What Is A Rent Agreement And Why Is It Important
What do you lose if you cancel a property booking?
Here’s all you need to know.
When Suchitra M was planning to invest in a new home, she had many queries. Chief among them was 'How do I get the refund in case I change my mind later? Suchitra is not the only one. From finding a better project to incurring unforeseeable financial trouble, there are many reasons why one may have to cancel their home-buying plans. In such a case, how do they get their booking amount back?
Here’s everything you need to keep in mind when cancelling a home purchase.
"Property deals can be cancelled after booking, but within a stipulated period and before executing the agreement of sale. If the booking of the property is cancelled within the stipulated time, the booking amount is returned without any deduction. However, one needs to check with the sales office of the developer on the refund rules. Also, if one tries to exit out of the deal after executing the agreement of sale, then there are financial implications as per the conditions of sale," says Subhankar Mitra, managing director, advisory services (In dia), Colliers.
"All sale agreements contain a forfeiture clause, which can vary from five to 20 per cent of the total sale value, which in effect can result in a loss. Some developers refund the full amount on humanitarian grounds if the home-buyer has lost the breadwinner/been rendered unemployed, which can affect the repayment of loan/purchase of property," says Siva Krishnan, managing director and India’s head, residential services, JLL India.
It is important to remember that, "For cancellations of home bookings, there is no single rule that fits all. This varies from project to project and is largely a function of the sales agreement. Properties booked prior to the lockdown may not have the provision to get a full refund; there would be some percentage of cancellation charges. However, during the lockdown, several projects offered home-buyers the option to pay a certain sum at booking with the flexibility to get a full refund in case they cancel after the lockdown was lifted and they visit the property site, says Prashant Thakur, director and head research, Ana rock Property Consultants. Thus, it is important that you pay close attention to the clauses, terms and conditions mentioned in the agreement. The sales team may promise you several things to crack the deal, but unless it is in black and white, it has no value and would not be considered in the court of law. "Timeline and refunds depend upon terms and conditions laid down by the developer in the agreement. From the moment a developer receives a request for cancellation, it takes an average of 60 days for the customer to get the refund," adds Krishnan.
It is also crucial to ensure that you make all payments via cheques or bank transfers instead of cash. This ensures you have paper evidence of all payments. Keep all receipts and acknowledgement letters handy.
"If the payment and the refund happen within the same financial year, there are usually no tax complications and can be adjusted. If otherwise, there could be some difficulty. However, in both cases, it is imperative to verify with a professional tax expert," advises Thakur.
Thanks to Real Estate (Regulation and Development) Act, 2016 (RERA), most developers abide by the rules and refund the amount without delaying much. However, in case there is any issue, home-buyers can approach RERA or consumer courts in their respective jurisdictions. To avoid complications, the safest bet is to invest in a RERA registered project. It is always ideal to have a legal advisor involved from the very first step to verify the project, builder and all associated documents.
In case of a home loan, the developer will make the repayment to the institution and requisite refund to the customer for his own contribution as per the terms and conditions laid down in the agreement. "In case the loan amount has not been disbursed by the lender, one can cancel their sanctioned loan by informing the bank. If the loan has been sanctioned, the bank will not return the processing fees. Moreover, once the loan is disbursed, even partially, one cannot cancel it because along with loan disbursal, the loan account number is created and the agreement between the lender and borrower is in force," informs Thakur.
Source: Times Property