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Builders Cannot Deduct More Than 10% of Base Price on Homebuyer Cancellations

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Builders Cannot Deduct More Than 10% of Base Price on Homebuyer Cancellations

Builders Cannot Deduct More Than 10% of Base Price on Homebuyer Cancellations

Builders Cannot Deduct More Than 10% of Base Price on Homebuyer Cancellations

The Supreme Court has ruled that real estate developers cannot deduct more than 10% of the basic sale price (BSP) in case a homebuyer cancels their booking. A bench of Justices B R Gavai and S V N Bhatt held that contractual terms that are one-sided, unfair, and unreasonable would amount to an unfair trade practice.

The ruling came in response to a plea by Godrej Projects Development Ltd, which sought to forfeit 20% of the BSP as per its agreement with a homebuyer. The court rejected the plea, affirming that a 10% forfeiture limit, as established by the National Consumer Disputes Redressal Commission (NCDRC), was reasonable.

The court cited its earlier rulings and NCDRC judgments dating back to 2015, including the case of DLF Ltd. v. Bhagwanti Narula, which upheld the 10% forfeiture limit. It maintained that any forfeiture beyond this threshold would be considered a penalty under Section 74 of the Indian Contract Act, of 1872.

The case involved a homebuyer who had booked a flat in the “Godrej Summit” project at Sector 104, Gurgaon, but later sought a refund. The NCDRC had directed the company to refund the buyer after deducting only 10% of the BSP, amounting to Rs. 17.08 lakh. The Supreme Court upheld this decision while setting aside the NCDRC’s order to pay interest on the refunded amount.

The ruling reinforces previous consumer protection judgments and sets a legal precedent on the permissible limits of forfeiture in real estate transactions.

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About the author
Sandeep Sadh

About Sandeep Sadh

Sandeep Sadh has been in the real estate business since 1993 in Mumbai. He has expertise in Buying, Selling, Leasing properties in Mumbai and a deep understanding of legal and tax related matters due to his experience.

Summary

Over the years, he has experienced the City's growth. He has been a columnist in the Times of India with numerous articles, which bring about a clear picture of the real estate market in Mumbai. He is a regular on NDTV, CNBC, ET Now Real Estate and Zee News, giving his experienced quotes as and when required.

Sandeep Sadh has used information and technology since the year 1998 and now what people call it Prop Tech to cater to the needs of Home Buyer, Seller, Investor and Corporates, HNI and NRI looking to Buy/Sell or Lease their properties in the Mumbai Property Market.

Sandeep has a holistic experience of real estate be it Leasing an Apartment for your CEO in the most upmarket buildings, to enter into a long lease for your office in Mumbai in prime buildings or an Investment in good projects with a detailed analysis keeping in mind the Demand and Supply and other micro factors of the project/property.

Sandeep Sadh has developed a few websites like www.mumbaipropertyexchange.com, www.realestatemumbai.com, www.propi.in which augment the real estate consulting business.

Right from Investments in Primary Markets to Selling, leasing and specializing for NRI’s all over the world. He is an expert in NRI Home Buying and Selling and has a good understanding of the Income Tax laws pertaining to Selling a Property and Repatriating funds overseas or reinvesting based on Capital Gains etc.

Experience

  • Residential Leasing
  • Commercial Leasing
  • Residential Home Buying
  • Commercial Property Buying
  • Investment Properties with complete Property Management as your Real Estate Family office

While transacting in the above segments, he has complete experience and deep understanding of the paper work, his areas of expertise are :

  1. Drafting of the Leave and License Agreements
  2. MOU for Buying/Selling Properties
  3. Drafting Agreement for Sale
  4. Gift Deeds
  5. Computing of Capital Gains with current ready reckoner values
  6. Drafting of Supporting Power of Attorney.

As an add on Service, Sandeep Sadh has tied up with various Professionals like Lawyers and Chartered Accountants who add value in transacting and specially services for Non Resident Indians.

Application to Income Tax for Lower Tax Deduction Certificate – Through a qualified CA and keeping a grip on the traction so that the remittance back to Non Resident Indians after Selling the property is seamlessly transferred.

You can connect with Sandeep Sadh on ssadh@mumbaipropertyexchange.com

LinkedIn - https://www.linkedin.com/in/sandeepsadhmpe/

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