Want To Cancel A Flat Booking? Read This
There are a variety of reasons, because of which homebuyers proceed to cancel after booking flat with his builder. In many cases, this buyer starts having second thoughts about his choice. The buyer’s plans of going ahead with the purchase might also be changed because of sudden changes in his financial position (loss of employment, for instance). The buyer may also want to back out because he finds out problems with the project or the developer. Now, whatever your reason be for cancelling your property purchase plans, here are certain points you must take note of, if you are in such a situation.
The builder is liable to pay you the entire amount if the agreement is not registered
Legally, the developer cannot deduct any money out of the advance payment you have made for the booking till the time a builder-buyer agreement is made and registered with the sub-registrar.
A has given Rs 3 lakh as booking amount for a flat worth Rs 1 crore to B. In case A changes his plans and goes for cancellation, B will have to return him the entire amount.
At this juncture, it is important to note that a builder-buyer agreement is not created until the buyer pays at least 10 per cent of the property value. After that amount is paid and the agreement gets registered, the cancellation gets costly for the buyer.
In case the builder refuses to give back the booking amount
The buyer will have to move the state real estate regulatory authority or the consumer forum to seek relief, in case the developer refuses to pay the booking amount.
The builder will forfeit the entire booking amount if the agreement is registered
In a scenario where the agreement is registered, the builder gains the legal position to forfeit the entire amount. Things to that effect are also mentioned in the builder-buyer agreement. The buyer would lose more than the outstanding money, which might include registration charges and taxes.
While you are at it
Under the provisions of the Real Estate (Regulation & Development) Act, 2016, a buyer does not attain the position of an “allottee” till the time a builder-buyer agreement is registered, and hence enjoys only limited rights. This is why the process to get the refund would get complicated, if due diligence is not shown by the buyer while he is out to book a property.
For instance, it would be a grave mistake to make any payments, no matter how small, without having it documented. Ask the builder to give you a signed receipt for the booking advance. It is also strictly advised that all payments be made to the builder through online channels so that there is a record of the transaction.
What happens to the excess amount?
When a buyer books and flat and then eventually cancels it, but benefits by receiving a higher amount than he initially paid from the builder, the extra money will be treated as capital gains in the tax parlance. This was laid by the Mumbai Bench of the Income Tax Appellate Tribunal (ITAT). The tribunal also made it clear that the excess income thus earned will not be treated as long term capitals gains and be treated as a tax-free income, unless the holding period conditions and other conditions are satisfied.