Cancellation of Property Booking – All You Need to Know

Mr Sharma had been on the lookout for a 2BHK in Andheri for over a year. He finally found the perfect flat with a reputed builder. The location seemed just right, the project had all the amenities he wanted for his family, and the apartment seemed affordable with a housing loan since the launch had just been announced. He went ahead and paid INR 2 lakhs as Bayana or token amount and verbally agreed to sign the Builder Buyer Agreement that would legally establish a contract for buying the flat. Unfortunately, within a few days, Mr Sharma fell into financial hardship and could not arrange the required finances. He is now considering cancelling the flat booking but is worried if the builder will repay the token amount.

While buying a residential apartment is a goal most of us have, there can be unforeseen circumstances when you may have to cancel a booking. What are your rights and responsibilities in such a situation? Let’s take a look.

Reasons for flat cancellations 

There are several reasons why a potential buyer may decide to cancel the booking of a property. Some of the more common reasons include –

• Loss of job or unanticipated financial distress
• Inability to secure housing finance
• Health issues, ailments, or disability
• Finding a more affordable option
• Poor reviews about developer
• Finding a more lucrative investment option

In most of these cases, the legal responsibilities and the financial liability incurred by the prospective buyer depend on the reason and the stage of homebuying.

Verbal agreement and token amount

In most cases, developers do not hold potential buyers to verbal agreements to buy a property, and unless a legal contract is signed, the token amount is completely refunded. One important point to remember here is that most reputed developers or large builders are quite understanding of the situations buyers sometimes find themselves in. However, when dealing with an unreliable builder, you may face some difficulties in receiving a refund of the token money. It may be a good idea to consult a legal professional who deals with real estate contracts in such cases.

The Builder-Buyer Agreement

The Builder-Buyer Agreement, often referred to as the BBA, is a legally binding contract that you enter into when agreeing to buy an apartment or flat. It details the payment schedules or instalments and the various clauses both parties must abide by. Like all contracts, when the agreement is registered, it is incumbent upon both parties to abide by the terms.

Standard BBAs have exit clauses that allow either party to renegade from the contract under certain conditions. These are important if you wish to cancel the booking. In some cases of flat cancellations, breaking the contract may be possible with the payment of a penalty, i.e., a small part of the payment made may be forfeited in case of cancellation. If your developer has a refundable policy, though, it is likely that you can receive the entire amount as a refund.

Currently, the real estate sector is experiencing a high demand, and it is a buyers’ market. Most reputed and established developers make it possible for buyers to cancel without any financial implications. However, this may depend on the reason for cancellation, your negotiation skills, and your relationship with the builder.

Best practices for potential homebuyers

It is always a good idea to consider investing with trusted developers who abide by the best practices in the sector. Developing a cordial relationship with the developer is important throughout the homebuying journey.

• Read the terms and conditions of the sale and the clauses mentioned in the BBA carefully before signing. These are legal commitments you are entering into. Take the help of a lawyer if there is any clause you do not seem to understand.
• Avoid cash transactions when booking a property. Digital transactions are optimal, but if you pay by cheque or draft, keeping a copy is a good idea.
• Keep records of all your communication with the developer and save any receipts for the payments you have made.
• Remember that the developer or builder may refund you any amount due to you for flat cancellation after deducting any expenses they may have incurred, including VAT, GST, and service charges.

Relying on RERA

In rare cases, a potential buyer may decide to cancel the booking due to complaints against the developer or concerns regarding the project. In these cases, you must file all complaints in writing or e-mail and keep a record of the responses. Under the Under the Real Estate (Regulation and Development) Act of 2016 (RERA), developers are required to adhere to the quality and timeline commitments made to homebuyers. In case of failure, the home buyer can seek legal recourse. This is why it is important to invest in RERA-registered projects.

To check for RERA-registered projects, visit the Blox website today.