Builder Rights Under RERA: What to Do If a Homebuyer Defaults on Payments?

The Real Estate (Regulation and Development) Act, 2016 (RERA) was enacted to bring transparency, accountability, and efficiency to the real estate sector. While much of the discussion revolves around homebuyer protections, it is equally important to understand the rights and remedies available to builders when a homebuyer defaults on payments. This blog explores the legal provisions under RERA that safeguard builders’ interests, relevant case laws, and recent developments.

Understanding Homebuyer Default Under RERA

A homebuyer default occurs when the buyer fails to make scheduled payments as per the builder-buyer agreement. Some common reasons include:

Financial constraints or loan rejections.
Willful non-payment despite contractual obligations.
Delay in availing home loans or legal disputes.
Lack of intent to proceed with the purchase due to market fluctuations.

RERA provides a legal framework to ensure that developers are protected against undue financial burdens arising from such defaults.

Key Rights of Builders Under RERA

1. Right to Terminate the Agreement

Under Section 19(6) of RERA, a builder has the right to terminate the agreement if a homebuyer fails to make payments as per the agreed schedule.
The builder must provide a notice specifying the default and allow time for the buyer to rectify it before taking legal action.

2. Right to Impose Interest on Delayed Payments

As per Section 19(7) of RERA, if a homebuyer delays payments but still intends to continue the purchase, the builder can charge interest on the overdue amount at a rate prescribed by the state RERA authority.
The interest rate usually aligns with the State RERA-prescribed rates or the RBI’s highest marginal cost lending rate plus 2%.

3. Right to Forfeit Booking Amount

If the agreement contains a forfeiture clause, builders can retain a portion of the booking amount in case of cancellation due to homebuyer default.
Generally, builders can forfeit up to 10% of the total unit cost, as seen in various legal precedents.

4. Right to Re-Sell the Property

After termination, builders can legally resell the unit to another buyer and recover losses incurred due to the previous buyer’s default.

5. Right to Seek Legal Remedies for Breach of Contract

Builders can approach the State RERA Authority or the Real Estate Appellate Tribunal (REAT) if they suffer significant financial loss due to a homebuyer’s non-compliance.

Key Case Laws Related to Homebuyer Default Under RERA

1. M/S Ansal Housing Ltd. v. Shital Kumar Agarwal (UP RERA, 2022)

The UP RERA Authority ruled in favor of the developer, allowing them to terminate the agreement after repeated payment defaults by the homebuyer. The court upheld the builder’s right to forfeit a part of the booking amount.

2. Pankaj Aggarwal v. TDI Infrastructure Ltd. (HRERA, 2021)

In this case, the buyer failed to pay installments despite multiple notices. HRERA (Haryana RERA) permitted the builder to impose interest charges and later cancel the agreement after continued non-payment.

3. Ram Kishore v. Supertech Ltd. (Delhi RERA, 2020)

The Delhi RERA ruled that a builder can recover reasonable damages from a homebuyer who backs out at the last moment, as long as the agreement terms clearly mention the penalties.

Recent Developments & Legal Clarifications

1. Standardization of Interest Rates for Payment Defaults

Several state RERA authorities have recently updated their rules to standardize interest rates on delayed payments to ensure fairness to both buyers and developers.

2. Strengthening Builder Protections Against Fraudulent Buyers

Cases of speculative buying (where buyers book properties only to back out later due to market trends) have increased. State RERA bodies are now allowing builders to take stricter action against such practices.

3. Increased Use of Mediation for Dispute Resolution

Many RERA authorities, including Maharashtra RERA (MahaRERA) and Karnataka RERA, are promoting mediation before litigation to resolve payment disputes more efficiently.

Steps Builders Should Take When a Buyer Defaults

Issue a Payment Reminder – Send an official notice requesting immediate payment within a reasonable timeframe.
Charge Interest as per Agreement – If the buyer delays payment, levy interest per the contract terms.
Send a Legal Notice for Breach of Agreement – If non-payment continues, issue a legal notice warning of contract termination.
Approach the RERA Authority – If the buyer refuses to comply, file a case with the respective state RERA authority.
Terminate and Re-Sell the Property – If permitted under contract terms, cancel the agreement and sell the property to a new buyer.

While RERA primarily focuses on protecting homebuyers, it also ensures fairness to builders by providing clear legal recourse in cases of payment default. Developers have the right to impose penalties, terminate agreements, and seek financial compensation for losses caused by defaulting buyers.

With recent legal developments and case law precedents reinforcing builder rights, it is essential for developers to follow due process, issue timely notices, and take legal action when necessary. By staying informed about state-specific RERA provisions, builders can protect their business interests while maintaining compliance with the law.

For builders facing homebuyer default issues, consulting a legal expert familiar with RERA regulations can help navigate disputes effectively and safeguard financial stability.

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Marketing and Advertising Under RERA: What Builders Can and Cannot Do

The Real Estate (Regulation and Development) Act, 2016 (RERA) has significantly transformed the real estate sector in India by enforcing strict guidelines on project transparency, marketing, and advertising. Builders and developers are now required to adhere to specific rules to ensure that buyers receive authentic information and are not misled by false promises. This blog explores the legal framework governing real estate advertising under RERA, key provisions, permissible and prohibited marketing practices, and recent legal developments, including landmark case laws.

Key Provisions of RERA Governing Advertising and Marketing

RERA imposes several obligations on developers when it comes to advertising real estate projects. Some of the key provisions include:

1. Mandatory Registration Before Advertisement (Section 3)

Developers cannot advertise, market, or sell any real estate project without registering it with the respective state RERA authority.
The registration number issued by RERA must be included in all promotional materials, ensuring transparency.

2. Disclosure of Accurate Project Details (Section 11)

Developers must provide complete and truthful information in advertisements, including:
- Carpet area (not super built-up area)
- Project timelines and possession date
- Approvals and legal clearances
- Amenities and specifications
Misleading advertisements are considered a violation of RERA, attracting penalties and legal consequences.

3. Prohibition of False Promises (Section 12)

If a builder fails to deliver what was promised in advertisements, buyers are entitled to:
- A full refund with interest
- Compensation for losses incurred due to false claims

4. Standardized Terms in Agreements (Section 13)

Builders cannot demand more than 10% of the total cost before signing a sale agreement.
The agreement must align with the commitments made in advertisements.

5. Restrictions on Pre-launch Advertising

Pre-launch offers without registration are illegal and subject to heavy penalties.

What Builders Can Do Under RERA

Despite restrictions, builders can still engage in effective marketing within the legal framework. Here’s what they can do:

✅ Advertise RERA-registered projects with correct and verifiable information. ✅ Use digital platforms, newspapers, TV, and hoardings for promotions, provided they include the RERA registration number. ✅ Offer legitimate discounts, promotional schemes, and financing options as long as they are clearly mentioned in the sale agreement. ✅ Highlight project amenities and features, ensuring they align with actual approvals and sanctioned plans. ✅ Conduct promotional events and property exhibitions showcasing RERA-approved projects.

What Builders Cannot Do Under RERA

🚫 False Advertising and Misleading Claims

Builders cannot claim unrealistic amenities, approvals, or possession dates.
Misrepresentation of carpet area, super-built-up area, or pricing is strictly prohibited.

🚫 Advertising Without RERA Registration

Any form of marketing before obtaining RERA registration is illegal.

🚫 Hidden Charges or Undisclosed Costs

All pricing details must be transparent, and additional charges must be disclosed upfront.

🚫 Celebrity Endorsements That Mislead Buyers

Builders cannot use misleading endorsements from celebrities to falsely attract buyers.

🚫 Bait-and-Switch Tactics

Advertising one project and later offering a different property is a punishable offense under RERA.

Landmark Case Laws on Advertising Violations Under RERA

1. Lodha Group Misleading Advertisement Case (Maharashtra RERA, 2019)

Issue: Lodha Group was penalized for advertising a project without mentioning the RERA registration number.
Ruling: Maharashtra RERA imposed a hefty fine and ordered corrective measures.

2. Amrapali Group Fraud Case (Supreme Court, 2019)

Issue: Amrapali falsely advertised possession dates, leading to significant delays.
Ruling: The Supreme Court canceled the developer’s registration and handed over incomplete projects to NBCC for completion.

3. DLF Ltd. v. Competition Commission of India (CCI) (2011, Pre-RERA but Relevant)

Ruling: CCI fined DLF and highlighted the need for regulatory oversight, later addressed by RERA.

Issue: DLF misrepresented project approvals and changed specifications after sale.

Recent Developments in RERA Marketing Regulations

1. Increased Digital Monitoring by RERA Authorities

State RERA bodies are now actively monitoring digital and social media advertisements to prevent misleading claims.

2. Crackdown on Influencer Marketing

Developers using influencers for property promotions must ensure compliance with RERA guidelines.

3. Heavier Penalties for Non-compliance

States like Maharashtra and Karnataka have introduced stricter penalties for misleading advertisements.

4. RERA Compliance in Online Property Portals

Platforms like MagicBricks and 99acres must verify RERA registration before listing projects.

Recent Developments in Force Majeure Under RERA

1. COVID-19 and Blanket Extensions (2020-2021)

Many state RERA authorities granted automatic 6–9 months extensions to developers due to the pandemic.
Maharashtra RERA (MahaRERA) and Haryana RERA (HRERA) extended completion deadlines for ongoing projects.

2. RERA Amendments for Natural Calamities (2023)

Several states have proposed modifications in RERA rules to define Force Majeure events more clearly, ensuring that both developers and homebuyers are protected.

3. Strict Scrutiny on Force Majeure Claims (2024)

Developers must now submit detailed evidence and project progress reports to justify extensions.

RERA authorities have started rejecting Force Majeure claims where delays were due to financial mismanagement rather than external events.

RERA has significantly improved transparency and accountability in real estate marketing. Developers must ensure that all advertisements comply with RERA guidelines to avoid legal consequences and maintain consumer trust. Homebuyers should always verify RERA registration numbers before making any decisions. By adhering to these rules, the real estate industry can move towards a more ethical and buyer-friendly environment.

For homebuyers and investors, the key takeaway is: Always check for RERA registration before making a property purchase!

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