Can the Builder Forfeit 10% Booking Amount on Flat Cancellation? Understanding Your Rights Under RERA

Question: My friend booked a flat in Kandivali on March 15, 2025, by paying Rs 17 lakh, which is 10% of the total flat cost. The builder issued only an allotment letter mentioning the flat number, total area, cost, and possession date. In May, my friend received a transfer order and had to cancel the booking on May 28, 2025. He requested the builder to refund the amount paid, but the builder claimed that, as per the terms in the allotment letter, the entire 10% amount would be forfeited. Can the builder legally do this under RERA? What are the rights of homebuyers in such cases, and what is the maximum deduction allowed? – Rajendra Rane, Borivali (West)

---

Answer:

Under the Real Estate (Regulation and Development) Act, 2016 (RERA), homebuyers enjoy specific protections regarding the cancellation and refund of property bookings.

MahaRERA has issued a model allotment letter that all builders must use when accepting booking amounts, with the booking amount capped at 10% of the total flat cost.

Further, as per MahaRERA’s official orders dated August 12, 2022, and September 3, 2024, if a homebuyer cancels a booking, the builder can forfeit only a maximum of 2% of the total flat cost.

Refund Deduction Caps Under MahaRERA

• Within 15 days of booking: Full refund with no deduction.
• Between 16 and 30 days: Deduction up to 1% of the total flat cost.
• Between 31 and 60 days: Deduction up to 1.5%.
• Beyond 60 days: Deduction up to 2% only.

In your friend’s case, since the cancellation was made after 60 days, the builder can legally deduct only 2% of the flat’s cost and must refund the remaining amount.

Therefore, the clause in the allotment letter allowing forfeiture of the entire 10% booking amount is contrary to MahaRERA’s orders and is unenforceable.

Unfortunately, many builders still include such arbitrary forfeiture clauses in allotment letters, ignoring MahaRERA’s clear directives.

Relevant Case Law: Preeti Dwivedi vs. Raymond Realty

In this case, the complainant paid Rs 6.07 lakh as a booking amount for a Rs 1.16 crore flat. After cancelling the booking within three months, Raymond Realty insisted on forfeiting 10%, citing its allotment letter.

MahaRERA held the 10% forfeiture clause to be arbitrary and directed the builder to deduct only 2% and refund the balance to the homebuyer.

Additional MahaRERA Provisions

• Builders must refund the balance amount within 45 days of cancellation.
• If the builder fails to refund within this period, they are liable to pay penal interest at MCLR + 2% per annum on the refund amount.

These rules protect homebuyers from unfair forfeiture clauses and ensure fairness and accountability in property transactions.

Homebuyers often have genuine reasons to cancel bookings, but builders have long exploited such situations by imposing harsh forfeiture terms. MahaRERA’s regulations now safeguard consumer rights in these matters.

---

Advocate Shirish V Deshpande is chairman of Mumbai Grahak Panchayat. Queries can be sent to him at shirish50@yahoo.com.

For exclusive and budget-friendly property deals in Mumbai and surrounding regions, visit: https://budgetproperties.in/

https://www.freepressjournal.in/mumbai/consumer-connect-builder-cannot-forfeit-more-than-2-on-flat-booking-cancellation-says-expert

**Can the Builder Forfeit 10% Booking Amount on Flat Cancellation? What Are Homebuyers’ Rights Under RERA?**
*By Advocate Shirish V Deshpande, Chairman, Mumbai Grahak Panchayat*

—

**Question:**
My friend booked a flat in Kandivali on March 15, 2025, by paying Rs 17 lakh, which is 10% of the total flat cost. The builder issued only an allotment letter mentioning details such as the flat number, total area, cost, and possession date.

In May, my friend received a transfer order and had to cancel the booking on May 28, 2025. He requested the builder to refund the amount paid, but the builder claimed that, as per the terms in the allotment letter, the entire 10% amount would be forfeited.

Can the builder legally do this under RERA? What are the rights of homebuyers in such cases, and what is the maximum deduction allowed?
— Rajendra Rane, Borivali (West)

—

**Answer:**

Under the Real Estate (Regulation and Development) Act, 2016 (RERA), homebuyers enjoy clearly defined rights regarding the cancellation and refund of property bookings.

MahaRERA has issued a **model allotment letter** that every builder must use when accepting the booking amount, which cannot exceed 10% of the total flat cost.

**What does MahaRERA say about cancellation and refund?**
According to MahaRERA’s orders dated August 12, 2022, and September 3, 2024:

– If a homebuyer cancels a booking, the builder can **forfeit a maximum of 2% of the total flat cost**.
– Refund deductions are capped depending on the cancellation timeline:

– **Within 15 days of booking:** Full refund, no deduction.
– **Between 16 and 30 days:** Deduction up to 1% of total flat cost.
– **Between 31 and 60 days:** Deduction up to 1.5%.
– **Beyond 60 days:** Deduction up to 2% only.

In your friend’s case, since the cancellation was made **after 60 days**, the builder can deduct only **2% of the flat’s cost** and must refund the remaining amount.

The clause in the allotment letter allowing forfeiture of the entire 10% amount is contrary to MahaRERA’s orders and is therefore **unenforceable**.

—

### Important Precedent: Preeti Dwivedi v/s Raymond Realty
In a similar case, the complainant had paid Rs 6.07 lakh as booking amount for a Rs 1.16 crore flat. After cancelling within three months, Raymond Realty insisted on forfeiting 10%, citing the allotment letter.

MahaRERA held the clause arbitrary and directed the builder to deduct only 2% and refund the balance to the homebuyer.

—

### Additional Buyer Protection under MahaRERA

– Builders **must refund the balance amount within 45 days** of cancellation.
– Failure to refund on time makes the builder liable to pay **penal interest at MCLR + 2% per annum** on the refund amount.

—

### What This Means for Homebuyers

Homebuyers often have genuine reasons to cancel bookings. Unfortunately, some builders impose unfair forfeiture clauses to exploit these situations. MahaRERA’s rules now protect homebuyers from such unfair practices, ensuring greater fairness and accountability in property transactions.

If you face similar issues, it is advisable to:

– Check whether the booking amount exceeds 10% of the total cost (which it should not).
– Verify whether the refund deductions comply with MahaRERA guidelines.
– Approach MahaRERA for dispute resolution in case of non-compliance.

—

*For further legal queries, you can write to Advocate Shirish V Deshpande at shirish50@yahoo.com.*

—

**Looking for budget-friendly property deals in Mumbai and surrounding areas?**
Visit [https://budgetproperties.in/](https://budgetproperties.in/) for exclusive listings and offers.

—

*Disclaimer: This content is for informational purposes only and does not constitute legal advice.*
https://www.freepressjournal.in/mumbai/consumer-connect-builder-cannot-forfeit-more-than-2-on-flat-booking-cancellation-says-expert