RERA and the Right to Refund: What Homebuyers Can Claim for Delayed Projects

Project delays are one of the most pervasive grievances in India's real estate sector, and the Real Estate (Regulation and Development) Act 2016 was enacted in large part to address them. RERA gives homebuyers the right to seek a refund of the amount paid, together with interest, where a developer fails to complete and hand over possession by the agreed date. The right to refund under RERA is now well established in law, and state Real Estate Regulatory Authorities have developed a body of orders clarifying the conditions under which refunds must be given and the rate of interest payable.

The Statutory Right to Refund Under Section 18

Section 18 of RERA provides that if a promoter fails to complete or is unable to give possession in accordance with the terms of the agreement for sale, the promoter shall be liable to return the amount received with interest at the prescribed rate. The rate of interest is typically the State Bank of India's marginal cost of lending rate plus two percent, though this varies by state. The right to refund is a buyer's choice: RERA also gives the buyer the option to stay invested in the project and continue to receive interest on delayed possession rather than exit.

How to File a Complaint Before RERA

Homebuyers seeking a refund must file a complaint before the Real Estate Regulatory Authority in the state where the project is located. Most state RERAs now have online complaint portals where complaints can be filed electronically with supporting documents including the agreement for sale, payment receipts, and correspondence with the developer. The complaint must clearly state the agreed date of possession, the actual delivery status, and the relief sought. State RERAs are required to dispose of complaints within 60 days, though in practice timelines vary. Orders can be appealed to the Real Estate Appellate Tribunal and further to the High Court.

Enforcement of RERA Orders and Recovery

One of the persistent challenges in RERA litigation is the gap between obtaining an order and actually recovering the money. RERA authorities have the power to recover amounts as arrears of land revenue, which allows enforcement including attachment of the developer's property and bank accounts. Where a developer is undergoing insolvency proceedings before the NCLT, homebuyers are treated as financial creditors and must file claims before the Resolution Professional. The Supreme Court has held that homebuyers qualify as financial creditors with the right to initiate insolvency proceedings.

Practical Takeaways

Homebuyers facing project delays should first assess whether to seek a refund or remain invested, taking into account the developer's financial health, project construction progress, and their own financial circumstances. If seeking a refund, all payment proofs and the agreement for sale must be preserved. Where a developer is already in insolvency, buyers should file claims promptly with the Resolution Professional. Legal counsel experienced in both RERA and IBC is advisable where the developer's financial situation is unclear.