Delayed Possession under RERA: Refund with Interest or Monthly Interest?

By the legal team at Neeraj Associates · Updated 22 October 2026 · 6 min read

Practice areas: RERA Cases REAT Appeals

By Team Neeraj Associates, Lucknow · Last reviewed: October 2026 · 6 min read

हिंदी में पढ़ें: कब्ज़े में देरी: रिफ़ंड या ब्याज — हिंदी गाइड

The two options under Section 18

Section 18(1) applies when the builder cannot complete the project or give possession:

• by the date in the agreement for sale (or the date by which it was to be completed), or
• because its business stopped, or its RERA registration was suspended or revoked.

In that case the buyer may choose:

1. Refund with interest: withdraw from the project and get back the amount paid, with interest, including compensation. Section 19(4) also gives the allottee this right to a refund if the builder fails to comply with the agreement or is unable to give possession.
2. Interest for delay: stay in the project and receive interest for every month of delay until possession. This is set out in the proviso to Section 18(1).

The choice is the buyer's, and it is without prejudice to any other remedy. Under Rule 16 of the UP RERA Rules, 2016, a refund with interest and compensation is to be paid within 45 days of becoming due.

How is the interest calculated?

• Same rate both ways: Section 2(za) says the builder and the buyer pay interest at the same rate when either defaults.
• The UP rate: Under the model agreement for sale in the UP Real Estate (Regulation and Development) (Agreement for Sale/Lease) Rules, 2018, both refund interest and delay interest are at SBI's MCLR on home loans plus 1%. MCLR changes from time to time, so check the rate in force on the date of the order.
• Refund: Interest runs on each payment from the date it was paid until the refund is made.
• Delay interest: Interest runs on the amount paid from the agreed possession date until possession is actually handed over.

A simple worked example (round numbers, for illustration only):

SBI's one-year MCLR is 8.85% from 15 October 2026, so MCLR + 1% comes to about 9.85%. We round it to 10% a year to keep the arithmetic simple.

• Amount paid to the builder: ₹40,00,000
• Delay interest at 10% a year = ₹4,00,000 a year, or about ₹33,333 a month
• For a delay of 2 years and 6 months, delay interest comes to about ₹10,00,000

For a refund, the same rate is applied to each instalment from its own payment date. For example, ₹10,00,000 paid five years ago earns about ₹5,00,000 in interest, while ₹10,00,000 paid one year ago earns about ₹1,00,000. Keep a table of every payment date and amount, because the complaint should show this calculation.

Refund or stay? Points to weigh

• Project progress: Look at the quarterly progress reports and photographs on the UP RERA website. Does the project look likely to be completed?
• Your finances: A refund frees your money and stops loan interest. Staying gives you the flat at the old price, plus monthly interest for the delay.
• Occupancy certificate: The builder must obtain the completion and occupancy certificates (Section 11(4)(b)). Ask whether the "offer of possession" comes with them.
• Home loan: If a bank or tripartite agreement is involved, the refund order usually has to account for the lender's dues.
• Force majeure: A builder may seek an extension of registration for genuine force majeure (Section 6). Check whether the registration was in fact extended and for how long.

What about compensation?

Interest compensates for the use of your money. Other loss, such as rent paid while waiting, extra loan interest or mental harassment, is claimed as compensation before the Adjudicating Officer under Sections 71 and 72, using Form N (Rule 34 of the UP RERA Rules, 2016). When fixing compensation, the officer considers (Section 72):

• any disproportionate gain or unfair advantage made by the builder
• the loss caused to the buyer
• whether the default was repeated
• other relevant factors

Keep rent receipts, loan statements and similar proof.

What to ask for in the complaint

• A clear choice: refund with interest, or possession with delay interest
• Interest at the prescribed rate (SBI MCLR + 1%), worked out payment by payment, to the date of payment
• A payment table annexed to the complaint: date, amount and receipt number of each instalment
• Directions to pay within the time allowed by the rules (45 days under Rule 16)
• A separate compensation claim before the Adjudicating Officer, if needed
• Costs of the proceedings

How to file, which form to use and the fee are explained step by step in our UP RERA complaint guide.

Frequently asked questions

Can I change my mind after choosing delay interest?

The Act gives the choice to the buyer when the builder defaults. Whether you can switch later depends on the stage of the case and the project. Raise it with the Authority as early as possible.

Does the builder pay interest even if it gives possession late but completes the flat?

Yes. Under the proviso to Section 18(1), interest is payable for every month of delay until possession is handed over.

Is the refund only of the basic price?

Section 18(1) speaks of the amount received by the builder. That usually covers all amounts you paid to the builder, but statutory charges paid to the government may be treated differently.

Which MCLR is used: one-year or another tenor?

The UP rules refer to SBI's MCLR on home loans plus 1%, without naming a tenor. Orders state the rate applied. The one-year MCLR used in the example above is only an illustration.

What if the builder does not pay after the order?

The amount can be recovered as arrears of land revenue under Section 40(1), and penalties can be imposed. A separate guide on recovery and appeal after a RERA order follows in this series.

Can I claim refund if my project is stuck because the builder is insolvent?

Insolvency proceedings against the builder affect how and where you can recover. Homebuyers are treated as financial creditors under the Insolvency and Bankruptcy Code, 2016, so the route changes. Take advice on your specific project.

About the authors

Team Neeraj Associates, Lucknow Email: rishi.saxena@neerajassociates-legal.com · Phone: +91 8960006363

Disclaimer: This article is general information as of October 2026, not legal advice. The interest example is illustrative only, rates change, and every case depends on its facts. Please consult an advocate about your situation.