Supreme Court Rules Builders Don't Owe Home Loan Interest To Buyers For Delays

In a major decision that could influence how builder-buyer disputes are handled across India, the Supreme Court has ruled that builders are not responsible for reimbursing homebuyers for the interest they pay on home loans, even when construction is delayed.

The judgment overturns a 2019 order from the National Consumer Disputes Redressal Commission (NCDRC), which had sided with a group of buyers in a stalled housing project in Mohali, Punjab. That earlier ruling had directed the builder to repay not just the booking amount with 8 per cent interest, but also the 10.75 per cent interest buyers were paying on loans from the State Bank of India, as per a report by Economic Times.

The project was launched in 2011, with possession promised by May 2015. However, when buyers visited the site that year, construction was far from complete. Facing another 2–3 years of delay, they decided to walk away. The builder agreed to a refund with 8 per cent interest, but buyers argued it wasn't enough to cover the cost of the loans they had taken to finance the flats, the report added.

The Punjab State Consumer Commission sided with the buyers in 2018, ordering the builder to cover not just the refund and interest but also the home loan interest, along with Rs 60,000 for mental harassment and Rs 30,000 in litigation costs. The NCDRC upheld this decision in 2019, as per the report.

But now, the Supreme Court has reversed it.

According to the apex court, a buyer's choice of financing, whether through savings, loans, or any other means, has no bearing on a builder's liability. Builders are responsible only for delays and breaches of contract, the court emphasized, the report added.

The court said a developer is not obligated to account for how a buyer arranges money to pay for a flat, making clear that loan interest doesn't fall under compensation unless specifically stated in the contract.

Referring to previous rulings, including DLF Homes Panchkula (P) Ltd., the court clarified that 8 per cent interest on the refunded amount is a fair compensation for delayed possession. Any further payment for home loan interest was deemed excessive and legally unsupported, as per the report.