The Supreme Court has ruled that real estate developers cannot deduct more than 10% of the basic sale price (BSP) in case a homebuyer cancels their booking. A bench of Justices B R Gavai and S V N Bhatt held that contractual terms that are one-sided, unfair, and unreasonable would amount to an unfair trade practice.
The ruling came in response to a plea by Godrej Projects Development Ltd, which sought to forfeit 20% of the BSP as per its agreement with a homebuyer. The court rejected the plea, affirming that a 10% forfeiture limit, as established by the National Consumer Disputes Redressal Commission (NCDRC), was reasonable.
The court cited its earlier rulings and NCDRC judgments dating back to 2015, including the case of DLF Ltd. v. Bhagwanti Narula, which upheld the 10% forfeiture limit. It maintained that any forfeiture beyond this threshold would be considered a penalty under Section 74 of the Indian Contract Act, of 1872.
The case involved a homebuyer who had booked a flat in the “Godrej Summit” project at Sector 104, Gurgaon, but later sought a refund. The NCDRC had directed the company to refund the buyer after deducting only 10% of the BSP, amounting to Rs. 17.08 lakh. The Supreme Court upheld this decision while setting aside the NCDRC’s order to pay interest on the refunded amount.
The ruling reinforces previous consumer protection judgments and sets a legal precedent on the permissible limits of forfeiture in real estate transactions.