Builder-buyer agreements fairer now, yet buyers must scrutinise fine print

Do not skip crucial provisions of the agreement that have a bearing on your interests

The Supreme Court (SC) in Parsvnath Developers Ltd vs Mohit Khirbat has ruled that builders cannot use one-sided clauses in builder–buyer agreements (BBAs) to cap compensation for delayed possession. Upholding the powers of the National Consumer Disputes Redressal Commission (NCDRC), the court said statutory consumer protections override restrictive terms in BBAs, and homebuyers remain entitled to fair and reasonable compensation. The ruling also underlines that real estate contracts cannot dilute remedies available under consumer protection law or the Real Estate (Regulation and Development) Act, 2016 (Rera). For buyers facing long possession delays, the judgment comes as a major relief.

 

Key flaws in earlier BBAs 

Older BBAs often left buyers with little bargaining power. “They imposed steep penalties on buyers for payment delays but offered minimal compensation for delayed possession, with vague timelines and wide force majeure clauses enabling prolonged delays. Developers could unilaterally alter plans, increase area, and levy extra charges, while refund and dispute terms remained restrictive,” says Asha Kiran Sharma, partner, King Stubb & Kasiva, Advocates and Attorneys. 

A clear imbalance in bargaining power prevailed. “Cancellation clauses were often harsh, allowing significant forfeitures. Possession was sometimes offered without essential occupancy or completion certificates. Courts frequently intervened to protect homebuyers,” says Vivek Agarwal, co-founder and chief technology officer, Square Yards. 

How Rera reshaped BBAs

 

Rera has pushed builders towards more structured, transparent and equitable BBAs. “It created parity in interest payable by both buyer and developer for default, restricted unilateral change of plans without the consent of two-thirds allottees, and required 70 per cent of project funds to be kept in a separate account,” says Sharma.

 

State-prescribed model agreements have curbed one-sided clauses. Rera tightened norms regarding project registration, detailed disclosures (of specifications, payment schedule and possession date), and barred builders from collecting more than 10 per cent of the cost before a registered agreement for sale is signed. “It restricts unilateral changes to layout, provides statutory remedies for delay, including refund with interest, and imposes a five-year defect liability,” says Agarwal.

 

Standard agreement format

 

Rera requires the agreement for sale to follow a prescribed model format under state Rera rules. This agreement can be executed only after the project has been registered. “While minor state-level variations exist, the format standardises key terms — carpet area, possession date, payment schedule, interest payment for delay, refund rights, defect liability and force majeure,” says Sharma. She adds that one-sided clauses have been curbed to protect homebuyers.

 

Must builders follow Rera format?

 

State Rera prescribes a standard agreement for sale format, which builders must follow. Developers may make limited project-specific changes, but they cannot dilute statutory protections or insert clauses that curb buyers’ rights. “Any term contrary to Rera or consumer law will not stand legal scrutiny. The SC’s recent ruling reinforces that contractual freedom cannot be used to insert one-sided terms that undermine consumer protection law,” says Shankey Agrawal, partner, BMR Legal.

 

Key points to watch out for in BBA

 

Buyers should check provisions related to the possession timeline and any grace period, compensation for delay, cancellation charges, price escalation, force majeure, and the builder’s obligations on approvals and amenities. “Watch out for clauses that impose heavy penalties on buyers but limit the developer’s liability. While Rera offers protection, the agreement ultimately governs outcomes on the ground,” says Agrawal.

 

Mistakes to avoid

 

Many buyers sign quickly to avoid losing the unit, without verifying Rera registration or approvals. They also treat terms as non-negotiable and overlook clauses that govern delays, cancellation, refunds and exit rights, while focusing mainly on price and location. “The biggest mistake is treating the agreement as a formality — when it ultimately determines the buyer’s rights if things go wrong,” says Agrawal.

 

Buyers should read the agreement with the assumption that timelines can slip and disputes can arise. “Many focus on price and amenities but overlook delay clauses, grace periods, force majeure, compensation and exit terms — provisions that matter most if timelines slip. The judgment underscores that a BBA is not untouchable; the law prevails, and buyers must sign with diligence, not just optimism,” says Viren Mehta, founder and director, ElitePro Infra, a real estate and investment consultant.

 

The writer is a Delhi-based independent journalist

 

Key takeaways from judgement

 

· Delay in possession amounts to deficiency in service; homebuyers can seek Consumer Protection Act remedies

  · Compensation is wide: includes not just pecuniary loss but also mental agony/harassment

  · Relief for delay can go beyond interest to include rebate, litigation costs, etc. as incidental/ancillary Section 14 relief

  · Subsequent purchasers can claim for deficiency; compensation rights run with the allotment (unless expressly barred)

  · No forced possession without occupancy certificate; its non-availability is deficiency in service

 

Source: Copy of SC judgement