It is not necessary that property deals will always culminate into the execution and registration of an agreement. The deal may be halfway canceled by either the seller or the buyer for any reason. Earlier cancelling an apartment booking was a tedious task to do. However, after the introduction of the new RERA (Real Estate Regulation and Development) Act, 2016 it will enable the homebuyers to exit real estate deals smoothly.
The RERA empowers the homebuyer to cancel an allotment of the apartment booked with a builder at any stage even if there is no default on the part of the developer. It binds the builder to return the money collected from the buyers within 45 days of such cancellation after deducting the booking amount. The booking amount shall be forfeited by the developer.
The Act has clearly stated that the booking amount shall be forfeited and instructed the builder to return the balance amount within 45 days. It has also stipulated that if developer fails to give the possession of the apartment within the stipulated time, the homebuyer can terminate the agreement and is entitled to refund the amount paid with interest in 45 days of such termination on which interest is payable @ Highest Marginal rate of SBI (State Bank of India) plus 2%.
There are various stages for which money is involved for the Allotment of property:
1. Booking amount/Token money
2. Stamp duty
3. Registration charges
4. GST (Goods and Service Tax)
Treatment for refund of money is different in every case.
1. Booking amount/ Token money– It shall be forfeited by the developer in every case as the seller has to suffer losses if the deal has been cancelled by the buyer.
2. Stamp duty– These charges are determined by the State Governments of every state and they differ accordingly. The rules for refund of the stamp duty would vary from state to state.
As per the Indian Stamp Act, 1899 refund of stamp duty can be claimed within 6 months from the stamp duty paid and it will be refunded after deducting 10% of the total stamp duty paid.
3. Registration Charges– When a property gets registered with the Registrar, then along with sale deed and agreement to sale, the buyer has to pay the registration charges for getting its property registered. The amount paid to the Government is non-refundable.
4. GST– When the buyer books an Under-Construction Property, as per the existing laws, the developer levies a GST on the agreement value, at a certain rate. This rate will depend on whether the property falls under the ‘affordable housing’ category or not and also on whether the developer is availing of the GST.
For any reason, if the buyer wants to cancel the booking and thus, surrender his rights over the under-construction property, the builder may agree to refund the booking amount and installments paid, or even agree to pay a higher amount to the buyer, depending on the demand and supply dynamics at that time. The builder will not be entitled to claim any refund with respect to the GST, as he has already rendered services to the buyer