Delayed Possession in Bangalore: Refund or Interest Under RERA Section 18
Delayed possession is the most common dispute between flat buyers and developers in Bangalore, and the RERA Act answers it in Section 18. This guide explains the pair of remedies found there, how interest is fixed in Karnataka and what counts as the promised date. It also covers the points buyers often get wrong, such as force majeure and late handover.
What Section 18 provides
Section 18(1) of the Real Estate (Regulation and Development) Act, 2016 applies when a developer fails to complete a flat, plot or building on time. The agreement's own possession date is the test. The section also applies when the developer's business stops because its RERA registration is suspended or revoked.
From that point the buyer, whom the Act calls the allottee, chooses between two courses. The choice belongs to the buyer alone, and the developer cannot force one or the other.
| Point | Withdraw from the project | Stay in the project |
|---|---|---|
| What the buyer receives | Every rupee paid, plus interest, and compensation if the officer awards it | Monthly interest on the money paid, running until handover |
| What happens to the flat | The booking ends and the developer may resell it | The buyer keeps the flat at the agreed price |
| Suits a buyer who | Doubts the project will finish or has found another home | Is keen on this flat and sees work nearing its end |
Section 19(4) repeats the refund right from the buyer's side. Sub-sections (2) and (3) of Section 18 add compensation for loss caused by a defect in the title of the land and for other breaches by the developer.
Which date counts
The clock starts on the possession date that the registered agreement carries. A date mentioned by a sales executive, printed on a brochure or shown on a hoarding carries no weight beside it. Where the agreement allows a grace period in clear words, the grace period is usually added before the delay begins.
The completion date declared on the Karnataka RERA portal is a separate date. It is the developer's commitment to the regulator, and it is often later than the date given to an early buyer. An extension of the project's registration lets work continue lawfully, and the agreement date still governs the buyer's claim.
The interest rate in Karnataka
Interest under the Act is paid at a prescribed rate, so neither side sets it. Rule 16 of the Karnataka Real Estate (Regulation and Development) Rules, 2017 fixes it at the State Bank of India's highest marginal cost of lending rate plus 2%. The benchmark moves with the bank's rate revisions, so the figure on the day of the order applies.
The same rate works in both directions. A buyer who pays an instalment late owes interest to the developer at this rate, and a developer who delivers late owes it to the buyer. A clause that charges the buyer 18% and offers a few rupees per sq ft a month for delay does not survive this rule.
A worked illustration
Assume a buyer has paid Rs. 80 Lakhs and the flat is handed over 12 months after the agreed date. Take 11% a year as the rate, purely as an illustration. The interest for the year of delay comes to Rs. 8.8 Lakhs, or about Rs. 73,000 for each month.
For a buyer who withdraws, K-RERA orders commonly count interest on each instalment from the day it was paid until the refund. On the same Rs. 80 Lakhs paid over three years, that sum is far larger than a year's delay interest. Rule 17 requires a refund that has become due to be paid within sixty days, together with the interest.
Refund or interest: how to choose
Both remedies have a cost that the section does not mention. A refund ends the buyer's claim on a flat whose market price may have risen since the booking. Staying in keeps that gain and ties the buyer to a project that may slip further.
The questions below help in weighing the two.
- How far has the tower progressed, and is work continuing on site every week?
- Has the developer applied for the occupancy certificate, or is the structure still incomplete?
- What would a similar flat in the same locality cost today?
- Is the developer paying earlier K-RERA orders, or are recovery cases piling up against it?
- How long can the household carry rent and loan instalments together?
A home loan complicates a refund. The lender has the first claim on the money returned, and the loan runs until it is closed, so the instalments continue during the case. Tell the lender in writing before filing for a refund, and ask how it wants the money routed.
Compensation is a separate claim
Interest makes up for the time the buyer's money was held. Compensation covers a loss beyond that, such as rent paid for the extra months or the higher cost of a replacement home. The two are decided by different officers under the Act.
The Supreme Court settled this division in November 2021, in Newtech Promoters and Developers v. State of Uttar Pradesh. The regulatory authority decides refund and interest, and the adjudicating officer decides compensation under Sections 71 and 72. The court also described the buyer's right to a refund on delay as unconditional, whatever the cause of the delay.
Force majeure and other defences
Developers usually answer a delay claim by pointing to events outside their control. Section 6 of the Act defines force majeure narrowly as war, flood, drought, fire, cyclone, earthquake or another natural calamity that affects regular development. Labour shortages, sand supply, a slow market and pending approvals fall outside that list.
Where a genuine force majeure event is proved, the agreement extends the possession date by the period of the event. That shortens the delay and leaves the rest of the claim standing. A buyer who is behind on payments faces a counter-claim for interest on the arrears, so clear any dues or record the reason for holding them back.
Taking possession late
A buyer who stays in the project earns interest until the day of handover, and accepting the keys does not cancel what has built up. The risk is in the paperwork at handover. Possession letters sometimes carry a line stating that the buyer has no further claims of any kind.
Read the letter before signing, strike out or object to such a line in writing, and keep a copy. Possession should come with the occupancy certificate for the tower, because an offer of possession without one is incomplete. Note the date of the offer, since that is where the delay period normally ends.
Steps when the date has passed
A claim under Section 18 is made by a complaint to the Karnataka Real Estate Regulatory Authority. The preparation matters more than the filing. Work through the steps below first.
- Find the possession clause in the registered agreement and write down the date and the grace period, if one exists
- List every payment with its date, amount and receipt number
- Photograph the site and save the developer's emails about revised dates
- Write to the developer stating the delay and the remedy chosen, and keep proof of delivery
- Check the project's page on the K-RERA portal for its registration status and earlier orders
- File the complaint with the agreement, receipts and correspondence attached
The Act sets no minimum period of delay before a claim. The Supreme Court has also held that a buyer may go to the consumer commission instead, since the two remedies run side by side. Buyers comparing projects by delivery record are welcome to ask our team through the contact page.
