Telangana RERA Orders Builder to Pay 10.7% Interest Over 18-Month Possession Delay

• The flat was originally scheduled for handover by December 2024, but possession remained pending.
• The builder must pay interest on the amount deposited by the buyer from June 26, 2025.
• Telangana RERA found the debris fee was not supported by the Agreement of Sale.

Telangana RERA has directed a builder to pay 10.7% annual interest on the amount paid by a homebuyer after possession of a flat was delayed by more than 18 months. The authority also rejected a separate ₹30,000 debris charge, stating that the levy was not included in the Agreement of Sale.

The case concerns a residential project in Bachupally, Hyderabad, where a homebuyer identified as VenuGopal from Neredmet, Secunderabad, had booked a flat on the 10th floor of the project’s second block. The total agreed value of the property was ₹44.36 lakh, while the buyer had paid around ₹40.32 lakh, including amounts towards amenities, parking, EV charging and other facilities.

The Agreement of Sale was executed on February 28, 2023, and required possession by December 26, 2024, with a contractual grace period extending up to August 2025. However, possession was not handed over within the agreed period. Telangana RERA passed its order on August 25, 2026, directing the builder to compensate the buyer through interest.

During the proceedings, the builder attributed the delay to several circumstances, including labour shortages, the impact of Covid-19, and issues relating to alleged encroachment affecting the project.

The developer relied on the force majeure provisions of the Agreement of Sale and referred to an FTL encroachment issue involving certain blocks. According to the builder, the situation affected construction activity, resulted in labour dispersal and created difficulties with customers and institutional funding.

The developer also told the authority that the Telangana High Court subsequently permitted construction to continue in blocks other than Blocks 8 and 9. It further stated that HMDA had not found any substantial FTL violation apart from a minor issue that had already been rectified.

Despite these developments, the project’s construction deadline was eventually extended to December 18, 2026, significantly beyond the original possession commitment.

Telangana RERA did not accept Covid-19 as sufficient grounds for the delay in this case.

The authority noted that the Agreement of Sale was signed in February 2023, after the major disruption caused by the pandemic had subsided. Therefore, the builder had entered into the agreement while being aware of the circumstances affecting the project.

The authority held that the developer could not subsequently rely on Covid-19-related force majeure provisions to avoid the possession commitment agreed with the buyer.

Since the homebuyer had made substantial payments and had not defaulted on the agreed payments, while possession remained undelivered beyond the contractual timeline and grace period, the delay was treated as a breach of the builder’s contractual and statutory obligations.

The possession dispute was accompanied by another disagreement over an additional ₹30,000 debris charge.

The buyer challenged the demand, arguing that the fee had not been disclosed earlier and was not part of the Agreement of Sale. The developer, meanwhile, told Telangana RERA that construction was approximately 85% complete and that discussions with buyers had resulted in the debris charge being reduced to ₹20,000 per flat.

Telangana RERA rejected the levy because it was not supported by the Agreement of Sale. The authority held that imposing such a charge was inconsistent with the promoter’s obligations under Sections 11(4)(a), 11(4)(d) and 14 of the RERA Act.

As part of its order, Telangana RERA directed the builder to pay 10.7% interest per annum on the amount already paid by the homebuyer.

The interest is to be calculated from June 26, 2025, and will continue until lawful possession of the flat is actually handed over.

The authority also directed the builder to pay the interest accumulated up to the date of its August 25, 2026 order within 60 days. If the outstanding amount is not paid within the prescribed period, further interest will continue to accrue and will have to be paid until possession is legally delivered.

Based on the amount of approximately ₹40.32 lakh already paid by the buyer, an Economic Times report estimated the accumulated interest up to August 25, 2026, at around ₹5.04 lakh. This figure is only an estimate, however, because the interest liability continues beyond the order date until lawful possession is handed over.

The RERA order also leaves open the possibility of additional compensation.

The homebuyer can approach the Adjudicating Officer under Section 71 of the RERA Act by filing an application in Form N for compensation relating to mental agony, financial loss or any assured compensation that may have been promised by the builder.

This means the 10.7% interest ordered by Telangana RERA does not necessarily represent the buyer’s only potential remedy under the applicable legal framework.

The case highlights why the possession date and other contractual terms in an Agreement of Sale are important when buying an under-construction property.

For homebuyers dealing with prolonged delays, records such as the signed sale agreement, payment receipts, builder correspondence, revised possession commitments and details of additional charges can provide important evidence in a RERA proceeding.

The order also demonstrates that additional demands made by a promoter can be challenged when they are not supported by the contractual documents or applicable legal provisions.

The builder is required to clear the interest amount accumulated up to the August 25, 2026 order within 60 days. The 10.7% interest liability will continue until lawful possession is handed over.

The buyer may separately pursue compensation before the Adjudicating Officer for eligible financial losses, mental agony or assured compensation under Section 71 of the RERA Act.

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