Booking Cancelled Within 48 Hours: Can Builders Deduct Money?

The Maharashtra Real Estate Regulatory Authority (MahaRERA) has supported a developer’s ability to collect cancellation fees from a homebuyer’s booking cash, even if the buyer cancelled within two days due to financial constraints and uncertainties about house loan approval.

MahaRERA dismissed the buyer’s request for a complete refund, ruling that the deduction was lawful because it was made in accordance with the project’s cancellation policy, which was posted on the MahaRERA website via a deviation report provided by the developer.

The case

A customer reserved a 2 BHK flat in May 2024 for ₹89.86 lakh. The homebuyer paid a booking fee of ₹1 lakh and received an allotment letter the same day. However, two days later, and before any sales agreement was signed, the homebuyer cancelled the booking.

The homebuyer stated in an email dated May 10, 2024, that he had to cancel the appointment owing to financial difficulties and doubts about loan clearance. The homebuyer complained to MahaRERA that the developer deducted Rs. 89,861 as cancellation charges and did not refund the full booking amount, despite the fact that the cancellation clauses in the allotment letter were unfair and violated MahaRERA guidelines and formats. He stated that, despite the developer’s assurance that the refund would be completed within 35 to 40 working days, no refund has been received to date, despite repeated follow-ups and conversations demanding refund and clarification on the deduction,” the homebuyer submitted in the MahaRERA.

Developer’s Argument

The developer, however, insisted that the cancellation was voluntary and caused by the homebuyer’s own financial constraints. It maintained that the booking form and allotment letter clearly stated that cancellation within 15 days of allotment would result in charges equal to 1% of the unit cost. The company deducted ₹89,861 from the booking amount and refunded the remaining ₹10,139. The developer stated that the complainant was informed of the cancellation policy and charges in the booking form and allotment letter, which they accepted.

What is MahaRERA’s return policy for cancellation?

In 2022, MahaRERA issued an order that allowed developers to deduct up to 2% of the total consideration cost in the event of a booking cancellation. However, it also permitted developers to file deviation reports to the MahaRERA website to reveal any changes in project terms or conditions, allowing consumers to make more informed judgments before making a purchase.

In this regard, the MahaRERA order states, “If promoters choose to execute with an allottee an allotment letter that is not in accordance with the proforma of the allotment letter as approved by the Authority in its meeting held on 24.06.2022, then the deviations/modifications in the proforma of the allotment letter as proposed by promoters shall be highlighted in different colour.”

When seeking registration of a real estate project, the developer must upload the same, along with a deviation document outlining the deviations/modifications, so that allottees can make an informed decision, according to MahaRERA’s ruling.

MahaRERA’s order in this instance

While investigating the disagreement, MahaRERA discovered that the developer had published a deviation report in the aforementioned case, which revealed the cancelation policy on the project page. The authority referred to MahaRERA Order No. 35 of August 12, 2022, which permits developers to deviate from the model allotment letter provided that such deviations are disclosed through a deviation report uploaded on the regulator’s website. The respondent uploaded a deviation report dated 21.03.2023 on the MahaRERA website, disclosing that cancellation within 15 days of allotment would attract d.

According to the MahaRERA judgment, the complainant rented the mentioned flat after the deviation report dated 21.03.2023, which had already been placed on the MahaRERA website. As a result, the complainant was found to be aware of the aforementioned cancellation policy at the time of booking.

The MahaRERA dismissed the complaint, stating that it is of the considered opinion that the cancellation charges levied by the respondent were in accordance with the cancellation policy disclosed in the deviation report dated 21.03.2023, and thus cannot be considered illegal or contrary to MahaRERA order no. 25 of 2022.

What do legal experts say?

According to legal experts, homebuyers should carefully analyze the deviation report posted by the developer to the MahaRERA website before making a purchase. Any doubt created by the stated variations may impact the buyer’s decision and, in some situations, result in the cancellation of the booking.

“In my opinion, the current order may cause some doubt among homebuyers. However, potential buyers should exercise extreme caution and study the deviation report filed by the promoter on the MahaRERA website when booking a flat. “If the booking is made after the deviation report has been uploaded, it could be argued that the homebuyer was aware of the cancellation policy and other disclosed deviations at the time of booking,” said Mumbai-based solicitor Trupti Daphtary.