Consumer Connect: 'Builders Are Legally Bound To Pay Interest For Delay, Without Asking,' Says Expert

Q. My uncle has booked a flat with a builder in a project in Kandivali by paying `90 lakh against the total price of `1.50 crore. The agreement was executed in January 2022, and the promised possession date was December 31, 2023. According to the MahaRERA website, the builder has been granted an extension up to December 31, 2025. The builder is refusing to pay any interest on the `90 lakh, claiming that the MahaRERA extension nullifies the delay. Is the extension binding on the buyer? Can my uncle claim interest for the delay? For calculating the delay, which possession date counts – the one in the Agreement for Sale or the extended date by MahaRERA? — Suresh Kulkarni, Borivali A.

Although MahaRERA grants an extension of project registration, this extension is not relevant for the homebuyer when it comes to calculating the delay. The possession date mentioned in the registered agreement is binding and does not automatically get revised due to the extension granted by MahaRERA. In your uncle’s case, therefore, the delay begins from January 1, 2024. The builder cannot hide behind the extended date granted by MahaRERA. Several judgments have affirmed this interpretation.

As per Section 18 of RERA, if a builder delays possession beyond the date mentioned in the registered agreement, he is liable to pay interest to the homebuyer on the amount paid, at the rate of MCLR + 2% per annum. Let’s see what the law says. Section 18(1): “If the promoter fails to complete or is unable to give possession of an apartment – (a) in accordance with the terms of the agreement for sale or (b) due to discontinuance of his business as a developer on account of suspension or revocation of the registration under this Act or for any other reason – he shall be liable on demand to the allottees, if the allottee wishes to withdraw from the project, to return the amount received in respect of that apartment, with interest at such rate as may be prescribed, along with compensation as provided under this Act.

Provided that where an allottee does not intend to withdraw from the project, he shall be paid, by the promoter, interest for every month of delay, till the handing over of possession, at the prescribed rate.” Thus, Section 18 covers two situations: First, if the buyer wants to withdraw from the project, the builder is liable to refund the amount paid, along with interest and compensation. In this case, the buyer has to demand the refund.

Second, if the buyer chooses to continue in the project despite the delay, the builder is mandated to pay interest for every month of delay – without any demand from the buyer. This second provision is especially important. The builder is legally bound to pay interest automatically for the delay, even if the buyer does not ask for it. In fact, the model Agreement for Sale prescribed by MahaRERA also includes a clause that states: “If the promoter fails to abide by the time schedule for completing the project and handing over the apartment to the allottee, the promoter agrees to pay to the allottee, who does not intend to withdraw from the project, interest as specified in the Rule, on all the amounts paid by the allottee, for every month of delay, till the handing over of possession.”

Unfortunately, many homebuyers are unaware of this important provision in RERA and in their own agreement. As a result, they suffer silently while enduring long delays by builders.

(Advocate Shirish V Deshpande is chairman, Mumbai Grahak Panchayat. Queries can be sent to him on email: shirish50@yahoo.com)