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Homebuyers cannot claim Bank Loan Interest from Developer for Delay In Flat Delivery: Supreme Court

  • June 11, 2025
  • 1654 Views

The Hon’ble Supreme Court in Greater Mohali Area Development Authority (GMADA) through its Estate Officer (H)  V/s Anupam Garg etc  vide its Judgement dated 4th  June, 2025          [2025 INSC 808] has clarified that while developers must refund the principal amount with interest to aggrieved homebuyers in cases of delay or non-delivery, they cannot be held liable for paying interest on the personal loans taken by buyers to finance their homes.

Factual Background

GMADA launched a scheme of residential flats termed ‘Purab Premium Apartments’ to be constructed in the Sector 88 locality, at Mohali in the year 2011. Anupam Garg secured an application form for a 2-BHK + Servant Room Residential Apartment-Type II upon payment of 10% of the total consideration of ₹ 55 lakhs, i.e., ₹ 5,50,000/- as earnest money.

The allotment of the flats took place through a ‘draw of lots’ on 19th  March, 2012. He was successful and a Letter of Intent was issued in his favour on 21st  May, 2012. It provided details regarding price, payment schedule, possible plans of payment, locations where payment can be deposited, particulars of ownership, possession, management and maintenance and other general terms and conditions.

The scheduled date of delivery of possession was 21st  May, 2015. But  GMADA issued a letter of allotment-cum-offer of possession on 29th  June, 2016.

Upon visiting the allotted flat,  he found that various changes were made to the project itself, as also in the facilities and amenities provided therein, unilaterally.  Hence he expressed his desire to withdraw from the scheme and sought a refund of the money advanced for the flat. GMADA did not concede for his demand. So, he later filed a consumer complaint.

Findings of State Consumer Disputes Redressal Commission

The State Consumer Disputes Redressal Commission ruled in Garg’s favor as follows:

“ The opposite party ( ie GMADA)  is directed to refund the entire deposited amount of Rs.41,29,619/- to the complainant, along with interest at the rate of 8%, compounded annually under Clause 3(II) of the Letter of Intent, Ex. C-2. The opposite party shall also pay a compensation of Rs.60,000/- to the complainant for the mental tension and harassment suffered by him and Rs.30,000/- as costs of litigation.

The opposite party shall also pay the interest paid by the complainant to State Bank of Hyderabad and State Bank of India on the loan taken from it and paid to the opposite party for the purchase of the flat as charged by the Bank from the complainant.”

Appeal to National Consumer Disputes Redressal Commission

GMADA appealed to the National Consumer Disputes Redressal Commission (NCDRC), which upheld the State Commission’s order. GMADA then approached the Supreme Court, challenging specifically the direction to pay the interest on Garg’s housing loan.

Appeal to supreme court

The appellants’ case is that casting liability for the respondents’ loan upon GMADA is not a position under law. In contrast, the respondents argue to the contrary, stating that the Commissions have the requisite authority to grant compensation over and above what is agreed in the contract. It is their case that the terms of the agreement cannot circumscribe the authority of the Commission to award just compensation.

Case Laws referred

In Bangalore Development Authority v. Syndicate Bank (2007) 6 SCC 711: Where the development authority having received the full price, does not deliver possession of the allotted plot/flat/house within the time stipulated or within a reasonable time, or where the allotment is cancelled or possession is refused without any justifiable cause, the allottee is entitled for refund of the amount paid, with reasonable interest thereon from the date of payment to date of refund. In addition, the allottee may also be entitled to compensation, as may be decided with reference to the facts of each case.”

GDA v. Balbir Singh (2004) 5 SCC 65 compensation cannot be the same in all cases irrespective of the type of loss or injury suffered by the consumer.

DLF Homes Panchkula (P) Ltd. v. D.S. Dhanda (2020) 16 SCC 318: “15. The District Forum under the Consumer Protection Act, 1986 (“the 1986 Act”) is empowered inter alia to order the opposite party to pay such amount as may be awarded as compensation to the consumer for any loss or injury suffered by the consumer due to the negligence of the opposite party including to grant punitive damages. But the forums under the Act cannot award interest and/or compensation by applying rule of thumb The order to grant interest at the maximum of rate of interest charged by nationalised bank for advancing home loan is arbitrary and has no nexus with the default committed. The appellant has agreed to deliver constructed flats. For delay in handing over possession, the consumer is entitled to the consequences agreed at the time of executing buyer’s agreement. There cannot be multiple heads to grant of damages and interest when the parties have agreed for payment of damages @ Rs 10 per square foot per month. Once the parties agreed for a particular consequence of delay in handing over of possession then, there have to be exceptional and strong reasons for Scdrc/Ncdrc to award compensation at more than the agreed rate.”

Findings of Supreme Court

“A perusal of the judgment and orders of the Commissions does not reveal any exceptional or strong reasons for the interest on the loan taken by the respondents to be paid by GMADA. That apart, whether the buyers of the flat do so by utilizing their savings, taking a loan for such purpose or securing the required finances by any other permissible means, is not a consideration that the developer of the project is required to keep in mind. For, so far as they are concerned, such a consideration is irrelevant. The one who is buying a flat is a consumer, and the one who is building it is a service provider. That is the only relationship between the parties. If there is a deficiency or delay in service, the consumer is entitled to be compensated for the same. Repayment of the entire principal amount along with 8% interest thereon, as stipulated in the contract, alongside the clarification that there shall be no other liability on the authority, sufficiently meets this requirement.”

Decision of the Supreme Court

Hence developers must refund the principal amount with interest to aggrieved homebuyers in cases of delay or non-delivery, they cannot be held liable for paying interest on the personal loans taken by home buyers to finance their homes.

29 thoughts on “Homebuyers cannot claim Bank Loan Interest from Developer for Delay In Flat Delivery: Supreme Court”

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