Homebuyers Not Entitled To Loan Interest Reimbursement From Builders, Rules SC

The Supreme Court has ruled that real estate developers are not obligated to reimburse the interest paid by homebuyers on loans taken for purchasing flats, even in cases where buyers seek a refund due to project delays, as reported by the Times of India. Setting aside an earlier consumer court directive, the apex court overturned a ruling that had ordered the Greater Mohali Area Development Authority (GMADA) to repay not just the principal amount of a homebuyer’s investment but also the interest the buyer had paid to the bank on a home loan. The consumer forum also added 8 per cent annual interest on the refunded principal, the report added.

A bench comprising Justices Sanjay Karol and Prasanna B Varale made it clear that compensation for delay is limited to the terms agreed upon in the original contract. "There cannot be multiple heads to grant damages and interest over and above what is agreed upon between the homebuyer and the builder," the bench noted, as quoted by TOI.

The court emphasised that how a homebuyer funds the purchase, be it through personal savings, loans, or other means, is irrelevant to the developer. “Whether buyers of the flat do so by utilising their savings, taking a loan for such purpose or securing the required finances by any other permissible means, is not a consideration that the developer of the project is required to keep in mind," the judgment said, as quoted by TOI.

Describing the relationship between the buyer and the builder strictly as one between consumer and service provider, the court found no legal basis or exceptional circumstance to force GMADA to pay interest on the loan availed by the buyer, the report added.

The ruling reinforces the legal principle that builders are accountable only to the extent of the contractual agreement, and not for the financing decisions made by the buyer independently, as per the report.