You defaulted on payments. The builder still cannot keep your deposit.

Two homebuyers, one builder, and the 2% rule that saved their deposits

Rupesh Deshbhratar booked a flat in Borivali in 2017. He paid about Rs.2.95 lakhs. The builder then increased the building from 22 floors to 42. Deshbhratar objected. The builder terminated his booking in July 2019 and kept every rupee.

Rakesh Menon and Monisha Nair booked in January 2020. They paid about Rs.2.72 lakhs. Covid hit. They told the builder in July 2020 they couldn't pay more. The builder terminated in October 2020 and forfeited everything.

Two separate stories. One common question: could a builder keep 100% of a homebuyer's money when the deal fell through?

MahaRERA's answer, delivered on 30 September 2024 by Shri Mahesh Pathak, Member-I, was a calibrated middle path. The builder got to keep some money. The buyers got most of theirs back. But neither side got everything they wanted.

What the allotment letters actually said

Neither buyer had signed a registered agreement for sale. Both had only allotment letters. Deshbhratar's letter was dated 31 July 2017. Menon and Nair's was dated 29 February 2020. The total flat consideration in both cases was around Rs.57 lakhs. The amounts paid — about Rs.2.95 lakhs and about Rs.2.72 lakhs — were less than 5% of that total.

The builder, Ruparel Infra & Reality Pvt Ltd. (and Ruparel Realty for the second complaint), argued that the buyers had defaulted on payment schedules. The allotment letters, the builder said, permitted forfeiture of the entire amount on cancellation. Deshbhratar's booking was terminated on 12 July 2019. Menon and Nair's on 13 October 2020.

The buyers approached MahaRERA under Section 31 of the Real Estate (Regulation & Development) Act, 2016. They wanted full refunds with interest and compensation. The builder wanted to keep the money.

The arguments that didn't work

Deshbhratar argued that the builder had changed the building plan from 22 to 42 floors without informing him. That, he said, violated Section 14(2) of RERA, which requires promoters to adhere to sanctioned plans. He also argued that the builder's failure to disclose this change amounted to a misleading practice under Section 12.

MahaRERA examined this claim. The Authority found that no violation of Section 14(2) was established on the facts. More importantly, the Bench observed that even if there were a violation of Section 14(2), there is no explicit provision under that section which permits an allottee to seek a refund. That observation — technically obiter — could have future significance for buyers trying to use plan changes as a refund trigger.

Menon and Nair had a different problem. They had voluntarily stopped payments due to Covid-related financial hardship. They informed the builder in July 2020. The builder terminated in October 2020. MahaRERA held that by failing to make further payments, the complainants had violated Section 19(6) of RERA, which imposes a duty on allottees to make timely payments.

Section 18 of RERA — the provision that entitles buyers to refund with interest if the promoter fails to deliver possession — was also examined. The Authority held that since no agreement for sale had been executed, and no specific date of possession had been agreed upon or had lapsed, there was no violation of Section 18. No refund with interest under that provision could be granted.

The builder's arguments on Sections 12, 14(2), and 18 succeeded. The buyers' claims under those provisions failed.

The rule that changed everything

But the builder's victory on the main provisions did not mean it could keep all the money. MahaRERA applied its own Order No. 35/2022, dated 12 August 2022.

That order prescribes a standard format for allotment letters for projects registered with MahaRERA. Under that format, if a booking is cancelled before the execution of an agreement for sale, the maximum forfeiture permitted is 2% of the total consideration of the flat.

The builder's allotment letters — which provided for 100% forfeiture — were not in consonance with this order. MahaRERA held that the forfeiture of the entire amount paid was impermissible. The Authority directed the builder to refund the amounts paid by the complainants after deducting only 2% of the total flat consideration (which in both cases was around Rs.57 lakhs).

THE PLAY: If you are a homebuyer whose booking has been cancelled and the builder has forfeited more than 2% of the total flat consideration, you can approach MahaRERA for a refund of the excess — even if you defaulted on payments and even if no agreement for sale was signed.

What the order actually did

The operative order was precise. The complaints were partly allowed. The claims for interest and full refund were rejected. The respondent was directed to refund the amounts paid by the complainants after deducting 2% of the total flat consideration (excluding statutory dues and brokerage) within 45 days of the order.

No interest was granted. No compensation was awarded. The buyers got their money back minus a modest forfeiture. The builder got to keep 2% of the flat price as a cancellation fee — far less than the 100% it had forfeited, but more than nothing.

The order was passed on 30 September 2024, after the matter was reserved on 4 June 2024 following final hearings and directions for filing replies and written arguments.

Why this matters for every homebuyer and builder

For homebuyers, this order is a reminder that defaulting on payments — even for genuine reasons like Covid hardship — can cost you. Section 19(6) is real. If you stop paying, you cannot later claim the full refund with interest under Section 18. The builder's failure to deliver possession is not triggered if no possession date was ever agreed upon.

But the order is also a shield. Even if you default, the builder cannot forfeit your entire deposit. MahaRERA Order No. 35/2022 caps the forfeiture at 2% of the total consideration. Any clause in an allotment letter that provides for higher forfeiture is effectively unenforceable before MahaRERA.

For builders, the message is equally clear. You can terminate a booking for non-payment. You can forfeit something. But you cannot forfeit everything. The standard allotment letter format prescribed by MahaRERA binds all registered projects. If your allotment letter says 100% forfeiture, it will not be upheld.

For advocates advising clients, the key takeaway is this: the remedy under Section 18 is not available unless there is an agreement for sale with a specific possession date that has been breached. But the remedy under MahaRERA Order No. 35/2022 is available regardless — it applies to all cancellations before execution of the agreement for sale, irrespective of who caused the cancellation.

The order also clarifies that Section 14(2) violations — such as unauthorized changes to building plans — do not by themselves give the allottee a right to refund. That observation, though obiter, may influence future litigation.

The bottom line: If your booking is cancelled, you will lose at most 2% of the flat's total price — not your entire deposit — and you can get the rest back from MahaRERA even if you were the one who defaulted.