RERA Rules and Refund Policies: What to Do If a Project is Delayed?

Delays in real estate projects have been a persistent issue in India, leaving thousands of homebuyers stranded with financial losses and unfulfilled promises. To address this, the Real Estate (Regulation and Development) Act, 2016 (RERA) was enacted to regulate the sector and protect homebuyers from such uncertainties. One of the most critical aspects of RERA is its refund policies and mechanisms to ensure timely project completion.

This blog explores RERA’s rules regarding delayed projects, refund policies, legal remedies for buyers, notable case laws, and recent developments in the sector.

Under RERA, strict timelines and accountability measures are placed on developers to prevent unnecessary delays. Here are the key provisions:

1. Mandatory Registration and Timely Completion

• Every project exceeding 500 square meters or eight apartments must be registered under RERA.
• Developers must specify a completion date at the time of registration and adhere to it.
• In case of delays, developers are required to compensate buyers.

2. Compensation for Delayed Possession

• If a developer fails to complete the project on time, buyers have two options:
  • Continue with the project and receive compensation (interest for every month of delay).
  • Seek a refund with interest on the amount paid.

3. Refund and Compensation Mechanism

• If the buyer chooses a refund, the developer must return the full amount along with interest.
• The interest rate is based on the State RERA guidelines, typically aligned with the State Bank of India’s highest Marginal Cost of Lending Rate (MCLR) + 2%.

4. Escrow Account Protection

• Developers must deposit 70% of project funds into an escrow account to prevent fund diversion.
• This ensures that the money is used only for project development and reduces financial mismanagement.

5. Filing a Complaint Against Delays

• Buyers can file complaints with the State RERA Authority if the builder fails to comply with deadlines.
• If dissatisfied with RERA’s decision, buyers can escalate the matter to the Real Estate Appellate Tribunal (REAT).
• If the case remains unresolved, they can approach higher courts for justice.

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

• Ruling: The Punjab RERA directed the developer to refund the full amount with interest due to excessive project delays.
• Impact: Reinforced RERA’s commitment to protecting homebuyers from fraudulent practices.

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

• Ruling: The Supreme Court canceled the RERA registration of Amrapali Group and handed over unfinished projects to the National Buildings Construction Corporation (NBCC).
• Impact: Set a precedent for strict action against large-scale real estate fraud and developer misconduct.

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

• Ruling: The Supreme Court ruled that homebuyers could seek remedies under both RERA and the Consumer Protection Act.
• Impact: Strengthened buyers’ legal rights by allowing multiple forums for grievances.

If you are facing project delays, follow these steps to secure your rights under RERA:

Step 1: Verify RERA Registration

• Check whether your project is registered with RERA.
• Visit the State RERA website and look for project details, approvals, and completion deadlines.

Step 2: Communicate with the Developer

• Send an official email or legal notice asking for an update on the project status.
• Request compensation or a refund as per RERA guidelines.

Step 3: File a Complaint with RERA

• If the developer fails to respond, file a complaint with the State RERA Authority.
• Provide all necessary documents, including the sale agreement, payment receipts, and correspondence.

Step 4: Escalate to the Real Estate Appellate Tribunal (REAT)

• If RERA’s decision is unsatisfactory, escalate the case to REAT.
• Engage a legal expert if necessary.

Step 5: Approach Higher Courts (If Needed)

• If justice is still not served, approach the High Court or Supreme Court.
• Some homebuyers have also received relief through the National Consumer Disputes Redressal Commission (NCDRC).

1. Stricter Enforcement Against Defaulting Builders

• Several state RERA authorities have begun blacklisting developers who fail to deliver projects on time.
• Heavy fines and penalties are being imposed on defaulters.

2. Fast-Track Grievance Redressal

• Many states have digitized RERA complaint mechanisms to ensure faster resolution.
• Buyers can now track complaints online and receive quicker verdicts.

3. Increased Buyer Awareness Campaigns

• The government and real estate bodies are conducting awareness drives to educate buyers about their rights under RERA.

4. Court Orders for Stricter Refund Policies

• Some High Court rulings have directed developers to pay higher compensation for project delays.
• For instance, in 2023, the Bombay High Court ruled that builders must refund buyers with compounded interest rather than simple interest.

RERA has empowered homebuyers with strong legal protections against project delays. By enforcing transparency, ensuring financial security through escrow accounts, and imposing strict penalties on defaulters, RERA has significantly improved the real estate landscape in India.

If your project is delayed, you have the legal right to claim compensation or seek a refund with interest. Filing a complaint under RERA is now easier with online portals and fast-track grievance redressal systems. With ongoing legal improvements and strict enforcement, RERA continues to evolve, ensuring that homebuyers are no longer at the mercy of unreliable developers.

Always check for RERA registration before investing in a property to safeguard your rights and ensure a hassle-free home-buying experience.