Your Builder Pays ₹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 eighteen per cent, sometimes compounded, and often with a right to cancel the allotment after a set number of defaults.

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, such as ₹5 or ₹10, frequently calculated on super built-up area and payable only at the time of possession. On a typical flat this is 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.

How big is the gap in rupees?

Take a flat in Noida priced at ₹90 lakh, sold as 1,250 sq ft super built-up. By the original possession date the buyer has paid ₹72 lakh, much of it through a home loan.

Under the agreement, delay compensation at ₹5 per sq ft per month comes to ₹6,250 a month. Over a two-year delay, that is ₹1.5 lakh.

Now run the buyer's side. If one instalment of ₹9 lakh is paid two months late at 18 per cent a year, the builder charges about ₹27,000 for those two months alone. Meanwhile the buyer is paying perhaps ₹25,000 a month in rent and ₹60,000 or more in EMI.

By contrast, if the prescribed rate under the State's RERA rules works out to roughly 11 per cent a year (the actual figure depends on the State rule and the benchmark rate at the time), interest on ₹72 lakh is about ₹66,000 a month, or close to ₹16 lakh over two years. That is the difference between the contractual figure and the statutory one, and it is why the clause matters.

What does Section 18 of RERA actually give you?

Section 18 of the Real Estate (Regulation and Development) Act, 2016 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 provides for return of the amount received with interest at the prescribed rate, and compensation. Where the allottee does not intend to withdraw, the proviso provides for interest for every month of delay until handing over of possession, at the prescribed rate. Which route suits a particular buyer is a commercial decision as much as a legal one.

The rate is set by State rules rather than by the agreement. Many States prescribe the State Bank of India's highest marginal cost of lending rate plus two per cent, but check the rule in your State, because the figure and the benchmark can differ.

Section 2(za): interest must run both ways

The definition of interest in Section 2(za) of the Act contains an explanation that speaks directly to the asymmetry. It says the rate of interest chargeable from the allottee by the promoter, in case of default, shall be equal to the rate of interest which the promoter shall be liable to pay the allottee, in case of default.

It also fixes the periods. Interest payable by the promoter runs from the date it received the money until the date the money and interest are refunded. Interest payable by the allottee runs from the date of default until payment.

In practical terms, an agreement for a RERA-registered project that charges you 18 per cent while paying you ₹5 per sq ft is out of step with the statute. When you raise it, cite Section 2(za) by number. It is a specific point, not a general complaint about fairness.

Note one consequence that cuts the other way. Equal interest also means the builder can charge you the prescribed rate on genuinely late instalments. Symmetry is not a way out of paying on time; it is a way of making sure the same rule applies to both sides when either of them is late, which is what most buyers actually want.

Clause by clause: what to look for

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. Section 18 applies to projects that fall under RERA; for an older project outside it, the contract and consumer law carry more of the weight.

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's 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.
• A clause that the buyer's acceptance of possession waives all claims for delay, which you should strike or qualify.

What have courts said about one-sided builder agreements?

In Pioneer Urban Land and Infrastructure Ltd v Govindan Raghavan (2019), the Supreme Court considered an agreement where the buyer paid 18 per cent interest on delay while the builder paid ₹7 per sq ft per month. The Court held that a buyer cannot be bound by terms that are wholly one-sided, and that using such terms is an unfair trade practice under consumer protection law.

The Supreme Court has also held, in Imperia Structures Ltd v Anil Patni (2020), that the remedy under RERA does not bar a homebuyer from approaching a consumer commission. Which forum suits your case depends on the amount involved, the relief sought and how the local authority functions, which is a question for an advocate.

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, it is backed by Section 2(za), and the response tells you a great deal.

Sample wording to propose: "If the Promoter fails to hand over possession by [date], the Promoter shall pay the Allottee interest at the rate prescribed under the applicable RERA rules for every month of delay on all amounts paid by the Allottee, which rate shall be the same rate payable by the Allottee on any delayed payment."

If you are already in a delayed project, write to the promoter citing the possession date, Section 18 and Section 2(za), and keep the reply. The position then depends on your agreement, the project's 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.

Whichever stage you are at, keep a ledger of every payment: date, amount, receipt number and bank reference. Delay interest is calculated on the amounts you have paid, and on a refund Section 2(za) runs interest from the date the promoter received each amount, so a clean ledger lets you calculate the claim yourself and check any figure the builder offers in settlement.