Delayed Possession: Can Homebuyers Claim Interest?

Yes. If your builder has missed the possession date stated in your Agreement for Sale, you have a statutory right under Section 18 of the Real Estate (Regulation and Development) Act, 2016 (RERA) to claim interest on the amount you've paid, or to walk away with a full refund plus interest. This isn't a discretionary favour from the builder; it's a codified legal entitlement, and it applies whether you eventually want to keep the flat or exit the project entirely.

If you're dealing with a real delay right now, here's what the law actually gives you, how the interest is calculated, what to do if you've already taken possession, and how to actually file a claim.

The Short Answer: Yes, Under RERA Section 18

Section 18 of RERA states that when a promoter fails to complete a projfect or hand over possession by the date agreed in the sale agreement, the allottee has an unqualified right to either claim possession along with interest for the delay, or withdraw from the project and receive a full refund of the amount paid, along with interest. The word "unqualified" matters here: this isn't a right you have to argue your way into. If the delay has happened and is documented, the entitlement exists.

Your Two Options When Possession Is Delayed

Withdraw and Get a Full Refund With Interest

If you no longer want the property, whether because the delay has stretched too long, your financial situation has changed, or you've lost confidence in the project, you can withdraw and claim a full refund of everything you've paid, plus interest calculated from the date of each payment. This route makes the most sense when the delay is severe, the project shows no real signs of progress, or you simply need your capital back.

Stay in the Project and Claim Monthly Interest

If you still want the flat and expect the project to eventually complete, you can stay in and claim interest for every month of the delay, calculated on the amount you've paid, running from the day after your committed possession date until you actually receive possession. This route suits buyers who believe in the project's eventual completion and would rather be compensated for the wait than start over elsewhere.

How the Interest Rate Is Calculated

The rate most RERA authorities apply, for both the refund route and the stay-and-claim route, is the State Bank of India's Marginal Cost of Funds based Lending Rate (MCLR) plus 2% per annum. This benchmark is applied reciprocally: it's the same rate a builder is required to pay you for delay, and, under most agreements, the rate you'd owe the builder for a late instalment.

A worked example: Say you paid ₹40 lakh in instalments toward a flat, and your agreement's possession date was 31 December 2024, but possession still hasn't happened by, say, mid-2026. Interest accrues monthly on the ₹40 lakh (or on each instalment, from its own payment date, depending on how the claim is structured) at SBI MCLR + 2%. Over 18 months of delay, that interest can add up to a meaningful fraction of the amount paid, which is why many buyers who wait too long to file end up with substantial, well-documented claims by the time they do.

Because SBI's MCLR moves periodically, the exact rupee figure depends on your specific payment schedule and the MCLR rate in effect during each period of delay, so it's worth calculating this carefully, or using a dedicated RERA interest calculator, rather than estimating.

Already Took Possession? You May Still Be Able to Claim

This is one of the most commonly misunderstood points, and it matters a lot in practice. Accepting possession does not, by itself, waive your right to claim interest for the delay period that already occurred before you got the keys. The right to compensation for the period of delay and the act of finally taking possession are treated as separate matters. If you moved in after a long delay and never claimed the interest you were owed for that waiting period, it's worth checking whether you still can, subject to the limitation period discussed below.

One caution: some builders include a clause in the possession or extension letter that asks you to waive any further claims as a condition of taking possession. Never sign such a document without having it reviewed first, since it can genuinely extinguish a claim you'd otherwise be entitled to.

What If Your Builder-Buyer Agreement Has a Low Compensation Clause?

Many older agreements include a token compensation clause for delay, sometimes as little as a few rupees per square foot per month, while charging the buyer a much higher interest rate, sometimes 15 to 18% annually, for any delay in the buyer's own instalment payments. The Supreme Court has directly addressed this kind of asymmetry, holding that a builder-buyer agreement clause that charges the buyer a steep penalty for late payment while offering the buyer only a nominal compensation rate for the builder's own delay is a one-sided term and amounts to an unfair trade practice.

In practice, this means you are not necessarily bound by a token compensation figure written into an old agreement. Authorities and courts have repeatedly stepped in to award interest at rates closer to the RERA benchmark (SBI MCLR + 2%) or a comparable reasonable rate, rather than enforcing a clause that was clearly drafted to favour the builder.

How to File a Claim: The Actual Process

1. Confirm your project's RERA registration on your state's RERA portal, and note the registered possession date, since this is the date your claim will be measured against, not any informal date a sales executive may have quoted.
2. Gather your documents: the registered Agreement for Sale, every payment receipt, and any written correspondence with the builder about delays or revised timelines.
3. Register as a complainant on your state RERA portal (each state runs its own: MahaRERA, UP RERA, K-RERA, and so on) using your mobile number and email.
4. Choose the correct form and forum (see below) and file within the applicable limitation period, generally understood as up to three years from the cause of action, though filing sooner is always safer than waiting.
5. Pay the filing fee, which varies by state and claim value, typically in the range of ₹1,000 to ₹5,000.
6. Attend the hearing. Most state RERA authorities target disposal within 60 days of filing, though actual timelines vary with case load and complexity.

RERA Authority vs Adjudicating Officer: Which One Do You Need?

This distinction trips up a lot of first-time filers. A claim for refund, interest, or possession under Section 18 generally goes to the RERA Authority itself, under Section 31 (commonly filed as Form M in several states). A claim specifically for compensation (as opposed to interest or refund) is filed with the Adjudicating Officer, under Section 71 (commonly Form N). If you're unsure which applies to your situation, the safest approach is to be precise about what relief you're asking for, possession by a specific date plus interest, or a full refund plus interest, since an order can generally only grant what was specifically requested.

What If the Builder Ignores the Order?

A RERA order is legally enforceable, comparable to a civil court decree. If a builder doesn't comply voluntarily, you can file an execution application before the same authority, and in serious cases of non-compliance, the amount can be recovered as arrears of land revenue. Persistent non-compliance can also expose the builder to further penalties under the Act. If either side is unhappy with the outcome, an appeal can be filed with the Real Estate Appellate Tribunal, generally within 60 days of the order, under Section 44 of the Act.

Is the Interest You Receive Taxable?

Yes. Delayed interest or compensation received from a builder under a RERA order is generally treated as taxable income, specifically as "Income from Other Sources" under Section 56 of the Income Tax Act, and taxed at your applicable income tax slab rate. There's no specific blanket exemption for this kind of compensation under current tax law, so it's worth factoring this into your expectations and, ideally, discussing the reporting treatment with a tax professional once you actually receive an award.

What If Your Project Isn't RERA-Registered?

RERA's Section 18 remedy applies specifically to RERA-registered projects. If your project predates RERA's commencement in May 2017, or was never registered, or involves a plain land/plot sale outside RERA's scope, this specific route may not be directly available. That doesn't leave you without options: Consumer Courts, under the Consumer Protection Act, have separately and repeatedly held that they have the power to direct refund and compensation for delay in delivering a flat, so a consumer forum complaint remains a viable path even outside RERA's direct reach. Confirm your project's registration status on your state RERA portal before deciding which forum to pursue.

Common Problems and What to Do

Your builder cites a "grace period" clause to push the delay date further out. Grace period clauses have been challenged and, in several cases, found arbitrary where they aren't clearly and reasonably tied to genuine, documented circumstances. Don't assume a grace period automatically extends your possession date without reviewing the clause carefully.

You're not sure whether to file for a refund or to stay and claim interest. Consider the project's actual construction progress and your own need for the funds. A stalled project with little visible progress leans toward the refund route; a project that's genuinely close to completion may make the stay-and-claim route more practical.

You waited too long and are worried about limitations. File as soon as possible regardless, since delay itself is generally treated as a continuing wrong for as long as possession hasn't been handed over, but don't rely on that as a reason to keep waiting.

You're being asked to sign a waiver as a condition of taking possession. Don't sign anything that waives your right to claim for the delay period already suffered without having it reviewed first.