Can homebuyers seek refund of booking amount from a real estate developer in case of job loss?

The Maharashtra Real Estate Regulatory Authority (MahaRERA) has directed the developer of Godrej Meadows project in Pune to partially refund the booking amount paid by two homebuyers after deducting 2% of the total booking amount.

The homebuyers had cancelled the booking citing financial problems due to loss of job and had asked the builder to refund the booking amount.

The MahaRERA case

The homebuyers namely Shardul Kulkarni and Harshal Kulkarni in their complaint to MahaRERA had said that they had paid an amount of ₹3.22 lakh as of December 2021 towards booking the flat.

The homebuyers informed MahaRERA that on the date of booking, the sales and marketing team of the developer had informed them that in case the booking was canceled before the agreement for sale was signed, the entire money will be refunded without any deduction.

The homebuyers as of December 17, 2021, had paid a consideration amount of ₹3.22 lakh out of a total of Rs. ₹73.17 lakh which is around 4.50% of the total unit cost. However, on January 4, 2022, the homebuyers informed the developer about their intention to cancel the booking due to financial problems (loss of job) and requested a refund for the amount.

According to the complaint, the refund has not yet been made by the developer. This led the buyers to approach MahaRERA and claim refund along with interest.

Developer's take

The developer, in a written submission to the MahaRERA, has said that no commitment with regard to refund in the event of cancelling the unit before the sale deed was signed was agreed upon.

The developer said that the homebuyers had failed to make the 5% payment towards booking the flat. Clause 9 read with clause 3 of the booking application form states that a developer is entitled to forfeit 20% of the total consideration value of the flat. The developer also cited various case laws by virtue of which it has claimed that such forfeiture is permissible. It has prayed for dismissing the complaint filed by the homebuyers.

Also read: 5 orders passed by MahaRERA to safeguard homebuyers’ interests in Maharashtra

MahaRERA order

The MahaRERA, in its order dated May 28, 2024, has stated that forfeiture by the developer (which is nearly 5% of the total consideration of the said flat) is not legal as per the provisions of the RERA. Although, the developer has claimed that it has forfeited the said amount paid by the complainants as per the terms and conditions of the booking application form, it has failed to submit the copy of the booking application form on record of MahaRERA.

The MahaRERA has rejected the claim of interest sought by the homebuyers, saying that it did not have any merit. However, it directed the developer to refund the booking amount after deducting 2% of the total consideration value.

"The respondent (developer) is directed to refund the money paid by the complainants (homebuyers) towards the consideration of the said flat without any interest, after deducting 2% of the total consideration (value) of the said flat (excluding the statutory dues paid to the government/ brokerage if any) within a period of 45 days from the date of this order," the MahaRERA said in its order.

In an email response to HT Digital's queries, a Godrej Properties Limited spokesperson said that "In the impugned Order, though the Authority has arrived at the finding that the complainant has failed to show violation of Section 18 of the RERA Act by the developer, yet the Authority directed us to refund the amounts to complainant after forfeiture of amount equivalent to 2% of the sale consideration."

"We have already filed appeal in the Appellate Authority challenging the impugned Order and are confident on merits of the matter,” the developer said.

Also read: MahaRERA update: Developers of 195 projects set up grievance redressal cells to handle homebuyers' complaints

Can job loss be a reason for full refund?

According to an order issued by MahaRERA in August 2022, real estate developers are permitted to deduct a maximum of up to 2% of the total booking amount in case of cancellation of the booking.

As per the order, within 15 days of the cancellation of booking, the developer cannot deduct, but has to fully refund the booking amount. Within 16 to 30 days, 1% of the total cost of the unit can be deducted by the developer, 1.5% between 31 to 60 days and after 61 days, maximum up to 2% of the total unit amount.

Hence, irrespective of the job loss, homebuyers can claim for refund only after considering the above, legal experts told HT Digital.

Also read: Delayed possession: MahaRERA keeps registration of 1,750 lapsed real estate projects in abeyance

Are homebuyers entitled to a refund along with interest?

Homebuyers are entitled to receive a refund of the booking amount along with interest according to the order issued by MahaRERA in August 2022, according to lawyers.

“The order passed by MahaRERA is in accordance with the order issued by the authority in August 2022, which allows developers to forfeit up to 2% of the said unit’s cost in case of booking cancellation,” said advocate Sunil M. Kewalramani, a Mumbai-based real estate lawyer.

"In this case, I am of the opinion that the homebuyer, as per provision in the August 2022 MahaRERA order, is also entitled for interest on delayed refund of the amount. This is because the developer has failed to refund the amount within a period of 45 days from the date of cancellation of the apartment booking," Kewalramani added.