In a significant judgment, the Maharashtra RERA Appellate Tribunal has ruled that forfeiture of booking amount by the builder amounts to an unfair and unreasonable trade practice. The Tribunal emphasized that such arbitrary action violates the provisions of the Real Estate (Regulation and Development) Act, 2016 (RERA), thereby directing the builder to refund the amount withheld from the homebuyer.
Case Overview: Refund Denied on Loan Ineligibility
The case revolves around a homebuyer who booked a flat in the Lawns and Beyond project in Andheri, Mumbai, developed by M/s Omkar Ventures Pvt. Ltd. The total consideration of the flat was ₹1.36 crores. During a property exhibition, a channel partner of the builder assured the buyer that if her housing loan was not approved, the entire booking amount would be refunded.
Based on this assurance, the buyer paid ₹1 lakh as Expression of Interest (EOI) and ₹6.95 lakhs as application fees. An Allotment Letter dated December 5, 2017 was executed. However, when the buyer was unable to secure a home loan, she requested cancellation and refund of the amount paid.
Shockingly, the builder returned only ₹1 lakh and forfeited ₹6.95 lakhs, citing the terms of the allotment letter. Despite repeated requests, the builder refused to return the amount, prompting the buyer to file a complaint before MahaRERA.
Initial MahaRERA Decision and Appeal
While disposing of the complaint, MahaRERA upheld the forfeiture, stating that it was in accordance with the terms and conditions of the Allotment Letter, which allowed forfeiture of up to 10% of the consideration amount.
However, unsatisfied with the decision, the buyer approached the Maharashtra RERA Appellate Tribunal, seeking justice.
Appellate Tribunal Observations: Biased Clauses and Unfair Terms
The RERA Appellate Tribunal closely examined the case and made the following critical observations:
- The terms of the Allotment Letter were ambiguous, one-sided, and against the spirit of RERA.
- Builders cannot enforce arbitrary clauses in contracts that put homebuyers at a disadvantage.
- The RERA Act, 2016 is a welfare legislation, designed to protect the interests of homebuyers, and builders must not bypass its intent through vague agreements.
- Citing the Supreme Court’s ruling in Pioneer Urban Land and Infrastructure Ltd. v. Govindan Raghavan, the Tribunal reaffirmed that contracts containing unreasonable and one-sided terms cannot be enforced, especially when one party holds a weaker bargaining position.
Moreover, the Tribunal acknowledged the email communication from the builder’s channel partner, which assured a full refund in case of loan rejection. This assurance was held to be binding, given that the channel partner was acting on behalf of the builder.
Tribunal’s Verdict: Refund Ordered
Based on the above findings, the Tribunal concluded that forfeiture of the booking amount was illegal and unjustified. It directed M/s Omkar Ventures Pvt. Ltd. to refund the entire forfeited amount of ₹6.95 lakhs to the buyer.
Impact on Homebuyers and the Real Estate Sector
This ruling serves as a landmark precedent for similar cases involving:
- Forfeiture of booking amounts by builders
- Unfair and one-sided clauses in allotment letters
- Homebuyer protection under the RERA Act
The judgment is a strong message to real estate developers that they cannot exploit homebuyers through misleading promises and arbitrary contractual terms. It also reinforces that booking amounts cannot be forfeited if the buyer is not at fault, especially in cases involving loan rejection or misrepresentation by the builder or their agents.
Conclusion: A Step Towards Fairness in Real Estate Deals
This judgment upholds the objective of RERA – to ensure transparency, accountability, and protection for homebuyers in the real estate sector. Builders must now exercise greater caution in drafting their agreements and refrain from enforcing unjust forfeiture clauses.
Homebuyers facing similar issues should not lose hope. Legal remedies under RERA and appellate forums are available to ensure their hard-earned money is protected from arbitrary builder practices.