The Real Estate (Regulation and Development) Act, 2016 (RERA) was implemented to protect homebuyers from unfair trade practices and delays by real estate developers. One of the key provisions under RERA is the right to refund and compensation in case of project delays, misleading advertisements, or contractual breaches by builders. However, builders may have valid grounds to deny claims under certain circumstances. In this blog, we explore the refund and compensation rules under RERA, case laws that set important precedents, and recent developments in the real estate sector.

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1. Right to Refund in Case of Project Delays

Under Section 18 of RERA, if a developer fails to complete a project within the promised timeline, the buyer has the right to:

• Seek a full refund along with interest.
• Continue with the project while claiming delayed possession interest until handover.

2. Compensation for False Advertising

Builders often mislead buyers through false advertising. Section 12 of RERA ensures that if a buyer suffers financial loss due to misleading project advertisements, they are entitled to compensation.

3. Breach of Agreement by Builder

If a developer fails to comply with the terms mentioned in the sale agreement, the homebuyer can claim a refund along with interest and compensation for damages incurred.

4. Structural Defects & Poor Construction Quality

Under Section 14(3), a developer is liable to repair structural defects that arise within five years of possession. If the builder fails to rectify the issue, the homebuyer can seek compensation through the RERA authority.

5. Interest Rate on Refund and Compensation

The exact interest rate varies by state RERA guidelines.

The refund amount is subject to MCLR (Marginal Cost of Lending Rate) + 2% as per RERA rules.

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Although RERA provides strong protection for homebuyers, there are certain instances where builders can legally deny refund and compensation claims:

1. Force Majeure Clause

• Builders can deny refunds if the project delay is due to unforeseeable circumstances like natural disasters, war, or government-imposed lockdowns.
• Example: COVID-19 pandemic was considered force majeure by several RERA authorities, providing developers temporary relief from penalties.

2. Buyer’s Default in Payment

• If the buyer fails to make payments as per the sale agreement, the builder can reject refund claims.
• Case Law: In Ashok Kumar Jain v. TDI Infrastructure Ltd. (2021), the Haryana RERA ruled in favor of the builder when the buyer defaulted on multiple payments.

3. Non-Compliance with Sale Agreement Terms

• If a buyer voluntarily cancels the booking without a justified reason, the builder is allowed to deduct a pre-decided amount before refunding.
• Case Law: Sunil Agarwal v. Supertech Ltd. (2019) – The tribunal ruled that homebuyers cannot claim a full refund if they exit the project voluntarily.

4. Delay Due to Government Approvals

• If the delay is caused by regulatory approvals (such as environmental clearances or municipal permissions), RERA may allow the builder additional time to complete the project.

5. No Significant Delay in Possession

If the project delay is minor (1-3 months) and the builder can provide a valid justification, RERA may reject refund claims.

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1. Puneet Kaur v. TDI Infrastructure Ltd. (2021)

• The Punjab RERA ruled that a developer must refund the full amount with interest of 10% per annum due to an 8-year delay in project completion.

2. Bikram Chatterjee v. Union of India (2019) – Amrapali Case

• The Supreme Court of India canceled the registration of Amrapali Group for failing to deliver projects and directed the NBCC to complete them.

3. Imperia Structures Ltd. v. Anil Patni (2020)

The Supreme Court ruled that homebuyers can approach both RERA and the Consumer Protection Act for compensation, strengthening consumer rights.

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Some states are considering reducing the threshold for RERA applicability, ensuring that more projects come under its regulation.

Online Grievance Portals for Refunds

Many state RERA authorities have introduced online portals for quick complaint registration and refund processing.

Increased Penalties on Defaulting Builders

Several state RERAs, including Maharashtra RERA (MahaRERA) and UP RERA, have imposed hefty fines on developers delaying refunds.

Escrow Account Monitoring

Authorities are tightening regulations on escrow accounts to ensure that funds are not misused by developers.

New RERA Amendments Proposed

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RERA has significantly strengthened the rights of homebuyers by ensuring that they receive timely refunds and compensation for delays and unfair trade practices. However, builders also have legal defenses in specific scenarios, such as force majeure events, buyer defaults, or minor delays.

To protect yourself as a homebuyer, always check the RERA registration status of a project before investing and be aware of your refund and compensation rights under the law. If you face issues, filing a complaint with state RERA authorities is the first step toward securing justice.

RERA continues to evolve, with new case laws and regulatory updates making the real estate sector more transparent and consumer-friendly. Stay informed and ensure that you make legally sound real estate investments!