BACK TO RERA Act 2016
RERA Act 2016
Section 18
Return of Amount and Compensation
THE STATUTE
Original Text
If the promoter, for any reason, is unable to give possession of the apartment, plot or building,—
(a) in accordance with the terms of the agreement for sale or, as the case may be, duly completed by the date specified therein; or
(b) due to discontinuance of his business as a developer on account of suspension or revocation of the registration under this Act or for any other reason,
he shall be liable on demand to the allottees, in case the allottee wishes to withdraw from the project, without prejudice to any other remedy available, to return the amount received by him in respect of that apartment, plot, building, as the case may be, with interest at such rate as may be prescribed in this behalf including compensation in the manner as provided under this Act:
Provided that where an allottee does not intend to withdraw from the project, he shall be paid, by the promoter, interest for every month of delay, till the handing over of the possession, at such rate as may be prescribed.
(2) The promoter shall compensate the allottees in case of any loss caused to him due to defective title of the land, on which the project is being developed or has been developed, in the manner as provided under this Act, and the claim for compensation under this sub-section shall not be barred by limitation provided under any law for the time being in force.
(3) If the promoter fails to discharge any other obligations imposed on him under this Act or the rules and regulations made thereunder or in accordance with the terms and conditions of the agreement for sale, he shall be liable to pay such compensation to the allottees, in the manner as provided under this Act.
Legal Commentary
Section 18 is the most commercially significant provision in RERA — it is the basis for the majority of all RERA complaints filed and the source of the largest compensation awards. It creates a clear, enforceable compensation framework for the single most common homebuyer grievance: delayed possession.
**Two choices for the allottee on possession failure:**
1. *Withdraw and get full refund with interest:*
- All amounts paid from day one are refunded.
- Interest at the 'prescribed rate' — typically SBI's Marginal Cost of Lending Rate (MCLR) plus 2% per annum, calculated from the date of each payment.
- For a buyer who paid ₹80 lakh over 3 years and has been waiting 2 years beyond the possession date, the interest alone can be ₹20–25 lakh.
- This remedy is available 'on demand' — the buyer does not have to give a reason or notice period.
2. *Stay and get monthly compensation:*
- The buyer continues in the project and receives interest at the same prescribed rate (SBI MCLR+2%) for every month of delay.
- Monthly compensation is calculated on all amounts paid, accruing from the agreed possession date to actual possession.
- This option suits buyers who genuinely want the flat and are willing to wait — but want to be compensated for the wait.
**The prescribed interest rate (SBI MCLR+2%):** State rules typically specify the rate. Most states prescribe SBI MCLR + 2% per annum, compounded monthly. This rate is significantly higher than savings account interest — it acts as a genuine financial deterrent against delay.
**Defective title compensation (Section 18(2)):** If the project has a defect in title (the builder didn't actually own the land, or there were undisclosed encumbrances), the buyer can claim compensation for losses — with no limitation period. This unlimited limitation period is unusual in Indian law and reflects the gravity of title defects.
**Other obligation failures (Section 18(3)):** Section 18 is not limited to possession delays — it applies to any failure by the promoter to fulfil obligations under the Act or the agreement. Carpet area shortfall, specification changes, failure to provide amenities — all can be remedied under Section 18(3).
**State variation — interest rate:** Some states have prescribed rates slightly different from SBI MCLR+2%. MahaRERA prescribed MCLR+2%; Karnataka uses the same. UP RERA has used simple interest rather than compound in some orders.
Questions & Answers
Under RERA Section 18, you have two options: (1) Withdraw from the project and get all your money back with interest at SBI MCLR+2% per annum from the date of each payment; or (2) Stay in the project and receive monthly interest at the same rate from the agreed possession date until you actually get possession. The right accrues automatically when the possession date passes.
Most state rules prescribe SBI MCLR (Marginal Cost of Lending Rate) + 2% per annum. As of 2024-25, this is approximately 10–11% per annum. This is significantly higher than fixed deposit rates, making it a genuine financial deterrent against builder delays.
Yes. The Supreme Court in Pioneer Urban Land (2019) held that the right to refund under Section 18 is unconditional — it does not matter how much construction is done. If the agreed possession date has passed, you are entitled to refund on demand without giving reasons.
Section 18(3) covers 'failure to discharge any other obligation' — including delivering the correct carpet area. If the actual carpet area is less than what was agreed, you can claim compensation for the shortfall under Section 18(3). Most state RERA Authorities calculate this as a proportionate refund of the price difference.