MahaRERA order to allow developers to cut over 2% amount from buyers in booking cancellation

The Maharashtra Real Estate Regulatory Authority (MahaRERA) has issued a revised order that will pave the way for developers to increase the deduction amount in case of a booking cancellation, which was earlier capped at 2 percent.

In July, MahaRERA had issued an order prescribing the number of days and amount that can be deducted in case of cancellation of a booking. According to this, no amount could be deducted for cancellation within 15 days of booking, 1 percent of the cost of the said unit between 16 days to 30 days, 1.5 percent between 31 days to 60 days and 2 percent for cancellation over 61 days.

In this context, the MahaRERA in the July order had stated, “The Table in Clause 9 of the allotment letter prescribes the minimum period (number of days) within which the booking can be cancelled and the upper limit of the percentage of the amount to be deducted in case the allottee desires to cancel the booking.”

The order added, “The promoter may if the promoter so chooses, increase the number of days within which the booking can be cancelled as well as decrease the percentage of the amount to be deducted in the event of cancellation of the booking, in the allotment letter prescribed.”

However, in a revised order dated August 12, 2022, in relation to model allotment letter and model agreement for sale, the MahaRERA has not mentioned about developers being able to increase the number of days or decrease deduction amount, in case of cancellation of booking.

Additionally, the MahaRERA has said that if the developers want to add any points in case of deviations it should highlight the same with different colour.

In this context, 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, than the deviations/modifications in the proforma of the allotment letter as proposed by promoters shall be highlighted in different colour.”

The same has to be uploaded by the developer along with a deviation sheet mentioning/indicating therein the deviations/modifications while seeking registration of the real estate project so as to enable the allottees to make an informed decision, said MahaRERA in its order.

Explaining the significance, Chartered Accountant Aditya Zantye who practices with MahaRERA, said, “The MahaRERA’s revised order of August 12, 2022 has basically in a way paved the way for developers considering differing circumstances of different properties offered for sale to deduct more than 2 percent in case of cancellation of booking by highlighting the deviation or change in different colour.”

Zantye added, “A similar order issued in July 2022, allowed developers to decrease the deduction amount, however, the revised order now does not speak about decreasing and nor bars any increase. So, by this developers can charge more than 2 percent for cancellation by highlighting it in different colour. In a way, it is a good move considering litigation might come down by this. Also, more than 10 percent booking amount is in any way not permitted.”

Further, developers have welcomed the revised order by MahaRERA issued on August 12.

Manju Yagnik, Vice Chairperson, Nahar Group and Sr. Vice President, NAREDCO Maharashtra said, “This is a brilliant move by RERA which would further increase the transparency in the real estate sector while simultaneously empowering the end consumer. The fact that the developers would need RERA’s approval for any changes made to the sale agreement and the allotment letter should provide the consumer’s much-required relief.”

Yagnik added, “This would give the homebuyers maximum possible information on every aspect of the project and would also reduce future litigation processes if any. This standard draft would prevent multiple discrepancies between the developer and the consumers and would further streamline the home buying process.”

Meanwhile, the Maharashtra Real Estate Appellate Tribunal (MREAT) in its recent ruling had said that Real Estate Regulatory (RERA) Act doesn’t allow a property developer to forfeit money from the amount paid by a buyer if they cancel a purchase. It added that the RERA Act is silent on the point of permissible deduction if the buyer unilaterally cancels a booking for whatever reason.