Gujarat High Court Restores 18% Contractual Interest Rate for Homebuyers in RERA Refund Dispute

Aadrikaa Legal Services (ALS)- Law I Litigation I Arbitration

Date: 02.09.2026

Gujarat High Court Restores 18% Contractual Interest Rate for Homebuyers in RERA Refund Dispute

A recent judgment by the Gujarat High Court has clarified the calculation of interest rates in real estate disputes under the Real Estate (Regulation and Development) Act (RERA). This article explores the background, legal provisions, and implications of the case involving Ramsingh Baldharisingh Pal & Ors. versus M/s. Baghel Construction & Ors., focusing on the correct application of interest rates when promoters default on handing over possession.

Case Background

• Parties Involved:
  • Appellants: Ramsingh Baldharisingh Pal & others (allottees)
  • Respondents: M/s. Baghel Construction & others (promoters/builders)
• Project: Shiv Krupa Residency
• Issue: The promoters failed to hand over possession of flats by the agreed date (31.12.2019). The allottees sought cancellation of the contract and refund of their payments.

Chronology of Events

1. Complaint to RERA:
   • Allottees paid Rs. 15,25,000 to the promoters.
   • RERA ordered refund of Rs. 12,05,941 with 18% interest from the payment date, plus Rs. 30,000 as costs.
2. Promoters’ Appeal:
   • Promoters appealed to the Gujarat Real Estate Appellate Tribunal, which reduced the interest rate from 18% to 9% but upheld the refund and costs.
3. High Court Appeal:
   • Allottees challenged the reduction in interest rate before the Gujarat High Court.

Legal Provisions Examined

Rule 16 of Gujarat RERA Rules, 2017

• Rule 16(1):
  • The interest rate for defaults is the contractual rate agreed between promoter and allottee.
  • If no rate is agreed, the rate is the State Bank of India MCLR plus 2%.
  • The rate must be equal for both parties in case of default.
• Section 2(za) of the Act:
  • Reinforces that the interest rate for default by either party must be the same.

High Court’s Analysis and Decision

• The High Court found that the Tribunal erred by applying the default statutory rate (MCLR + 2%) instead of the contractual rate.
• The agreement between the parties specified 18% interest for default by the allottee; thus, the same rate applies if the promoter defaults.
• The Court quashed the Tribunal’s order reducing the rate to 9% and restored the RERA Authority’s order of 18% interest.

Key Takeaways for Homebuyers and Promoters

1. Contractual Rate Prevails:
   • If the agreement specifies an interest rate for default, that rate applies to both parties.
2. Statutory Rate Applies Only in Absence of Agreement:
   • If no rate is agreed, the statutory rate (SBI MCLR + 2%) is used.
3. Equality Principle:
   • The law ensures neither party is advantaged or disadvantaged by different interest rates in case of default.

Implications

• For Homebuyers:
  • Strengthens the position of allottees seeking refunds for delayed possession.
  • Ensures fair compensation aligned with contractual terms.
• For Promoters:
  • Highlights the importance of clear contractual terms.
  • Promoters must be aware that the same interest rate applies to them in case of default.

Conclusion

This judgment reinforces the principle of parity in interest rates under RERA and provides clarity for both homebuyers and developers. It underscores the importance of adhering to contractual terms and ensures that justice is served in real estate disputes involving delayed possession and refunds.

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Source: Gujarat High Court

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