Who knew purchasing a home from a reputed builder on the pre-EMI scheme could turn out to be an almost decade long nightmare. This is the experience of an Bengaluru based homebuyer who bought an apartment in March 2014 by using his savings of Rs 15 lakh and took a home loan of Rs 65 lakh from a bank. This homebuyer signed a tripartite agreement with the bank and builder which said that all pre-EMIs would be reimbursed by the builder till the time he gives possession of the apartment i.e. by March 31, 2017. However, the builder neither delivered the apartment by March 31, 2017 nor reimbursed any of the pre-EMI amounts as agreed.
The homebuyer had to pay all the pre-EMIs to the bank till June 2024. The bank continued to charge all the pre-EMIs to homebuyer despite builder abdicating its responsibility of re-imbursing pre-EMI and there was no visible sign of the apartment’s construction getting finished. Ultimately this homebuyer had to approach Karnataka High Court in 2024 to get a restraining order against the bank from initiating any sort of precipitative action including but not limited to civil or criminal proceedings to recover the outstanding loan amount.
While the high court did grant this appeal and issued the restraining order in June 2024, the homebuyer had to approach the Karnataka RERA tribunal to fight for an order mandating the builder to refund the money and foreclose the bank loan and give reimbursement for all the pre-EMIs paid. The Karnataka RERA after analysing the case applied Section 18 of RERA Act, 2016 and ordered the builder to foreclose the home loan and pay Rs 2.56 crore (including interest) to the homebuyer.
Read below to understand how this homebuyer won this case against the builder and also managed to get a restraining order against the bank. The legal analysis and reasoning used in this case can help you in similar situations.
How did this case start?
According to the order of Karnataka RERA dated March 24, 2025, here’s a timeline of events:
Builder’s lawyers said in Karnataka RERA that demonetisation, GST, Covid-19 prevented him from completing the apartment’s construction for 8 years
As per the order of the Karnataka RERA, the builder’s lawyers said:
There is a delay in completing the project and the builder could not handover the apartment as per the agreed timeline. The reason for delay in completion of the project are:
Legal and licensing issues, Heavy and continuous rainfall and flooding in the project site, Demonetization, Introduction of GST, Restrictions imposed on working hours due to curb on sand mining, shortage of skilled labour, steel and other construction materials, Covid-19 lockdown imposed by the government Karnataka RERA says builder can’t say Covid-19 prevented him from completing the project when its possession deadline was March 2017
Karnataka RERA said:
The Karnataka RERA said:
Subrata Mukherjee, Partner, SNG & Partners, Advocates & Solicitors, says: “The homebuyer won the case due to the inordinate delay by the builder in handing over the apartment. The said delay was admitted by the builder and was not sufficiently explained. Further, the builder did not produce any documentary evidence to support the reasons for delay. Hence, in terms of section 18 of the RERA Act, the homebuyer has the right to withdraw from the project and claim return of the entire refund of the amount paid by the homebuyer to the builder along with interest payable.”
Also read: Bengaluru Homebuyer gets Rs 7.12 lakh compensation for delaying possession under RERA; Know your rights under RERA
Karnataka RERA explains why it ordered the builder to pay Rs 2.56 crore to the homebuyer
The Karnataka RERA explains the reason for this judgement:
Point 1: Delay in possession of the house violated Section 18 of RERA
The grievance of the homebuyer is that their apartment was not completed within the promised possession date i.e. March 31, 2017 and since they were given the option to withdraw from the purchase from the builder by signing a pre-EMI scheme document at the very conception of the purchase, the homebuyer availed the said option of withdrawal.
In view of the builder’s admission and acceptance of the homebuyer’s withdrawal and from all available records submitted before this RERA Authority, there has been delay in giving possession, and therefore the complainant is entitled to the relief of refund of the entire amount paid as contemplated under Section 18 of RERA Act.
Point 2: Builder defaulted on reimbursement obligations of bank’s pre-EMI amount
In view of the builder having failed to reimburse all the pre-EMIs to the homebuyer as agreed under the pre-EMI document and the letter of undertaking, which resulted in the homebuyer having made payment to the financial institute where he had availed the loan, and on account of the builder’s failure to give possession on time as promised, which again resulted in the homebuyer having continued to pay pre-EMI till July 2024, and further if the homebuyer had not approached the Karnataka High Court, he would had to make the payment of pre-EMI to the complainant until possession is given to the homebuyer.
In the instant case, the homebuyer has withdrawn on account of no possession being given, and the builder has failed to discharge the homebuyer from making payment of pre-EMI by closing the loan account standing in the name of the homebuyer with the financial institution as agreed by the builder.
The homebuyer is neither beneficiary of the property nor of the loan amount as both are retained by the builder.
Zahir Tapia – Associate, ALMT Legal, says: "The homebuyer in this matter was successful as the developer failed to hand over possession to the homebuyer by the contractually agreed date of 31st March 2017. This clearly constituted a breach under Section 18(1) of the Real Estate (Regulation and Development) Act, 2016, which provides for refund with interest in case of delayed possession.
Further, the developer had acknowledged and accepted the homebuyer’s cancellation of the apartment booking through an email dated 23rd April 2017, following the homebuyer’s email dated 18th January 2017. This showed mutual agreement on withdrawal, validating the buyer’s entitlement to a refund. Moreover, under the Pre-EMI Scheme and Letter of Undertaking dated 26th May 2014, the developer was obligated to service the EMIs on the loan availed by the buyer on cancellation. However, upon cancellation, the developer failed to foreclose the loan or repay the pre-EMIs already paid by the buyer, despite their express contractual responsibility to do so.
In this regard, the Authority also observed that the buyer had received neither the property nor the benefit of the loan, both being retained by the developer. The financial burden unfairly fell on the buyer even after cancellation. The Authority also held that excuses such as rainfall, demonetisation, COVID-19, and shortage of materials were rejected as insufficient and routine construction risks, especially since COVID-19 post-dated the promised delivery date in 2017. Furthermore, the developer failed to produce any documentary evidence on project status, progress, or justification for delay, weakening its defence and reinforcing the complainant’s case.."
What are some key legal takeaways from this judgement
ET Wealth Online has asked various experts about what might be some key legal takeaways from this judgement. Here's what they said:
Avikshit Moral, Partner, S&R Associates: There was substantial delay in handing over possession of the unit by the developer to the complainant which entitled him to exit from the project. The authority did not see merit in the reasons cited by the Respondent for such delay. It is this case the developer has been directed to refund the principal with interest thereon. But what makes this order interesting is the fact that the principal refund amount includes his self-contribution together with the amount paid by him as EMI to financial institution as per a private agreement executed between the complainant, respondent, and the financial institution. So, the principal refund amount seems to be much higher than the total cost of the unit.
Rohan Marathe – Senior Associate, ALMT Legal: This judgment affirms that developers remain liable to foreclose home loans and refund EMIs when a Pre-EMI scheme has been executed, especially after cancellation is accepted. The order also underscores that failure to deliver possession within the stipulated period entitles the buyer to a full refund with interest, even years after the agreed date. The judgment clarifies that Covid-19 cannot be cited as a defence for delays pre-dating the pandemic. The Authority has clarified that once a developer has accepted a buyer’s cancellation in writing, it cannot later evade liability by delaying refund or failing to close the loan account.
( Originally published on Apr 17, 2025 )
The homebuyer had to pay all the pre-EMIs to the bank till June 2024. The bank continued to charge all the pre-EMIs to homebuyer despite builder abdicating its responsibility of re-imbursing pre-EMI and there was no visible sign of the apartment’s construction getting finished. Ultimately this homebuyer had to approach Karnataka High Court in 2024 to get a restraining order against the bank from initiating any sort of precipitative action including but not limited to civil or criminal proceedings to recover the outstanding loan amount.
While the high court did grant this appeal and issued the restraining order in June 2024, the homebuyer had to approach the Karnataka RERA tribunal to fight for an order mandating the builder to refund the money and foreclose the bank loan and give reimbursement for all the pre-EMIs paid. The Karnataka RERA after analysing the case applied Section 18 of RERA Act, 2016 and ordered the builder to foreclose the home loan and pay Rs 2.56 crore (including interest) to the homebuyer.
Read below to understand how this homebuyer won this case against the builder and also managed to get a restraining order against the bank. The legal analysis and reasoning used in this case can help you in similar situations.
How did this case start?
According to the order of Karnataka RERA dated March 24, 2025, here’s a timeline of events:
- March 29, 2014: The bank sanctioned Rs 65 lakh (65,65,776) home loan and disbursed the amount to the builder in full.
- April 24, 2014: The builder signed a sale agreement with the homebuyer. On this same date the homebuyer paid Rs 15 lakh (15,56,872) from his savings in addition to the home loan already paid by the bank earlier.
- May 26, 2014: The builder, homebuyer and the bank signed a tripartite agreement about the Rs 65 lakh home loan and its pre-EMI terms and conditions. The builder also signed a letter of undertaking on this same date agreeing to reimburse all the pre-EMIs of this loan till the date of expected possession of the apartment i.e. March 31, 2017.
- May 26, 2014 till January 18, 2017: Builder failed to reimburse any of the pre-EMI amounts, while the bank continued to charge the homebuyer these pre-EMI amounts, which he continued to pay.
- January 18, 2017: The homebuyer cancelled the booking and the builder acknowledged this cancellation on January 24, 2017.
- January 24, 2017 till July 26, 2024: Neither the builder nor the bank discharged the homebuyer from repayment obligations of the home loan as agreed under the letter of undertaking signed on May 26, 2014. Hence the home loan EMI liabilities continued as if the booking was never cancelled.
- July 26, 2024: The Karnataka High Court passed a restraining order stopping the bank from initiating/continuing any civil or criminal proceedings against the homebuyer for recovery of the outstanding home loan amount.
- November 2, 2024: The homebuyer files a case in Karnataka RERA tribunal against the builder (Mantri Developers).
Builder’s lawyers said in Karnataka RERA that demonetisation, GST, Covid-19 prevented him from completing the apartment’s construction for 8 years
As per the order of the Karnataka RERA, the builder’s lawyers said:
There is a delay in completing the project and the builder could not handover the apartment as per the agreed timeline. The reason for delay in completion of the project are:
Karnataka RERA said:
- None of the reasons submitted by the builder has any force and legal validity to justify the delay in completion of the project and provide any exception from the application of Section 18 of the RERA Act, 2016.
- Further, one of the contentions raised by the builder for delay in completing the project is on account of Covid-19. As stated earlier, the delivery and completion of the project is March 31, 2017 and the actual Covid-19 pandemic started during the year 2020 and the builder cannot plead before the Authority Covid-19 pandemic as the reason for delay in completing the project. There, the reason sought by the builder on account of Covid-19 for delay in completing the project is not tenable and the same is not agreed by the Authority.
The Karnataka RERA said:
- The builder is directed to refund a sum of Rs 2.56 crore (2,56,47,520) towards refund with interest to the complainant as per the calculation submitted by the homebuyer, within 60 days from the date of this order, calculated from April 10, 2014 till November 2, 2024. The interest due from November 3, 2024 up to the date of final payment will be calculated likewise and paid to the homebuyer.
- The builder is directed to close the loan standing in the name of the homebuyer.
- The homebuyer is at liberty to initiate action for recovery in accordance with law if the respondent fails to pay the amount as per the order.
Subrata Mukherjee, Partner, SNG & Partners, Advocates & Solicitors, says: “The homebuyer won the case due to the inordinate delay by the builder in handing over the apartment. The said delay was admitted by the builder and was not sufficiently explained. Further, the builder did not produce any documentary evidence to support the reasons for delay. Hence, in terms of section 18 of the RERA Act, the homebuyer has the right to withdraw from the project and claim return of the entire refund of the amount paid by the homebuyer to the builder along with interest payable.”
Also read: Bengaluru Homebuyer gets Rs 7.12 lakh compensation for delaying possession under RERA; Know your rights under RERA
Karnataka RERA explains why it ordered the builder to pay Rs 2.56 crore to the homebuyer
The Karnataka RERA explains the reason for this judgement:
Point 1: Delay in possession of the house violated Section 18 of RERA
The grievance of the homebuyer is that their apartment was not completed within the promised possession date i.e. March 31, 2017 and since they were given the option to withdraw from the purchase from the builder by signing a pre-EMI scheme document at the very conception of the purchase, the homebuyer availed the said option of withdrawal.
In view of the builder’s admission and acceptance of the homebuyer’s withdrawal and from all available records submitted before this RERA Authority, there has been delay in giving possession, and therefore the complainant is entitled to the relief of refund of the entire amount paid as contemplated under Section 18 of RERA Act.
Point 2: Builder defaulted on reimbursement obligations of bank’s pre-EMI amount
In view of the builder having failed to reimburse all the pre-EMIs to the homebuyer as agreed under the pre-EMI document and the letter of undertaking, which resulted in the homebuyer having made payment to the financial institute where he had availed the loan, and on account of the builder’s failure to give possession on time as promised, which again resulted in the homebuyer having continued to pay pre-EMI till July 2024, and further if the homebuyer had not approached the Karnataka High Court, he would had to make the payment of pre-EMI to the complainant until possession is given to the homebuyer.
In the instant case, the homebuyer has withdrawn on account of no possession being given, and the builder has failed to discharge the homebuyer from making payment of pre-EMI by closing the loan account standing in the name of the homebuyer with the financial institution as agreed by the builder.
The homebuyer is neither beneficiary of the property nor of the loan amount as both are retained by the builder.
Zahir Tapia – Associate, ALMT Legal, says: "The homebuyer in this matter was successful as the developer failed to hand over possession to the homebuyer by the contractually agreed date of 31st March 2017. This clearly constituted a breach under Section 18(1) of the Real Estate (Regulation and Development) Act, 2016, which provides for refund with interest in case of delayed possession.
Further, the developer had acknowledged and accepted the homebuyer’s cancellation of the apartment booking through an email dated 23rd April 2017, following the homebuyer’s email dated 18th January 2017. This showed mutual agreement on withdrawal, validating the buyer’s entitlement to a refund. Moreover, under the Pre-EMI Scheme and Letter of Undertaking dated 26th May 2014, the developer was obligated to service the EMIs on the loan availed by the buyer on cancellation. However, upon cancellation, the developer failed to foreclose the loan or repay the pre-EMIs already paid by the buyer, despite their express contractual responsibility to do so.
In this regard, the Authority also observed that the buyer had received neither the property nor the benefit of the loan, both being retained by the developer. The financial burden unfairly fell on the buyer even after cancellation. The Authority also held that excuses such as rainfall, demonetisation, COVID-19, and shortage of materials were rejected as insufficient and routine construction risks, especially since COVID-19 post-dated the promised delivery date in 2017. Furthermore, the developer failed to produce any documentary evidence on project status, progress, or justification for delay, weakening its defence and reinforcing the complainant’s case.."
What are some key legal takeaways from this judgement
ET Wealth Online has asked various experts about what might be some key legal takeaways from this judgement. Here's what they said:
Avikshit Moral, Partner, S&R Associates: There was substantial delay in handing over possession of the unit by the developer to the complainant which entitled him to exit from the project. The authority did not see merit in the reasons cited by the Respondent for such delay. It is this case the developer has been directed to refund the principal with interest thereon. But what makes this order interesting is the fact that the principal refund amount includes his self-contribution together with the amount paid by him as EMI to financial institution as per a private agreement executed between the complainant, respondent, and the financial institution. So, the principal refund amount seems to be much higher than the total cost of the unit.
Rohan Marathe – Senior Associate, ALMT Legal: This judgment affirms that developers remain liable to foreclose home loans and refund EMIs when a Pre-EMI scheme has been executed, especially after cancellation is accepted. The order also underscores that failure to deliver possession within the stipulated period entitles the buyer to a full refund with interest, even years after the agreed date. The judgment clarifies that Covid-19 cannot be cited as a defence for delays pre-dating the pandemic. The Authority has clarified that once a developer has accepted a buyer’s cancellation in writing, it cannot later evade liability by delaying refund or failing to close the loan account.
( Originally published on Apr 17, 2025 )
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