Developers can’t charge homebuyers interest on unpaid dues if project is delayed: NCDRC

In this case, the homebuyer, Gurudarshan Singh, had booked a flat in Faridabad, The Pranayam for Rs 50.9 lakh. While the handover date was December 2011, the apartment was only ready for handover in 2013.

The National Consumer Disputes Redressal Commission (NCDRC) has ruled that a real estate developer cannot charge interest from homebuyers on unpaid dues if a project is delayed beyond the agreed time. Upholding an order passed by the state consumer forum, NCDRC on June 3 observed: "The project was delayed beyond the agreed time of handover. Consequently, the developer cannot demand interest for the delay in payment made by the homebuyers."

In this case, the homebuyer, Gurudarshan Singh, had booked a flat in Faridabad's The Pranayam for Rs 50.9 lakh. While the handover date was December 2011, the apartment was only ready for handover in 2013. Legal experts note that despite directions from the Supreme Court of India, several state real estate regulators have passed orders where homebuyers have been asked to pay interest.

Setting aside another NCDRC judgement, where the forum allowed a developer Pioneer Urban and Land Infrastructure Ltd to charge the homebuyer interest in a delayed project, the apex court said on April 10, 2024, "We are of the view that NCDRC is incorrect to order the developer for charging delayed interest from homebuyers." Thus, the Supreme Court quashed the interest charged by the developer for the homebuyer's delay in paying monthly instalments.

Legal experts say several state real estate regulators continue to pass similar orders despite the Supreme Court. This comes after a recent Karnataka RERA order asked a buyer to pay interest to the developer for failing to pay EMIs for a delayed Prestige Group project in Bengaluru, Moneycontrol reported.

In this instance, while the homebuyer paid about Rs 30.1 lakh by November 2011, he noticed that the construction was not complete as per the schedule. Thus, he stopped paying further money, and the developer levied an interest of about Rs 5 lakh for the delay in payments.

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Souptik Datta

Sub Editor|Moneycontrol

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In a contrasting order, however, the Karnataka state consumer forum directed the developer to refund the amount paid by the homebuyer with an additional interest of 12 percent for delaying the project according to the schedule. However, the developer appealed to NCDRC against the order, citing the failure of the homebuyer to pay timely installments and thus meant to be penalized.

In 2019, the state commission noted that homebuyers have faced substantial losses as they are forced to stay on rent and due to the price escalation of properties in Delhi and NCR.