After booking the housing unit, in case, the buyer changes his mind and doesn’t want to go ahead with the purchase. What will be the financial implications he will face? Will he get a refund of the token money/ booking amount and the part money paid towards the property? Read this guide to find.
A case in point is that of Atul Pathak who invested in a sample house in a project in Taloja, Navi Mumbai from the developer at a negotiated price. Pathak had a change of mind and wanted to invest in another property that he saw. Thus he cancelled his purchase and wanted a refund of the installment money that he had paid. Read here to know the token money refund guidelines under RERA that Pathak and people who have problems like his can explore.
What is token money?
When a buyer and a seller agree to get into a property transaction deal, the first step to be taken by the buyer is to pay the token money. A token money is the initial money paid by the homebuyer to the seller. Through this, he signals his intent of buying the property to the seller and in turn the seller acknowledges by not showing the property to other buyers further. The token money is around 1-5% of the value of the property and it is legal to give this money.
The process of refunding money to a home buyer is governed by the Real Estate Regulatory Authority (RERA) and in this guide we discuss the steps associated with refund of booking amount and instalment money.
What are the documents that a buyer should have to avoid problems with developer?
Note that it is important that a buyer documents the token money he pays to the builder legally by registration or through notary. This document should outline the details of the token money including money paid, refund to be paid in case of cancellation etc. and both parties honour this agreement.
Additionally, the buyer should have with him agreement of sale deed and all other property related that he has done with the developer communication in legally recognised documents.
What is RERA refunded amount if buyer cancels house after getting allotment letter?
In case a buyer cancels his booking within 45 days of receiving the allotment letter, he may have to pay for the loss incurred by the builder. Under RERA, a builder can deduct 2% of the cost of the property as cancellation fee and return the remaining money paid by the home buyer. Prior to implementation of the RERA, builders used to charge a fee as high as 10% of the total property cost for cancellation of allotment.
When can a buyer cancel the booking unit and get a refund?
According to the RERA, a homebuyer has the right to cancel the booking of a housing unit at any stage- a buyer can cancel the housing unit if he has a change of mind, financial problem etc. However, industry reports suggest that in most cases, a buyer cancels his booking within 45 days only in case the developer delays in giving possession to the property indefinitely.
RERA rules: What can buyer do if builder refuses to return the housing unit money?
- Check documents: In case a buyer doesn’t get a refund of the housing unit money from the developer, he has to first check the property documents he has signed with the developer. Check on aspects that may help such as delivery deadline, clauses that will mandate the token money refund etc.
- Communicate with the developer: Write a detailed letter or email to the developer explaining that you have cancelled the housing unit and would need the developer to return the token money. It’s also recommended to send a registered post to the developer as you get acknowledgement that the developer has received your letter.
- Register a complaint with RERA: You can as a homebuyer, register with RERA of your state and file a complaint in the grievances section of the RERA. Note that under RERA, a complaint has to be heard and disposed of within 60 days and hence, you will get the fastest revert through RERA.
- Opt for legal route: In case you don’t get any revert for the communication that you have initiated, you can send a legal notice requesting immediate refund of token money.
- File a case with the consumer forum: Even after getting the legal notice, if the builder fails to return the token money, you can register a complaint with the consumer forum.
- Civil case: This can be the final resort when after trying everything the developer doesn’t return the token money. Note that you have to provide all legal supporting documents for the case to be strong.
A homebuyer should know that he cannot approach RERA, appellate tribunal, consumer forum and civil court all at the same time. Only after a case has been dispose of in a particular court and he is not satisfied, he may approach the other option.
- Record of documents: It is recommended to maintain all communication and manage agreement of record, receipts or correspondence that has reference to token money so that it helps in grievance redressal.
If the homebuyer cancels his booking, will he get a stamp duty refund?
Stamp duty refund rules differ from state to state in India. Under the Indian Stamp Act,1899, stamp duty refund can be claimed by 6 months from the date it was paid. After a deduction of 10% of the total stamp duty paid, the remaining amount will be refunded.
Will a homebuyer get the GST he paid in case he cancels booking at an under-construction project?
In case of cancellation of an under-construction project, a developer may cut or take the booking amount and refund the installments paid. However, the home-buyer will not get back the GST as this is paid towards the service that he has already used and hence can’t be refunded.
Housing.com POV
While a seller has the right to take token money if a buyer has decided on purchasing the property, a buyer has the right to get a refund of the token money. A buyer can reach the RERA for issues related to token money as they have a faster grievance redressal policy of 60 days within which the buyer can be granted some respite. If a developer doesn’t obey the final order issued by RERA, he will have to face strict penalties.
FAQs
Can a token money be refunded?
A buyer is legally allowed to get a refund of his token money unless he has signed a document that mentions otherwise.
How can a homebuyer approach builder for refund of instalment amount?
In case the homebuyer cancels the housing unit, he can ask the builder to refund the instalment amount after cutting the cancellation fee of 2% of the total property cost.
| Got any questions or point of view on our article? We would love to hear from you. Write to our Editor-in-Chief Jhumur Ghosh at jhumur.ghosh1@housing.com |