bans as an ordinary business risk of building in the region, and a few weeks of stoppage cannot explain three years of delay. Disputes between the builder and the land-owning authority over dues, or the builder's own funding problems, are not force majeure at all.

Remember the line drawn in Newtech: the refund right is not defeated by unforeseen events. Force majeure arguments may shorten the period for which delay interest is calculated if you stay, but they do not take away your right to withdraw and be repaid once the agreed date, as validly extended, has passed.

Can you claim compensation over and above interest?

Yes, but before a different officer. After Newtech, the RERA authority decides refund and interest, while compensation for mental agony, rent paid in the meantime, loss of opportunity or litigation cost is decided by the adjudicating officer under section 71, applying the factors in section 72. In Haryana, for example, buyers commonly file one complaint before the authority for refund or delay possession charges, and a separate complaint before the adjudicating officer for compensation.

Compensation is not automatic. You must show the loss, for example rent receipts and a lease for the years you had to rent, or the higher interest you paid on a loan taken for a flat you could not live in. Adjudicating officers tend to award modest amounts unless the loss is documented, so keep the claim specific and supported. Many buyers find that the interest award does most of the work and decide whether a separate compensation case is worth the extra time.

What if you took a home loan or a subvention scheme?

A home loan does not take away your section 18 rights, but it changes who gets paid first. Under the usual tripartite agreement between you, the builder and the bank, the flat is mortgaged to the bank, and on a refund the bank's outstanding is cleared first from the refund amount, with the balance coming to you. Authorities usually order exactly that, so attach the tripartite agreement and a current loan statement to your complaint.

Subvention or "no pre-EMI" schemes cause particular trouble. Under these schemes the builder promised to pay the pre-EMI interest until possession, and many builders stopped paying once the project slowed, leaving the bank to demand EMIs from the buyer. Raise this specifically: the builder's failure to honour the subvention arrangement is a separate default, and authorities have directed builders to bear the interest they had undertaken. Keep paying the bank while the case runs, because a loan default hurts your credit score and the bank will not wait for RERA.

What if you have already taken possession or signed an undertaking?

Taking possession does not by itself end your claim for delay interest for the period before possession. Many builders hand over keys only after the buyer signs an indemnity or undertaking saying no claim for delay will be made. Courts and authorities have looked at such documents with suspicion, because a buyer who has waited years for a home has little choice but to sign, and they have generally refused to treat them as a free and informed waiver.

That said, delay helps the builder. A buyer who takes possession, says nothing for several years and then files a delay complaint will face questions the buyer who wrote to the builder before taking possession does not. If you are about to take possession of a delayed flat, write to the builder first, recording that you are taking possession without giving up your claim for delay interest, and keep proof that the letter was delivered.

Can the builder deduct earnest money or charges from a refund?

Not when the builder is the one in default. Forfeiture clauses allow a builder to keep earnest money when the buyer cancels without cause; they do not apply when the buyer withdraws because the builder failed to deliver. In a section 18 refund the authority orders the whole amount paid to be returned, with interest, and the builder's administrative charges, brokerage and "processing fees" do not come off it.

The position is different if you simply want to exit a project that is on schedule. In that case the builder may keep a reasonable earnest amount, and authorities have commonly limited forfeiture to around 10 per cent of the price rather than the large sums some agreements provide. Taxes paid on instalments, such as GST, are usually included in what the authority orders refunded, and the builder sorts out its own tax credits. One-sided clauses of this kind are discussed in our post on builder buyer agreement clauses courts strike down.

Documents you need for a delay claim

Collect these before you write to the builder. Most of them are already in your file or your email.

How to claim a refund or delay interest, step by step

1. Fix the due date

   Read the possession clause and any grace period, add any COVID extension the authority is likely to allow, and arrive at a realistic due date. If the clause is vague, note the agreement date and the date of the last payment you made.

2. Work out both figures

   Calculate the refund with interest from each payment date and the delay interest from the due date, using the current rate in your state's rules. Seeing both figures side by side is what makes the choice clear.

3. Write to the builder

   Send a written demand by email and speed post stating the due date, the delay and the relief you want: refund with interest or delay interest. Section 18 makes the refund payable on demand, so a clear demand also helps fix the date from which the builder is in default. A legal notice is not compulsory, but a short, factual letter often draws out the builder's position.

4. File the complaint

   If the builder does not respond or offers only the contractual penalty, file a complaint under section 31 before the RERA authority of the state where the project is located. Ask for the specific relief, attach the documents, and pay the prescribed fee.

5. Attend the hearings

   The builder will file a reply, usually pleading force majeure or disputing the dates. Answer it with documents rather than argument, and keep track of any change in the project's status, such as an OC being obtained during the case.

6. Get the order complied with

   Once the order is passed, note the date by which the builder must pay. If it does not pay or appeal with the required deposit, apply for execution or a recovery certificate without waiting.

The compensation claim before the adjudicating officer can run alongside the authority complaint. Decide early whether you want it, because the documents for loss need to be collected from the start.

Mistakes that cost delayed buyers money

• Stopping instalments without saying why. A buyer who stops paying construction-linked demands without recording the builder's default gives the builder a ground to cancel the allotment. If you stop, say in writing that it is because of the delay.
• Accepting a pre-OC "possession". Fit-out possession without an OC lets the builder argue the delay ended, even though the law says otherwise. Ask for a copy of the OC before taking keys.
• Asking for the wrong relief. A complaint that asks for refund and possession in the alternative, without a clear primary prayer, leaves the authority to choose for you. Decide first.
• Relying on the agreement's delay penalty. Signing a settlement that accepts ₹5 per square foot per month as full and final can waive a much larger statutory claim.
• Waiting years after possession. Delay interest claims are strongest when raised while the delay is running or soon after possession, with a letter on record.
• Ignoring the builder's insolvency. If an insolvency petition against the builder has been admitted, a RERA order cannot be executed during the moratorium. Our post on what homebuyers can do when a builder is under insolvency explains the claim process.

How long does it take, and what if the builder still does not pay?

Uncontested delay complaints are often decided within months; contested ones, with adjournments and a busy cause list, can take a year or more. An order is only the halfway point. Builders frequently appeal to the Real Estate Appellate Tribunal, and under section 43(5) a promoter must deposit the amount ordered, including interest and compensation, before its appeal is heard, which protects the buyer to a real extent. The appeal route is explained in our post on the RERA Appellate Tribunal and the deposit rule.

If the builder neither pays nor appeals, the order is enforced through execution proceedings or a recovery certificate sent to the district collector, who recovers the amount as arrears of land revenue. That stage has its own steps and its own delays, covered in our post on recovery certificates and execution of RERA orders. Some buyers prefer the consumer commission for a delay claim instead of RERA; the trade-offs are set out in RERA or consumer court for a flat buyer.

What to do this week if your possession date has passed

• Find the possession clause and grace period in your agreement and write down the due date.
• Download the project's registration page and latest quarterly update from the state RERA portal.
• Put together every payment receipt and match it with your bank statements.
• Calculate both the refund figure and the delay interest figure at the current prescribed rate.
• Visit the site and photograph the tower, with the date visible.
• Send the builder a short written demand stating the relief you want.
• Keep paying your home loan EMIs while the claim is pending.
• Do not sign any settlement or undertaking offered by the builder until someone has read it.

Getting the agreement read before you choose

The decision between refund and interest is hard to reverse once an order is passed, and it rests on details in the agreement that are easy to misread: the event the possession period runs from, a conditional grace period, a payment plan changed by a later letter. A point Advocate B.K. Singh often makes to buyers is that the relief asked for in the first complaint shapes everything that follows, including how easy the order will be to recover.

If you want an advocate to go through your agreement, payment record and the builder's letters before you write to the builder, the team of Advocate B.K. Singh at B.K. Singh & Associates can look at the papers and tell you where you stand. You can send them through our online legal enquiry, or read about how consumer and builder cases are handled at the consumer court practice in Delhi.