Your Builder Pays Rs 5 Per Sq Ft For Delay. You Pay 18% Interest

The two clauses to compare

Find the clause dealing with delayed payment by you. It will usually specify interest at a stated rate per annum on any overdue instalment, frequently in the region of fifteen to twenty per cent, sometimes compounded.

Now find the clause dealing with delayed possession by the builder. It will often specify compensation at a fixed amount per square foot per month, which on a typical flat translates to a fraction of what you are paying in rent or EMI while you wait. The two are not comparable, and they were not drafted to be.

What Section 18 provides

Section 18 of RERA addresses the position where a promoter fails to complete or is unable to give possession of an apartment, plot or building in accordance with the terms of the agreement for sale, or by the date specified in it.

It contemplates two routes for the allottee. Where the allottee wishes to withdraw from the project, the section addresses return of the amount received with interest and compensation. Where the allottee does not intend to withdraw, it addresses payment of interest for every month of delay until handing over of possession. Which route suits a particular buyer is a commercial decision as much as a legal one.

Why the contractual clause still matters

A buyer reading Section 18 might reasonably ask why the agreement clause matters at all. In practice it matters for two reasons. First, it is what the builder will point to in correspondence, and most disputes are resolved by correspondence rather than by adjudication. Second, the agreement is where the possession date itself is defined, and a statutory remedy for missing a date depends on the date being clear.

That is why the possession date clause deserves as much attention as the penalty clause. A date expressed as a target, or subject to extension for a long list of circumstances, weakens the position before any question of remedy arises.

The clauses that erode the date

• Possession described as anticipated, expected or targeted rather than committed.
• A grace period of six or twelve months added on top before any liability arises.
• Force majeure drafted so broadly that ordinary construction and approval delays fall inside it.
• Extension permitted for delays in obtaining approvals, which are the promoter own responsibility to pursue.
• A requirement that the buyer be free of any default before claiming, which turns a single late instalment into a forfeiture of the remedy.

What to do

Before signing, ask for the possession date to be committed rather than indicative, for the grace period to be short or removed, and for the delay compensation to be expressed on the same basis as the interest you pay. Symmetry is a reasonable ask and the response tells you a great deal.

If you are already in a delayed project, the position depends on your agreement, the project registration status and how the delay arose. Complaints under the Act are made to the State authority, and that is the point at which advice from an advocate who does RERA work is worth considerably more than a general article.