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Cancellation and Refund under RERA

Cancellation and Refund under RERA

Cancellation and Refund under RERA

RERA registration and RERA Act is applicable for all residential real estate development with 8 units or development of plots with a total area of over 500 square meters. The RERA Act permits the homebuyer, otherwise known as an allottee, to withdraw from the real estate agreement, whether or not the developer is at default. In such a scenario, the developer is obliged to refund the amount paid by the allottee within a period of 90 days (according to TNRERA) of the allottee’s withdrawal, after deducting the amount paid for the allotment.  In this article, we look at the rules and regulations relating to cancellation and refund under RERA in detail.

Cancellation under RERA

A homebuyer may withdraw from a purchase agreement for varied reasons. While some of them can be attributed to the default committed by a promoter, the other likely reasons for such a withdrawal could be due to dismal market situations, personal or financial emergencies or other reasons.

Home buyers rights under RERA.

Promoters Default

If a promoter fails to complete a project within the stipulated time or is unable to provide possession of the real estate property due to any reason whatsoever, the promoter must refund to the homebuyer, any amount received for the property. In addition to refund of the amount paid, the promoter is also required to pay an interest at the prescribed rate in this behalf including compensation.

Finally, the promoter is also required to compensate a homebuyer on any losses caused due to a defective title of the land, on which the project is/has been developed.

In case of delay and if the buyer is unwilling to withdraw from the contract, the promoter is obligated to pay the necessary interest until the project is completed. However, if the delay occurs due to any natural or other calamities which is not in the control of the developer, the promoter is not obligated to make any payment of interest.

Allottees Default

If a homebuyer fails to make the necessary payments for a continuous period of time, the developer is empowered to terminate the agreement and revoke the allotment made to the buyer. The provision of refund here is no different from the general RERA rule i.e. the amount paid to the promoter must be refunded to the homebuyer within a period of 90 days, (According to TNRERA) excluding booking amount and interest liabilities.

The liability for paying interest not only affects the promoter but the homebuyer as well. The promoter is entitled to claim interest from the homebuyer for any delay in payments.

Amendment of Agreement

The RERA Act now provides room for both allottees and developers to amend the sales agreement, provided both the parties consent to it by writing.

Rate of Interest

The rate of interest payable by either the promoter or the homebuyer will be the State Bank of India’s highest Marginal Cost of Lending Rate + 2%. If the State Bank of India’s Marginal Cost of Lending Rate is not applicable, it would be replaced by the benchmark lending rates stipulated by the Government-owned banking body i.e. State Bank of India.