Refund or Possession? Understanding Homebuyers’ Choice Under RERA Section 18

By NyayKart Legal Team — Experts in RERA, Consumer Disputes & Property Law Across India.

 Introduction

Owning a home is one of the biggest dreams for every Indian family. It represents security, stability, and emotional satisfaction. However, this dream can quickly turn into a nightmare when builders fail to deliver the property on time. Homebuyers are left paying EMIs on home loans for a house they cannot occupy while also paying rent for temporary accommodation. The financial pressure, coupled with emotional distress, can be overwhelming.

To address such problems and ensure accountability in the real estate sector, the Real Estate (Regulation and Development) Act, 2016 (RERA) was enacted. The law ensures transparency, fairness, and accountability in real estate transactions. Among its several buyer-friendly provisions, Section 18 of RERA stands out as one of the most powerful protections available to homebuyers.

Under this provision, if a builder fails to deliver possession within the time promised in the Agreement for Sale, the homebuyer has a clear legal choice — either withdraw from the project and claim a refund with interest and compensation, or continue with the project and claim interest for the delay. This article explains in detail the meaning, process, and benefits of both options under Section 18.

What Exactly Does Section 18 of RERA Provide?

Section 18(1) of RERA provides that:

“If the 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, the allottee shall be entitled to a refund of the amount paid along with interest and compensation.”

Alternatively, the allottee can choose to remain in the project and seek monthly interest for the period of delay until possession is handed over. In simple words, RERA gives the buyer two powerful remedies — Refund or Possession with Interest.

Option 1: Refund with Interest and Compensation

If you no longer trust the builder or the project is indefinitely delayed, you can choose to withdraw and demand full refund with interest and compensation.

What You’re Entitled To:

• Full refund of all payments made (booking + installments).

• Interest from the date of payment till refund — as per SBI MCLR + 2% (usually 9–10% p.a.).

• Compensation for mental agony, financial burden, and litigation costs.

  
  

Example:

You paid ₹40 lakh for a flat due in March 2021. As of March 2024, the builder has not delivered possession.

Interest @10% for 3 years = ₹12 lakh.

You can claim ₹52 lakh (Refund + Interest) through RERA.

Option 2: Continue with the Project and Claim Interest for Delay

Many buyers still want the flat — especially if the location or price is attractive.

In such cases, RERA allows you to stay in the project but claim monthly interest for the delayed period until the possession is actually given.

This ensures that the builder compensates you financially for blocking your funds during the delay.

Example:

Possession promised in December 2022, actual possession given in June 2024 = 18 months delay.

Interest on ₹50 lakh @10% = ₹7.5 lakh compensation for delay.

Step-by-Step Process to File Under Section 18

Step 1: Gather All Documents

• Agreement for Sale / Allotment Letter

• Payment Receipts / Bank Statements

• Builder’s Project Registration Certificate from the RERA website

• Correspondence between you and the builder (emails, messages, notices)

• Proof of Possession Date mentioned in the Agreement

  
  

Step 2: Send a Legal Notice

Before filing a complaint, it is advisable to issue a legal notice to the builder demanding refund or possession with interest. Give 15–30 days for compliance. This strengthens your case and sometimes results in an early settlement.

Step 3: File a Complaint on RERA Portal

Visit your State RERA website and file a complaint under Section 31 of the Act. Clearly specify your demand — refund or possession with interest — and upload all relevant evidence.

Step 4: RERA Hearing

RERA will summon the builder and conduct a hearing. Both sides will present their evidence and arguments.

Step 5: RERA’s Order

The Authority may direct the builder to:

• Refund the entire amount with interest.

• Pay monthly interest for delay.

• Compensate for mental agony and costs.

  
  

Step 6: Execution of Order

If the builder fails to comply, file a Non-Compliance Application under Section 39. RERA can take strict measures such as:

• Freezing the builder’s bank accounts.

• Attaching project properties.

• Imposing penalties and even imprisonment for continued defiance.

Common Defenses by Builders (and How to Counter Them)

1. Claim of force majeure — Builders often cite delay in approvals or COVID-19 disruptions. Buyers can demand proof of government notification covering the specific period.

2. Offer of alternative flat or discount — Accept only if value and quality are identical; otherwise, continue with your claim.

3. False claim of part possession — Insist on occupancy certificate and completion certificate to prove actual readiness.

Preventive Measures for Future Buyers

• Always verify the project’s RERA registration number and promoter details.

• Read the Agreement for Sale carefully — check the possession clause and penalty clause.

• Prefer projects that are 60–70% complete.

• Never make cash payments; always use bank transfers.

• Visit the RERA website regularly to track project status and updates.

Key Takeaways

• Section 18 gives buyers the legal right to choose between refund and possession with interest.

• Builder delay is a legal default, not a minor inconvenience.

• Documentation is crucial — every payment and communication counts.

• RERA ensures quick, enforceable relief to protect homebuyers’ interests.

• Judicial precedents favor the homebuyer, emphasizing the law’s remedial nature.

 FAQs

Q1. Can I get both refund and compensation together?

Yes, if you choose refund, you can claim interest + additional compensation for harassment or mental agony.

Q2. Can I file in both RERA and Consumer Forum?

No, you must choose one forum. Dual filing for the same cause of action is barred under res judicata.

Q3. Can I withdraw my complaint if the builder agrees to settle?

Yes, RERA allows withdrawal based on mutual settlement terms recorded before the Authority.

Q4. What happens if the builder doesn’t pay even after RERA order?

You can file for execution; RERA can attach property or even issue arrest warrant for non-compliance.

Conclusion

Section 18 of RERA is the backbone of homebuyer protection. It ensures that the dream of owning a home doesn’t turn into a financial disaster due to a builder’s negligence. Whether you choose to withdraw with a full refund or continue with the project and claim interest, RERA empowers you to hold the builder accountable.

The law makes it clear: Builders cannot delay indefinitely and escape liability. With proper documentation and timely legal action, homebuyers can recover their money or get their long-awaited possession along with compensation.

How NyayKart Can Help

At NyayKart, we specialize in RERA matters across India — from drafting legal notices to filing refund/interest complaints, representing before RERA authorities, and ensuring execution of orders.

Whether you want your money back with interest or possession with compensation, our legal experts can guide you every step of the way.