A Maharashtra Real Estate Appellate Tribunal ruling in favour of a Dubai-based Indian homebuyer has highlighted how delayed possession and one-sided cancellation clauses can combine to leave flat purchasers financially exposed. The tribunal directed a Mumbai-based builder to refund about Rs 1.15 crore paid for two flats, with interest at the State Bank of India’s Marginal Cost of Lending Rate plus 2%, after finding that the project was not delivered within the promised timeline and that the builder had not executed an agreement for sale.
The ruling is significant because the dispute was not only about delay. It also concerned the legal status of an allotment letter, the extent to which a builder can retain money when a buyer cancels a booking, and whether contractual conditions can override protections available under the Real Estate (Regulation and Development) Act, 2016. For homebuyers, these questions often determine whether a delayed project results in a manageable exit or a prolonged financial dispute.
The buyer had booked two flats with a Mumbai-based builder in 2015. The agreed prices were Rs 2.35 crore and Rs 3.17 crore. The buyer paid around 20% of the consideration for each unit: Rs 48.73 lakh for one flat and Rs 66.56 lakh for the other. The allotment letters stated that possession would be handed over before April 2017.
That deadline passed without possession. The occupancy certificate was obtained only on May 27, 2018, nearly a year after the promised possession timeline. The buyer also raised concerns about the draft agreement for sale, saying that it contained discrepancies and did not accurately reflect the terms recorded in the allotment letters. An agreement for sale was ultimately never executed, according to the report.
The buyer then sought cancellation and a refund. The builder’s position was that the money could be returned only after another purchaser was found for the flats. The builder also relied on Clause 12 of the allotment letters, which allowed it to deduct or forfeit specified amounts if the buyer terminated the booking.
According to the report, Clause 12 allowed the builder to forfeit 10% of the purchase price as liquidated damages and levy interest at 1.5% a month, or 18% a year, from the date of allotment until termination. The clause also made the refund dependent on the builder finding another buyer and receiving the full consideration from that transaction. This arrangement placed the timing of repayment and the size of the deduction substantially under the builder’s control.
MahaREAT rejected that approach. In its July 1, 2026 ruling, the tribunal directed the builder to refund the two amounts paid by the buyer, along with interest at SBI’s MCLR plus 2%. It also awarded Rs 25,000 towards costs. The principal amount covered by the order was approximately Rs 1.153 crore.
The tribunal’s reasoning began with the statutory requirement governing agreements for sale. Section 4(1) of the Maharashtra Ownership of Flats Act, 1963 requires a builder to enter into a written agreement for sale before accepting an advance or deposit from a homebuyer. MahaREAT noted that the buyer had already paid around 20% of the consideration, while the agreement for sale had not been executed. It therefore held, in its view, that the builder had contravened the provisions of the Maharashtra Ownership of Flats Act.
The absence of the agreement was important because an allotment letter does not perform the same legal function as a properly executed agreement for sale. The allotment letter recorded some commercial terms, including the possession deadline and the cancellation condition, but the tribunal examined those terms against the statutory framework governing home sales. The case shows how a buyer’s initial payment can create a major exposure before the fuller contractual and statutory protections associated with an agreement for sale are in place.
MahaREAT also found that the builder had not completed the project in accordance with the agreed terms or handed over possession of the flats to the buyer. On that basis, it held that the builder was liable to return the money received for the two units with interest. The tribunal said: “We are of the view that the allottees are legally entitled for refund of consideration amount along with interest under Section 18 of the RERA Act, 2016.”
Section 18 is central to the dispute because it provides a statutory route for a homebuyer seeking a refund when a promoter fails to give possession in accordance with the terms of the agreement. The tribunal’s application of that principle meant that the buyer’s exit was not treated as an ordinary voluntary cancellation carrying the deductions specified in Clause 12. Instead, the delayed possession and failure to complete the transaction within the agreed framework were treated as the basis for statutory relief.
The tribunal separately examined whether Clause 12 could be enforced. It found the provision heavily weighted in the builder’s favour. The clause did not give the buyer an immediate right to recover the money paid. It made repayment contingent on a new purchaser being found and the entire consideration being received. At the same time, it permitted the builder to make multiple deductions or forfeitures from the eventual refund.
The buyer’s advocate relied on an earlier MahaREAT decision, Dinesh R. Humane and Others v. Piramal Estate Pvt., which held that terms that are one-sided, unreasonable and unfair cannot be enforced against flat purchasers. MahaREAT applied the same principle in this dispute and held that the builder could not insist on Clause 12 when its terms were contrary to the rights available to homebuyers under the RERA framework.
The ruling therefore illustrates a wider tension in residential real estate contracts. Builders need mechanisms to address genuine buyer cancellations, but a cancellation clause can become legally vulnerable when it imposes significant deductions, delays repayment indefinitely or shifts all control over the refund process to the promoter. The tribunal’s finding indicates that the wording of an allotment letter cannot be considered in isolation from statutory rights and the circumstances that led to cancellation.
The case also connects with MahaRERA’s model allotment letter framework. Amit Wadhwani, a partner at Khaitan & Co, told ET that the buyer succeeded because MahaREAT found that a one-sided condition in an allotment letter could not override a homebuyer’s statutory entitlement to a refund under RERA. He also referred to a MahaRERA order dated September 3, 2024, issued under MahaRERA Order No. 60/2024.
According to the explanation cited in the report, the model allotment letter limits the amount that a builder can retain when a buyer cancels a booking. The maximum deduction is 2% of the unit’s cost, with the permitted deduction varying according to how soon the cancellation request is made after the allotment letter is issued. No deduction is permitted within 15 days. The ceiling is 1% for cancellations between 16 and 30 days, 1.5% between 31 and 60 days, and 2% after 61 days.
The framework also requires the remaining amount to be refunded within 45 days. If the builder fails to make the refund within that period, the buyer is entitled to interest at SBI’s highest MCLR plus 2%, according to the report. These provisions create a more defined structure than the clause challenged before MahaREAT, where the buyer’s refund depended on a future sale to another purchaser.
The financial scale of the dispute shows why such contractual details matter. The buyer had paid Rs 1.153 crore across the two flats before possession was delivered. The report said that, using an assumed average effective interest rate of approximately 10.5% and a period of around 11 years, the interest could be estimated at about Rs 1.33 crore. That calculation is only an estimate based on the assumed rate and period; the binding entitlement is the interest directed under the tribunal’s order, calculated according to the applicable SBI MCLR plus 2% rate.
For Mumbai’s housing market, the case raises an institutional question about when consumer protection begins to operate effectively in the purchase process. A buyer may commit a substantial sum at the allotment stage, while the final agreement remains pending and possession dates remain uncertain. If the allotment letter contains an aggressive cancellation mechanism, the buyer can face a choice between remaining tied to a delayed project and surrendering a significant portion of the money already paid.
The MahaREAT decision does not establish that every cancellation clause is invalid, nor does it remove the need to examine the facts and wording of individual contracts. Its importance lies in the tribunal’s treatment of a clause that made repayment conditional on a new sale while allowing substantial deductions, in a case where possession had already been delayed and the agreement for sale had not been executed.
The ruling confirms three points on the evidence presented: the buyer paid substantial advances for two Mumbai flats; possession was not delivered by the promised deadline; and the tribunal ordered a full refund of the consideration paid with interest and costs rather than permitting the builder to rely on Clause 12. The subsequent significance of the case will depend on how the order is implemented and how similar cancellation and refund disputes are assessed under MahaRERA’s model allotment framework.
