RERA and Your Money: A Clear Guide to Advance Payments and Booking Amount Refunds

Buying property is a major financial decision, and the Real Estate (Regulation and Development) Act, 2016 (RERA), was introduced to protect homebuyers from unfair builder practices. This guide explains how RERA rules regulate advance payments, booking amounts, and refunds—and what to do if a builder is not refunding your booking amount.

Table of Contents

• The RERA Framework
• Advance Payments Under RERA
• Booking Amounts Explained
• Refund Rules Under RERA
• Cancellations and Buyer Rights
• Builder’s Duties on Accepting Advances
• Unregistered Projects and Risks
• Refund Timelines and Interest
• Filing a Complaint with RERA
• Buyer Precautions Before Payment
• Beyond RERA: Other Legal Remedies
• Common Tactics by Builders
• Enforcement and Penalties
• Looking Ahead: RERA and Buyer Empowerment
• Frequently Asked Questions

The RERA Framework

The Real Estate (Regulation and Development) Act, 2016 (RERA) was introduced to promote transparency, accountability, and efficiency in the real estate sector. It aims to protect homebuyers and ensure timely project delivery by regulating real estate developers and agents.

Key Features:

• Mandatory Registration: All residential and commercial projects (above 500 sq. m or 8 apartments) must be registered with the state’s RERA authority before advertising or selling.
• Disclosure Obligations: Builders must publish details about the project, including layout plans, approvals, timelines, and financial status.
• Escrow Requirement: 70% of the amount collected from buyers must be deposited in a separate bank account to be used only for that specific project.
• Grievance Redressal: Buyers can file complaints with the RERA authority or the Adjudicating Officer for issues such as delays, non-refunds, or misrepresentations.

Advance Payments Under RERA

Section 13(1) of RERA:

• A promoter cannot accept more than 10% of the property’s cost as an advance payment or booking amount without executing a registered agreement for sale.
• This clause protects buyers from paying large sums without legal backing or commitment from the builder.

Buyer Protection:

• Builders must provide a signed agreement outlining possession date, specifications, and payment plans before collecting more than 10%.
• Any demand for higher advance without a sale agreement is a clear violation of RERA rules.

Booking Amounts Explained

The booking amount is the initial amount paid by a buyer to express interest or reserve a property. Builders often collect it at the pre-launch or initial stages of marketing.

Important Considerations:

• Booking amounts are legally part of the 10% advance cap under RERA.
• Builders may promise “fully refundable booking” but later impose deductions, check written terms carefully.
• Until a registered agreement for sale is executed, any collected amount (even as booking) cannot exceed 10%.

Refund Rules Under RERA

RERA empowers buyers to claim a refund of the advance or booking amount in several scenarios:

When Refunds Are Applicable:

• Project Delays: If the developer fails to complete or hand over the project as per agreed timelines.
• False Promises: If the builder misleads or fails to deliver as advertised.
• Cancellation by Buyer: The buyer can cancel and seek a refund before possession. Deduction is allowed only if mentioned in the sale agreement.

Refund Guidelines:

• Refund should be made within 45 days of request or order.
• Buyer is entitled to interest at SBI’s highest marginal cost lending rate + 2%.
• If the builder fails to refund, the buyer can file a complaint with RERA.

Cancellations and Buyer Rights

Buyer’s Right to Cancel:

• Under Section 18(1)(a) of RERA, a buyer can cancel the booking:
  • With Full Refund and Interest if the cancellation is due to builder default (e.g., delay, false info).
  • With Limited Deductions if the buyer backs out for personal reasons and the builder is not at fault.

Buyer’s Rights in Cancellation:

• Right to receive a refund within 45 days of cancellation.
• Right to challenge excessive cancellation charges before RERA if they seem unfair or are not part of a signed agreement.
• Right to file a RERA complaint if the refund is delayed or denied.

Note: Some builders insert hidden clauses about non-refundable booking amounts. But if these terms are not explained transparently and agreed upon in writing, buyers can challenge them under RERA.

Builder’s Duties on Accepting Advances

Under RERA, when a builder accepts an advance (up to 10%), they must:

• Execute a Registered Agreement for Sale: This is mandatory before accepting more than 10% of the cost.
  • The agreement must include: project layout, completion timelines, payment schedule, amenities, cancellation terms, and penalties for default.
• Maintain Transparency: Clearly mention whether the booking amount is refundable or non-refundable, and under what terms. Provide all approvals, sanctioned plans, and timelines on the RERA portal for buyer verification.
• Use of Advance: Builders must deposit 70% of buyer advances in a dedicated escrow account to ensure money is used for that specific project only.
• No Hidden Charges or Verbal Promises: Verbal assurances that differ from the agreement can be challenged. All terms must be in the written agreement, including refund policy, charges, and possession dates.

Unregistered Projects and Risks

Under the RERA ACT, every eligible real estate project must be registered with the respective State RERA authority before the builder can:

• Advertise
• Market
• Sell
• Book units

Risks of Investing in Unregistered Projects:

• No Legal Protection: If the project is unregistered, RERA protections like refund rights, timely possession, and grievance redressal may not apply.
• Lack of Transparency: Builders of unregistered projects often fail to disclose key details—such as project approvals, timelines, or funding sources.
• Higher Chances of Fraud: These projects may:
  • Lack proper land ownership titles
  • Operate without environmental or municipal approvals
  • Be more likely to be abandoned or delayed
• Difficulty in Legal Action: You can still file a complaint, but enforcement may be slower or redirected to civil courts or consumer forums instead of fast-track RERA proceedings.

Buyer Precaution:

• Always check if the project is listed on your State’s RERA portal. Example: TS RERA
• If it’s not registered, do not pay any booking amount or advance, even if the builder offers discounts or guarantees.

Refund Timelines and Interest

RERA sets strict standards on how fast builders must issue refunds and the interest payable if there’s a delay or default.

Refund Timeline:

• The builder must refund the booking/advance amount within 45 days from:
  • The date of cancellation (if eligible)
  • The date of RERA order (if refund is ordered)

Interest Rate on Refunds:

• The interest payable by the builder is calculated as: SBI’s highest Marginal Cost of Funds based Lending Rate (MCLR) + 2%
• This applies when:
  • Builder delays the project
  • Builder fails to refund on time
  • Builder defaults on promises made in the agreement

Penalty for Non-Compliance:

• Failure to refund on time can lead to:
  • Additional penalties
  • Legal action under Section 63 of RERA
  • Project deregistration or builder blocklisting

Filing a Complaint with RERA

If a builder is not refunding your booking amount, delaying possession, or violating any terms, you can file a complaint under RERA.

How to File a RERA Complaint:

• Visit Your State RERA Portal:
  • Example: MahaRERA (for Maharashtra), UP-RERA, etc.
• Register and Log In: Create a user account if required.
• Submit the Complaint Form: Fill in details like:
  • Project and builder info
  • Date and amount of payment
  • Nature of grievance (e.g., refund delay, possession delay, non-registration)
  • Attach supporting documents: receipts, agreements, emails, bank statements, etc.
• Pay Nominal Fee: Usually between ₹1,000–₹5,000 depending on the state.
• Attend Hearings: You may be called for an online or physical hearing with the builder.

You Can Also File With:

• Adjudicating Officer (AO): For compensation and interest.
• Consumer Forum: For service-related complaints.
• Civil Court or NCDRC (in larger disputes), though these take longer.

Tips for a Strong Complaint:

• Keep all payment proofs, emails, and screenshots.
• Quote specific RERA sections violated (e.g., Section 13 for advance payment, Section 18 for refunds).
• Mention if the builder threatened or misled you in writing.

Buyer Precautions Before Payment

Before paying a booking amount or advance for a property, it’s essential to take a few key precautions to protect your financial interest:

Verify RERA Registration

• Check the project’s registration on your state’s official RERA website.
• Confirm project details: layout plans, approvals, possession date, legal title, and escrow account info.
• Never pay for a project that is not registered.

Review the Agreement for Sale

• Ensure a draft agreement for sale is shared before paying anything beyond 10%.
• Check key clauses:
  • Cancellation and refund terms
  • Payment milestones
  • Completion deadlines
  • Interest penalties on delays
  • Builder’s default clauses

Don’t Rely on Verbal Assurances

• Get all promises (like “fully refundable booking”) in writing or in the agreement.
• Keep all receipts, bank transfers, and emails as proof.

Avoid Paying in Cash

• Always pay through traceable means (bank transfer, cheque).
• Cash payments may not be enforceable in legal proceedings.

Check Builder’s Track Record

• Look up past project delays, customer complaints, or litigation history.
• Search the builder’s name on consumer forums and RERA portals.

Beyond RERA: Other Legal Remedies

In addition to RERA, buyers have access to multiple legal forums depending on the nature of the dispute:

Consumer Court vs. RERA Authority

Recommendation: If you seek refund + compensation, file with both RERA and Consumer Court (only if allowed under state rules). You can also withdraw from one if the other is faster.

Civil Litigation and Alternative Dispute Resolution (ADR)

• Civil Court (Civil Suit)
  • Suitable for large claims, property title disputes, and complex agreements.
  • Takes longer (2–5+ years) and is costlier.
  • Often used when other remedies fail.
• Arbitration
  • Many agreements include an arbitration clause, which means disputes must be handled outside courts.
  • Usually faster but less transparent than RERA or Consumer Court.
  • May limit your ability to go to RERA unless challenged.
• Mediation
  • Available in some cities via consumer mediation centers.
  • Helpful for reaching amicable settlements quickly.

Common Tactics by Builders

Despite the legal protections under RERA, many builders still employ strategic loopholes and misleading practices to avoid or delay refunds and delivery. Here’s how they do it—and how you can protect yourself:

Loopholes Used to Withhold Refunds

• Vague or One-Sided Booking Forms
  • Builders often get buyers to sign pre-sale forms that include fine print saying the booking amount is “non-refundable. ” These documents are rarely explained clearly and may contradict verbal promises.
  • What You Can Do: Always demand a copy of the booking form before signing. Read all clauses, especially around refund, cancellation, and deductions.
• Deliberate Delay Tactics
  • Builders may claim your cancellation request is under “internal review” or “awaiting approval from accounts/legal.”Some stall until the refund timeline under RERA is breached, forcing you to take legal action.
  • What You Can Do: Send a written/email notice demanding refund with reference to Section 18 of RERA. If no action is taken within 30–45 days, file a complaint with the RERA authority.
• Blaming COVID or Force Majeure
  • Builders may falsely invoke “force majeure” clauses (e.g., COVID, labor shortages) to delay or avoid refunds and possession.
  • What You Can Do: RERA allows delay only if the builder proves real disruption—not just claims it. Many state RERAs have already ruled COVID cannot justify endless delays.
• Offering Substitutes Instead of Refunds
  • Builders may try to offer you another unit, smaller flat, or commercial space instead of refunding your money.
  • What You Can Do: You are under no legal obligation to accept a substitute. Insist on your full refund under RERA.
• False Promises of “Processing Soon”
  • They may provide false timelines (e.g., “refund in 10 working days”) without intention to comply, buying time until you give up or miss your filing window.
  • What You Can Do: Document all correspondence. These false promises can strengthen your case before RERA or Consumer Court.

Protecting Yourself from Misleading Practices

• Get All Commitments in Writing
  • Do not rely on verbal promises about refund policies, construction timelines, or “fully refundable booking.”
  • If it’s not in the Agreement for Sale or Booking Form, it’s legally difficult to enforce.
• Insist on RERA Compliance
  • Ask for:
    • RERA Registration Number
    • Approval documents
    • Escrow account details
  • Refuse to pay more than 10% in advance unless a registered sale agreement is signed.
• Avoid Early-Bird or Pre-Launch Offers
  • Many pre-launch projects are not legally approved or registered, exposing you to the risk of delay, legal issues, or fraud.
• Check Past Complaints Against the Builder
  • Use:
    • Your State RERA Portal
    • Consumer forums (e.g., Grahak Panchayat, India Consumer Helpline)
    • Real estate forums and WhatsApp groups
  • Multiple complaints are often a red flag, even for well-known developers.
• Review the Agreement with a Lawyer
  • If the builder provides a sale agreement, do not sign immediately.
  • Have a real estate lawyer check for:
    • Biased clauses
    • Unreasonable penalties on cancellation
    • Missing commitments

Enforcement and Penalties

RERA isn’t just a regulatory framework, it has teeth. Builders who violate RERA rules face real consequences:

Penalties on Builders

• Non-Registration of Project
  • Penalty up to 10% of the estimated project cost
  • Repeated violation: Up to 3 years imprisonment
• Failure to Refund
  • Penalty with interest, as per Section 18
  • RERA may also direct the builder to compensate for mental distress or litigation costs
• False Advertising or Misrepresentation
  • Fine up to 5% of project cost
• Violating Agreement Terms
  • Penalty or project de-registration
  • RERA can stop further sales, freeze bank accounts, or blocklist the builder

RERA Enforcement Tools

• Orders are legally binding.
• If builders fail to comply, RERA can issue recovery certificates enforceable like civil decrees.
• Buyers can escalate to RERA Appellate Tribunal, High Court, or Consumer Forum if the order isn’t enforced.

Looking Ahead: RERA and Buyer Empowerment

RERA has begun shifting power back to homebuyers, but awareness and enforcement are still evolving.

What’s Improving

• Faster digital complaints and hearings
• More state RERA authorities taking proactive action
• Real estate agents also being regulated and penalized for false representation

What Buyers Can Do

• Educate yourself on your RERA rights
• Join buyer groups and forums
• Demand compliance before making payments
• File complaints instead of giving in to builder pressure

RERA has introduced transparency, accountability, and legal remedies that were missing earlier. But its strength still depends on active buyer participation and vigilance.

Conclusion

The Real Estate (Regulation and Development) Act (RERA) has significantly changed the landscape of home buying in India by putting buyers’ rights at the forefront. Whether it’s refunding booking amounts, regulating advance payments, or penalizing non-compliant builders, RERA offers a robust legal framework that empowers consumers.

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