Supreme Court: Builder Not Responsible for Buyer’s Loan Interest Due to Flat Delivery Delays

In a key ruling impacting homebuyers and real estate developers, the Supreme Court clarified the extent of compensation owed by builders in cases of delayed possession. In Greater Mohali Area Development Authority (GMADA) v. Anupam Garg & Ors., the Court held that while developers are bound to refund the principal amount along with interest for delay, they are not responsible for repaying the interest on home loans taken by buyers.

The matter concerned a residential project initiated by GMADA in 2011, known as the ‘Purab Premium Apartments’ located in Mohali, Punjab. Anupam Garg and other buyers had booked flats by depositing 10% of the total cost, expecting possession within 36 months of the Letter of Intent. However, by 2015, the project was far from complete, prompting Garg to seek a refund and eventually file a consumer complaint.

The Punjab State Consumer Commission ruled in the buyers' favor, directing GMADA to refund the entire deposit with 8% compound interest and additional compensation for mental distress and litigation. It also asked GMADA to cover the interest Garg had paid on his home loan taken from the State Bank of India. The National Consumer Disputes Redressal Commission (NCDRC) affirmed this ruling, leading GMADA to challenge the decision before the Supreme Court.

The Supreme Court, while affirming the refund, interest, and compensation, struck down the order requiring GMADA to pay interest on the buyer’s personal loan. Justice Sanjay Karol, writing for the Bench, observed that a developer’s liability does not extend to the personal financial choices of the buyer, such as securing a bank loan. The Court emphasized that compensation under the Consumer Protection Act must be legally grounded and cannot be granted arbitrarily.

Referring to past decisions like Bangalore Development Authority v. Syndicate Bank and DLF Homes Panchkula v. D.S. Dhanda, the Court reiterated that compensation is meant to address the loss of use of the buyer’s investment, not external liabilities like loan interest. The 8% interest, the Court noted, was fair compensation for the delayed delivery, and any further burden on the developer was unwarranted without compelling justification.

Case Title: [Greater Mohali Area Development Authority (GMADA) v. Anupam Garg & Ors.]