Cancelling a Flat Booking in Bangalore: Refunds and Forfeiture Limits
Plans change after a flat is booked: a job move, a loan that falls short, or a family decision. When a buyer cancels, the booking form often says the amount paid is non-refundable. This guide explains how much a builder may keep, what the courts have said, how the RERA Act helps, and the steps to cancel a booking in Bangalore.
What Happens to the Money on Cancellation
The answer depends on two questions. The first is who is at fault: the buyer changing plans, or the builder failing to deliver. The second is what the money paid so far really was: earnest money that secures the deal, or instalments toward the price.
A booking form or agreement usually sets out a cancellation clause with a forfeiture amount. That clause is the starting point, but it is not the last word. Courts and consumer forums have repeatedly cut back forfeiture terms that go beyond a reasonable amount.
Earnest Money and Part Payment
Indian contract law treats these two kinds of payment very differently. Earnest money is paid to bind the contract and to guarantee that the buyer will go through with it. If the buyer backs out without cause, reasonable earnest money may be forfeited.
A part payment, by contrast, is an instalment toward the price of the home. In Satish Batra v. Sudhir Rawal (2013), the Supreme Court held that a part payment must be returned and cannot be kept as a forfeit. The receipts and the wording of the agreement show which kind of money was paid.
How Much a Builder May Forfeit
The clearest recent ruling is Godrej Projects Development Ltd. v. Anil Karlekar, decided by the Supreme Court on 3 February 2025. The agreement in that case let the builder keep 20% of the basic sale price as earnest money when the buyers cancelled. The court found the agreement one-sided and in the builder's favour.
It upheld the consumer commission's order that only 10% of the basic sale price could be forfeited, with the rest refunded. The court also said that forfeiting more than a reasonable earnest amount is penal in nature. Since 10% of the basic sale price has been treated as reasonable in many consumer cases, it is a useful benchmark for buyers.
The same ruling also shows the limits of the buyer's claim. As the buyers had cancelled because property prices fell, and not because of any fault of the builder, the court set aside the interest on the refund. A buyer who walks away by choice should expect a reasonable deduction and no interest.
The 10% Advance Rule Under RERA
Section 13 of the RERA Act bars a promoter from taking more than 10% of the cost of a home as an advance or application fee before a written agreement for sale is signed and registered. This rule matters at cancellation time. A builder that took 25% or 30% against a bare booking form had no right to collect that sum before the agreement.
Buyers who keep the advance within 10% until the agreement is registered also keep their risk low. Less money is at stake, and the agreement then sets out the cancellation terms in a document registered under Karnataka law.
When the Builder Is at Fault
The position changes when the cancellation is caused by the builder. Under Section 18 of the RERA Act, if the promoter fails to complete the home or give possession by the agreed date, the buyer may withdraw from the project. The buyer is then entitled to a refund of the amount paid with interest, at the rate set under the state rules.
The main cases where the fault lies with the builder include these:
- Possession delayed beyond the date in the agreement
- The builder stopping work because its RERA registration was suspended or revoked
- A defect in the title to the land, for which the RERA Act provides compensation
- Major changes to the approved plan or the home without the buyer's written consent
In such cases, the builder has no ground to forfeit the buyer's money. The claim is filed against the project with the Karnataka RERA authority, with the agreement and payment proof attached.
Scenarios at a Glance
The likely position on the money paid, in the most common cases, is shown below.
| Situation | Likely position | What to check |
|---|---|---|
| Buyer cancels, builder not at fault | A reasonable deduction, often about 10% of the basic sale price | The cancellation clause and how the money was described |
| Money paid was a part payment | Returned to the buyer in full | Receipts and the payment schedule |
| Builder delays possession | Full refund with interest | The agreed possession date and the RERA record |
| Clause allows forfeiture of everything paid | Open to challenge as unfair | Whether the agreement is one-sided |
| More than 10% taken before a registered agreement | The builder's position is weak | The dates of payments and of the agreement |
Steps to Cancel a Booking
A clear paper trail protects the refund. The usual steps are these:
- Collect every receipt, the booking form, the allotment letter and the agreement for sale.
- Note how each payment is described: booking amount, earnest money or instalment.
- Read the cancellation clause and work out the deduction it claims as a share of the basic sale price.
- Write to the builder to cancel, giving the reason and the refund expected, and keep the courier or email record.
- Act early, since a prompt cancellation is easier to settle than one made late in construction.
- If the refund is refused or the deduction is excessive, file a complaint with the Karnataka RERA authority or a consumer commission.
A property lawyer can review the agreement and the correspondence before a large deduction is accepted. For a registered agreement, the lawyer can also advise on cancelling the deed itself.
Avoiding the Problem at Booking
Most cancellation disputes can be headed off before the first cheque. Booking only in a RERA-registered project gives the buyer access to the authority if things go wrong. Reading the cancellation clause before paying the token shows the deduction the builder will claim.
It also helps to confirm the home loan before booking, since a loan shortfall is a common reason for cancelling. The EMI calculator shows the loan and the cash needed for a home in a given budget. For NRI buyers, the NRI guide covers the paperwork for buying from abroad.
