Can a Builder Deduct 10% of the Amount When a Homebuyer Seeks Refund Due to Project Delay? The ruling reinforces the principle that a homebuyer’s right to seek refund under RERA remains protected when possession is delayed beyond the promised timeline.

A recent decision of the Haryana Real Estate Appellate Tribunal (HREAT) on Earnest Money Refund that  provides important guidance on the rights of homebuyers seeking refunds in delayed real estate projects. The Tribunal clarified that a promoter cannot automatically deduct 10% of the sale consideration merely because an allotment is cancelled, particularly where the delay in completing the project is attributable to the promoter.

The ruling reinforces the principle that a homebuyer’s right to seek refund under RERA remains protected when possession is delayed beyond the promised timeline on Earnest Money Refund case.

Background of Earnest Money Refund Dispute

The allottee had booked a residential unit in a housing project and entered into a Builder Buyer Agreement with the promoter.

Under the agreement, possession was to be delivered within the stipulated period. However, despite substantial payments

Delay of More Than Five Years

The Tribunal noted that the promised possession date had expired years earlier, while the Occupation Certificate was obtained only after a delay of more than five years.

The homebuyer had already paid a substantial amount towards the sale consideration and continued waiting for the project to progress. Even after noticing little progress in construction, the allottee gave the promoter additional time before eventually seeking a refund.

The Tribunal observed that the delay was considerable and that the promoter failed to provide any convincing explanation for the prolonged non-completion of the project.

Also Read-Case of forfeiture of amount by Builder RERA Panchkula

Homebuyer’s Right to Refund

One of the central issues before the Tribunal was whether the allottee was entitled to a complete refund of the deposited amount or whether the promoter could deduct 10% of the sale consideration on the ground that the allottee had stopped making further payments.

The Tribunal examined the facts and found that the project itself had not progressed in accordance with the agreed timeline. Since the promoter failed to complete the project within the committed period, the allottee’s decision to seek a refund could not be treated as a default attracting forfeiture.

The Tribunal therefore rejected the promoter’s contention that 10% of the sale consideration should be deducted from the refundable amount.

When Is 10% Deduction Permissible?

The Tribunal made an important observation regarding forfeiture and deductions.

According to the ruling, deduction of a portion of the sale consideration may be permissible where the allottee is clearly at fault or commits a default recognized under the RERA framework.

However, where the promoter itself is responsible for substantial delay in project completion and fails to justify such delay, the promoter cannot seek the benefit of forfeiture provisions against the allottee.

Interest on Refund

Although the Tribunal upheld the allottee’s entitlement to a full refund, it modified the interest component.

The Tribunal observed that the allottee had demanded a refund several years after the promised possession date and approached the Authority at a later stage.

Taking these circumstances into consideration, the Tribunal directed that interest would be payable from the date of filing of the complaint until actual realization, rather than from the dates of individual deposits.

Significance of the Decision

The ruling highlights two important principles under RERA:

• Promoters cannot rely upon forfeiture clauses where project delays are attributable to their own conduct.
• Homebuyers retain the right to seek a refund when possession is delayed beyond a reasonable period.

The decision also demonstrates that appellate forums may balance equities while determining the period for which interest should be awarded.

Also Read-Appeal to Haryana Real Estate Appellate Tribunal at Chandigarh

Key Takeaways

• Substantial delay in project completion can entitle an allottee to seek a refund under RERA.
• A promoter cannot automatically deduct 10% of the sale consideration in every cancellation case.
• Forfeiture may not be permitted where the delay is attributable to the promoter.
• The timing of the refund demand and legal proceedings may influence the calculation of interest.
• RERA continues to protect homebuyers from prolonged and unexplained construction delays.

Key Legal Grounds for Your Appeal

Conclusion

The Haryana Real Estate Appellate Tribunal’s decision reinforces the consumer-protection objectives of RERA by holding promoters accountable for excessive project delays. The ruling makes it clear that forfeiture provisions cannot be used as a shield where the promoter itself has failed to honour its commitment regarding timely delivery.

For homebuyers, the judgment is a reminder that prolonged delays may give rise to a statutory right to refund, while for promoters it underscores the importance of timely project completion and transparent compliance with contractual obligations.

By Satish Mishra Advocate, More on 99888-17966.