Home stuck in a stalled project? Know when RERA can get you a refund

As Telangana regulator orders Rs 14.17 lakh refund plus Rs 6.4 lakh interest, know how homebuyers can get help against erring builders

Buying a home involves years of savings, loan commitments and the expectation that the promised property will be delivered on time. But when construction is stalled and a developer stops responding, buyers can be left with neither the home nor easy access to the money they have already paid.

 

The Real Estate (Regulation and Development) Act, 2016 (RERA) provides an important safeguard in such situations. Where a developer fails to deliver possession within the agreed framework, a homebuyer may, depending on the circumstances, choose to exit the project and seek a refund with prescribed interest.

 

A recent Telangana RERA order shows how this protection can work in practice. The authority directed a developer to refund Rs 14.17 lakh paid by homebuyer Lily Sahu, along with applicable interest, after finding that the project had remained stalled and the promoter had failed to demonstrate a credible path towards completion. The estimated interest in the case was around Rs 6.4 lakh up to August 24, 2026.

 

 

The order also offers a lesson for buyers stuck in delayed projects that the repeated assurances from a builder may not be enough when there is no meaningful construction progress or evidence that the project will be completed.

 

When can a homebuyer seek a refund?

 

Section 18(1)(a) of RERA allows an allottee to withdraw from a project and seek a refund of the amount paid, along with prescribed interest and compensation where applicable, if the promoter fails to complete the project or is unable to give possession in accordance with the agreement for sale.

 

Tusi Kumar, partner at law firm Singhania & Co., said the authority would generally examine the possession or completion date mentioned in the agreement, the extent and duration of the delay, the actual construction status, statutory approvals and the project's RERA registration.

 

The promoter’s conduct is also relevant. This includes whether construction has stopped, whether the project has effectively been abandoned, whether the promoter's registration has been revoked or suspended, and whether the developer has been declared a defaulter.

 

Alay Razvi, managing partner at Accord Juris, said a refund may be justified where construction has stalled, approvals are absent, the developer has abandoned the project or the promoter's RERA registration has been suspended or revoked.

 

However, this does not mean every delay automatically results in an immediate refund. Shaurya M Tomar, senior partner, Chugh Universal Legal, said each case has to be considered on its own facts, including the possession date, nature and duration of the delay, contractual terms, regulatory status of the project and the circumstances behind the non-completion.

 

What happened in the Telangana case?

 

Sahu had signed an agreement for sale with the developer on June 21, 2022 and paid Rs 14.17 lakh towards a 3BHK flat priced at Rs 56.7 lakh. The 1,575 sq ft flat was to be delivered within 36 months from the date of obtaining the required building permission.

 

However, according to the TGRERA order, the promoter neither obtained the necessary statutory approvals nor commenced meaningful construction. The buyer also received no response from the developer.

 

The authority noted that several other homebuyers had already approached it against the promoter. In an earlier complaint, TGRERA had declared the promoter a defaulter for violations relating to the sale and marketing of units without mandatory RERA registration.

 

TGRERA concluded that the project had effectively been abandoned and that there was no credible plan to restart or complete the development. It therefore considered a refund more appropriate than requiring Sahu to continue waiting for possession.

 

Gudipati Gayatri Kashyap, advocate, Delhi High Court, said RERA recognises that a homebuyer cannot be expected to wait indefinitely for a project that has ceased to have any credible prospect of completion.

 

She said prolonged delay, lack of approvals, abandonment of the project or revocation of the promoter's registration can support a buyer's decision to withdraw and seek a refund with prescribed interest.

 

How is the interest calculated?

 

The interest payable under Section 18 is calculated according to the rate prescribed under the relevant state's RERA rules.

 

In this Telangana case, the authority directed payment of interest under Rule 15 of the Telangana RERA Rules, 2017. The prescribed rate is linked to State Bank of India’s Marginal Cost of Lending Rate (MCLR), with an additional two percentage points.

 

The interest is calculated from the respective dates on which the buyer made payments until the refund is fully realised. Based on the calculations in the case, the interest on Sahu’s Rs 14.17 lakh payment was estimated at around Rs 6.4 lakh up to August 24, 2026.

 

What should buyers do if the builder stops responding?

 

The first step should be to create a proper written record. Buyers should not rely only on telephone conversations or verbal assurances.

 

Rahul Hingmire, managing partner, Vis Legis Law Practice, advised homebuyers to preserve the agreement for sale, allotment letter, payment receipts, bank statements, loan records, RERA registration details, sanctioned plans, possession commitments, emails, WhatsApp messages, legal notices and photographs showing the actual construction status.

 

Buyers should also check the relevant State RERA portal for the project's registration, approvals, extensions, complaints and orders against the promoter.

 

Kumar similarly advised buyers to document their efforts to obtain performance from the developer, including formal notices and evidence of unanswered communications.

 

A buyer can approach RERA under Section 31 if the developer fails to meet its obligations. The strength of the case will depend heavily on the documentary evidence establishing the payment made, promised possession date, delay and actual status of the project.

 

What if the builder does not pay after the RERA order?

 

Getting a favourable RERA order does not necessarily mean the buyer will receive the money immediately. If the promoter fails to comply, the buyer may have to pursue execution and recovery proceedings.

 

Aradhana Bhansali, senior partner at Rajani Associates, said a homebuyer has a statutory right to seek execution of the order. Under Sections 40(1) and 40(2) of RERA, amounts payable towards refund, interest or penalties can be recovered through the prescribed mechanism, including as arrears of land revenue.

 

Depending on the circumstances, recovery can involve seeking disclosure of the promoter's assets and, where legally permissible, attachment and sale of assets to recover the amount awarded.

 

The practical lesson from the Telangana case is therefore broader than the Rs 14.17 lakh refund. Siddharth Joshi, advocate, Delhi High Court, said buyers should preserve the purchase agreement, payment records, communications with the developer and evidence showing the current status of the project to support their claim.

 

For homebuyers, the key point is that a promised possession date is not an open-ended commitment. Where a project has remained stalled, regulatory requirements have not been met and the promoter shows no credible path towards completion, RERA can provide an exit through refund and prescribed interest.