The Maharashtra Real Estate Regulatory Authority (MahaRERA) has upheld a developer’s right to deduct cancellation charges from a homebuyer’s booking amount, even when the buyer cancelled the booking within 2 days due to financial constraints and uncertainty over home loan approval.
Dismissing the buyer’s plea for a full refund, MahaRERA ruled that the deduction was valid because it was made in accordance with the project’s cancellation policy, as disclosed on the MahaRERA website through a deviation report submitted by the developer.
The case
A homebuyer had booked a 2 BHK apartment in May 2024 for ₹89.86 lakh. The homebuyer paid a booking amount of ₹1 lakh and received an allotment letter on the same day. However, two days later and before the execution of any agreement for sale, the homebuyer cancelled the booking.
The homebuyer submitted that, due to financial difficulties and uncertainty regarding loan approval, he had to cancel the booking by email dated May 10, 2024. The homebuyer told MahaRERA that, despite the cancellation being made immediately before the registration of any agreement, the developer deducted Rs. 89,861 as cancellation charges and failed to refund the entire booking amount.
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“The cancellation clauses mentioned in the allotment letter are one-sided, unfair, and contrary to MahaRERA guidelines and prescribed formats,” the homebuyer submitted before MahaRERA. He said that though the developer informed them that the refund would be processed within 35 to 40 working days, no refund has been received till date despite several follow-ups and communications seeking refund and clarification regarding the deduction,” the homebuyer submitted in the MahaRERA.
Developer’s argument
The developer, however, maintained that the cancellation was voluntary and triggered by the homebuyer’s personal financial constraints. It argued that the booking form and allotment letter clearly specified that cancellation within 15 days of allotment would attract charges equivalent to 1% of the unit cost. Based on this clause, the company deducted ₹89,861 from the booking amount and processed a refund of the balance ₹10,139.
“The developer submitted that at the time of booking, the complainant was informed about the cancellation policy and the applicable cancellation charges as mentioned in the booking form and allotment letter, which were accepted by the complainant,” the developer told MahaRERA.
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What is MahaRERA’s rule on refund for cancellation?
In 2022, issued an order permitting developers to deduct up to 2% of the total consideration amount in the event of a booking cancellation. However, it also allowed developers to upload deviation reports on the MahaRERA website to disclose any changes in project terms or conditions, enabling homebuyers to make informed decisions before proceeding with a purchase.
In this context, the MahaRERA order states, “If promoters choose to execute with an allottee an allotment letter that is not in accordance with the proforma of the allotment letter as approved by the Authority in its meeting held on 24.06.2022, then the deviations/modifications in the proforma of the allotment letter as proposed by promoters shall be highlighted in different colour.”
The same has to be uploaded by the developer, along with a deviation sheet mentioning the deviations/modifications, when seeking registration of the real estate project, so as to enable the allottees to make an informed decision, said MahaRERA in its order.
MahaRERA’s order in the current case
While examining the dispute, noted that the developer had uploaded a deviation report in the above case, disclosing the cancellation policy on its project page. The authority referred to MahaRERA Order No. 35 of August 12, 2022, which permits developers to deviate from the model allotment letter provided that such deviations are disclosed through a deviation report uploaded on the regulator’s website.
“It is observed from the material placed on record that the respondent had uploaded a deviation report dated 21.03.2023 on the MahaRERA website disclosing that cancellation within 15 days from the date of allotment would attract deduction of 1% of the total consideration amount,” MahaRERA said in its order.
According to the MahaRERA order, it is further observed that the complainant booked the said flat after the said deviation report dated 21.03.2023 had already been uploaded on the MahaRERA website. Therefore, the complainant was deemed to have knowledge of the said cancellation policy at the time of booking.
The MahaRERA dismissed the complaint, citing that it is of the considered opinion that the cancellation charges levied by the respondent were in accordance with the cancellation policy disclosed through the deviation report dated 21.03.2023 and therefore cannot be termed illegal or contrary to MahaRERA order number 25 of 2022.
What do legal experts have to say?
According to legal experts, on the MahaRERA website before proceeding with a purchase. Any uncertainty arising from the disclosed deviations could influence the buyer’s decision and, in some cases, may lead to the cancellation of the booking.
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“In my view, the present order may create some uncertainty among homebuyers. However, by way of abundant caution, prospective purchasers are advised to review the deviation report uploaded by the promoter on the MahaRERA website at the time of booking a flat. If the booking is made after the deviation report has been uploaded, it may be argued that the homebuyer had notice of the cancellation policy and other disclosed deviations at the time of booking,” said Mumbai-based solicitor Trupti Daphtary.