What happens if the possession of your dream home is delayed? You buy an apartment, sign an agreement, make the necessary payments, but the builder repeatedly fails to deliver the flat on time. Are you entitled to interest payout under RERA Act?In one such case, the Bombay High Court has ordered the builder to pay interest and ruled that buyers have an unconditional right to monthly interest in case of project delays.
What the case is about
Two homebuyers filed a case against the builder. The dispute concerned an apartment for which they had signed the sale agreement in 2014, with possession due by June 30, 2017.The flat’s consideration was Rs 1.95 crore. By the time of the complaint, the buyers had paid Rs 2.06 crore, including the consideration paid to the promoter, stamp duty, registration charges and applicable taxes.Also Read | US-based daughter files case against parents seeking share in properties; Karnataka HC rejects her ‘ancestral’ claim, saying they were father’s separate assets, not coparcenary propertyHowever, when they didn’t get the possession by the agreed deadline, the buyers approached MahaRERA, seeking possession along with interest for the delay. In January 2019, the authority directed the developer to hand over the apartment with an occupancy certificate by December 31, 2019, while allowing the buyers to seek interest at a later stage.The buyers appealed. In March 2021, the Maharashtra Real Estate Appellate Tribunal directed the promoter to pay interest at the State Bank of India’s highest marginal cost of lending rate plus 2% on the amount paid, from July 1, 2017, until possession was handed over. It also awarded Rs 25,000 in costs.The builder challenged that order before the Bombay High Court. The developer’s argument was that by continuing to pay installments under revised schedules, and by not objecting to its letters announcing new dates, the buyers had in effect accepted the delay.The promoter relied on Section 55 of the Indian Contract Act, which addresses the consequences of accepting delayed contractual performance without notifying the other party of an intention to claim compensation.The developer also invoked contractual force majeure provisions and the COVID-19 pandemic.Also Read | Grandmother and her son gifted 2.5-acre land to his second wife, who sold it; his daughter from first marriage claimed it was ancestral, but Madras HC rejects her plea
Why did the court rule in favour of homebuyers?
According to Gaurav Dasgupta, Partner, Khaitan & Co, this is one of the most homebuyer-friendly rulings he has seen this year.Its message is simple: a developer cannot turn a buyer’s patience into a waiver.The Bombay High Court examined whether accepting delayed performance could deprive homebuyers of their right to interest under Section 18 of RERA. It held that the statutory protection could not be made conditional on giving the notice contemplated under Section 55 of the Contract Act.The Bombay High Court rejected this since RERA is a special act for real estate, which overrides a general act like contract act, when there is a conflict between the provisions.“It held that Section 18 of RERA gives a buyer who stays with a delayed project an unconditional right to monthly interest. Following the Supreme Court, it said that right cannot be cut down by conditions or by events the buyer does not control. RERA is a beneficial legislation, and the court upheld the spirit of the act,” explains Gaurav Dasgupta.Also Read | Man enters JDA for land, gets 6 flats from builder and transfers 5 to wife, but gets tax notice; ITAT Delhi deletes Rs 4.14 crore additions after finding no stock-in-trade conversion or saleThe developer’s letters were information, not a renegotiation, according to the court.“A new date cannot be agreed informally by conduct, and in an ongoing RERA project the only lawful way to extend time is to extend the registration with the regulator after following due process of law. The Court also refused to let the developer rely on Covid-19, because the pandemic came long after the 2017 deadline had already passed,” Dasgupta tells TOI.In earlier similar cases, the court had given a ruling about payment of interest from the advent of RERA, but in this case, the court went on to uphold the allowing of interest from the date of original possession, even though it was before RERA came into force.The court dismissed the builder’s appeal which argued that the buyers had accepted changes to the possession schedule and could not subsequently claim interest without giving the developer notice. The High Court held that Section 18 of RERA protects a buyer’s right to interest for delayed possession, even when the buyer chooses to remain in the project.Explaining the purpose of the legislation, the court said RERA was enacted “to protect the interest of consumer in the real estate sector”. It then clarified the right available to buyers who decide not to withdraw from a delayed project.The court held that Section 18 gives buyers an “unqualified absolute right” to accept delayed performance without giving up their claim to interest for every month of delay.Also Read | He bought a diesel SUV for Rs 13.69 lakh; but repeated DPF issues followed; consumer commission finds deficiency in service and awards Rs 10.99 lakh refund, 9% interest and compensationThe promoter had argued that the buyers’ conduct showed acceptance of revised possession dates. However, the High Court noted that the appellate tribunal had found “no authentic evidence” that they had accepted the revised possession date or waived their right to interest.The court also examined the developer’s communications. It observed that these primarily informed buyers about the delay and offered assurances about completion. As the judgment states, “The revised timelines are couched in a manner so as to be in nature of information requiring no further acts by the allottees.”Importantly, the court held that even if the buyers had accepted the revised date, that would not extinguish their statutory entitlement. It stated: “Even accepting that there was acceptance of revised date of possession, considering Section 18 of RERA Act, the allottees were well within their rights to accept the delayed performance without foregoing their right to interest for delayed possession.”On the pandemic defence, the court noted that the contractual deadline was June 2017 and the project’s revised completion date under RERA registration was December 2019. COVID-19 came later and, the court held, “does not impact the performance of the contract.”The Bombay High Court therefore upheld the direction to pay interest from July 1, 2017, until possession was handed over, and dismissed the promoter’s second appeal on June 18, 2026.
Significance of ruling
According to Gaurav Dasgupta, for homebuyers, paying installments on time while a project runs late does not cost you your interest claim.“Thus, it is important to keep faith in RERA and not violate any provisions of payment as agreed in the project timeline and then seek legal recourse for any violation on the part of the developer, including interest and costs,” he says.For developers, the lesson is just as clear.“If timelines slip, the answer is a formal extension under RERA, not reassuring letters to buyers. Interest liability starts on the contractual date and keeps running unless the extension is expressly agreed under the due process established under RERA – getting approval of 2/3rd of the allottees and approval of RERA,” he adds.It’s important to note that the ruling has been challenged before the Supreme Court through a special leave petition filed on 24 July 2026.The developer’s advocate had initially said that an out-of-court settlement was being explored, but later stated that they want full-fledged hearing in the appeal, says Dasgupta.The question the Supreme Court may now have to answer is whether this long-established Contract Act rule has any role left in RERA disputes.
