An allottee can seek a refund with interest, delay interest, insolvency or a consumer award against a developer that has not delivered

An allottee whose developer has not delivered a flat can ask, under section 18 of the Real Estate (Regulation and Development) Act, 2016 (RERA Act), either for the money back with interest or, staying in the project, for interest for every month of delay, at the rate in rule 16 of the Karnataka Real Estate (Regulation and Development) Rules, 2017, which is the State Bank of India highest marginal cost of lending rate plus two per cent. Compensation goes to an adjudicating officer under section 71, and an appeal lies to the Real Estate Appellate Tribunal within sixty days, where a promoter must first deposit the amount payable to the allottee, or at least 30 per cent of any penalty, or both, under the proviso to section 43(5). Money raised from an allottee is financial debt under section 5(8)(f) of the Insolvency and Bankruptcy Code, 2016 (IBC), so the allottee is a financial creditor under section 5(7), but a joint insolvency application needs 100 allottees of the project or 10 per cent of them, whichever is less. An allottee who bought the flat other than for a commercial purpose is a consumer under the Consumer Protection Act, 2019, and until an insolvency moratorium intervenes that route stays open alongside, before the District Commission up to INR 50 lakh paid, the State Commission up to INR 2 crore and the National Commission above that.

Which remedies does section 18 give, and at what rate?

Section 18(1) of the RERA Act, with section 19(4), applies where the promoter fails to complete or give possession by the date in the agreement for sale, or cannot because the developer's business has been discontinued. The choice is then the allottee's. To withdraw, the allottee asks for the amount received for the apartment, "with interest at such rate as may be prescribed" and with compensation as the Act provides. To stay, the proviso requires the promoter to pay interest "for every month of delay, till the handing over of the possession", at the prescribed rate. Section 18(1) is "without prejudice to any other remedy available".

The Act leaves the rate to the State. Rule 16 of the Karnataka Real Estate (Regulation and Development) Rules, 2017, notified on 10 July 2017 and in force from its publication in the Karnataka Gazette on 11 July 2017, fixes the rate payable by the promoter to the allottee, or by the allottee to the promoter, at the State Bank of India highest marginal cost of lending rate plus two per cent. Rule 17 makes a refund payable within sixty days of falling due.

Where is the claim filed, and what does each officer decide?

In Karnataka, rule 29 sends a complaint of violation of the Act to the Authority, and rule 30 sends a complaint for compensation under sections 12, 14, 18 and 19 to the adjudicating officer, each on a fee of INR 1,000.

Under section 71 the adjudicating officer is a judicial officer who is or has been a District Judge and adjudges compensation under those sections, and is to dispose of the application within sixty days of receiving it, recording reasons in writing if it cannot. Unpaid interest or compensation is recoverable as arrears of land revenue under section 40(1), and section 79 bars a civil court from any matter that the Authority, the adjudicating officer or the Appellate Tribunal can determine.

What does an appeal cost each side?

Section 44 allows an appeal to the Real Estate Appellate Tribunal against an order of the Authority or the adjudicating officer within sixty days, extendable for sufficient cause. Karnataka rule 33(1) sets the fee at INR 5,000.

The money condition is in the proviso to section 43(5), and it binds only a promoter. A promoter's appeal is not entertained until the promoter has deposited at least 30 per cent of the penalty, or a higher percentage the Tribunal sets, or the total amount to be paid to the allottee including interest and compensation, or both. For a refund order the working limb is the second: the whole sum ordered for the allottee. An allottee who appeals deposits nothing under the proviso.

When is an allottee a financial creditor, and what must a joint application show?

Section 5(8)(f) of the IBC counts, as financial debt, any amount raised under a transaction having the commercial effect of a borrowing, and section 5(7) makes the person owed a financial debt a financial creditor. The Explanation to clause (f), inserted by Act No. 26 of 2018 with effect from 6 June 2018, deems any amount raised from an allottee under a real estate project to have that effect, and takes allottee and real estate project from section 2(d) and (zn) of the RERA Act. The joint application threshold followed from 28 December 2019.

Section 7(1) lets a financial creditor apply to the National Company Law Tribunal when a default has occurred. Its second proviso requires, for allottees, a joint application by not less than 100 allottees under the same real estate project or not less than 10 per cent of the total number of such allottees, whichever is less. One allottee cannot start the process whatever the sum owed, and the 10 per cent limb governs any project of fewer than 1,000 allottees. Section 4 sets the minimum default at INR 1 lakh, raised to INR 1 crore by S.O. 1205(E) of 24 March 2020.

On admission, the moratorium in section 14(1)(a) bars suits and proceedings against the corporate debtor in any court, tribunal, arbitration panel or other authority, words wide enough on their face to reach proceedings before the Authority and the consumer commissions. The Insolvency and Bankruptcy Code (Amendment) Act, 2026 altered section 7(4) and (5) from 26 May 2026, not these provisos.

What does the consumer route add?

Section 2(7)(ii) of the Consumer Protection Act, 2019 makes a consumer of anyone who hires or avails of a service for consideration, but not a person who avails of it for any commercial purpose, so a flat bought for resale or investment can fall outside the Act. Section 2(42) lists housing construction as a service, and section 100 makes the Act additional to other law, as section 88 of the RERA Act does in return. The first proviso to section 71(1) let a complaint on sections 12, 14, 18 or 19 pending under the Consumer Protection Act, 1986 at the commencement of the RERA Act be withdrawn, with the forum's permission, and filed before the adjudicating officer.

Forum turns on the consideration paid, not on the claim. Sections 34, 47 and 58 state INR 1 crore and INR 10 crore, but each lets the Central Government prescribe another value, and G.S.R. 912(E) of 30 December 2021 did so: District Commission up to INR 50 lakh, State Commission above INR 50 lakh up to INR 2 crore, National Commission above INR 2 crore, for complaints other than those against unfair contracts. Section 69 allows two years from the cause of action, extendable for sufficient cause.

What does the arithmetic look like?

An illustration. All facts and figures are hypothetical. A flat in a 400-unit registered project, each unit allotted to one allottee, is sold for INR 90 lakh under an agreement dated 1 November 2021, paid in full that day. Possession was due on 1 November 2024 and has not been given on 1 November 2026. Assume the State Bank of India rate is 9.00 per cent throughout, so rule 16 gives 11.00 per cent a year, simple.

Agreement 1 November 2021; price and amount paid INR 90.00 lakh
Possession due 1 November 2024; position on 1 November 2026
Rate: 9.00 per cent assumed + 2 per cent (rule 16) = 11.00 per cent
Interest a month on INR 90.00 lakh                    INR 0.825 lakh

Stay: interest for delay to 1 Nov 2026, 24 months     INR 19.80 lakh
Withdraw, interest from payment to 1 Nov 2026,
  60 months                                           INR 49.50 lakh
  Refund and interest                                 INR 139.50 lakh
Withdraw, interest from due date to 1 Nov 2026,
  24 months                                           INR 19.80 lakh
  Refund and interest                                 INR 109.80 lakh

Promoter's appeal against the INR 139.50 lakh order
  Deposit before the appeal is heard                  INR 139.50 lakh
  Allottee's appeal                                   no pre-deposit

Consumer forum: consideration paid INR 90 lakh        State Commission
Insolvency: 400 allottees, 10 per cent                40
  Lesser of 100 and 40                                40

The Act and the Rules fix the rate but not the date from which interest on a refund runs, so the table shows both readings. Interest continues to run after 1 November 2026 until possession is handed over or the refund is paid. If the refund is ordered on the first reading, and the promoter appeals, the proviso to section 43(5) keeps the appeal out until INR 1.395 crore is deposited. Had the order also imposed a penalty of INR 10 lakh, 30 per cent of it is INR 3 lakh and, on the reading that both limbs apply, the deposit is INR 1.425 crore. Paid consideration of INR 90 lakh lies between INR 50 lakh and INR 2 crore, so a consumer complaint goes to the State Commission.

For insolvency, taking the 400 units as 400 allottees, 10 per cent is 40, which is less than 100, so the applicants must be at least 40 allottees. This allottee needs 39 others. If each of the 40 is owed a refund of INR 90 lakh that has fallen due and is unpaid, the defaults total INR 36 crore, and the Explanation to section 7(1) counts a default owed to any financial creditor towards the INR 1 crore minimum.

What remains unsettled?

Four points.

The date from which interest on a refund runs: from each payment or from the due date. The two readings differ by INR 29.70 lakh above. Nor does rule 16 say on which date the State Bank of India rate is read.

The reading of "or with both" in the proviso to section 43(5): whether the penalty percentage and the allottee's sum are both deposited, or whichever applies to the order.

How the threshold is counted. The second proviso to section 7(1) counts allottees under the same real estate project, and the text does not say whether that means persons or units, or whether allottees who hold possession or are owed nothing are in the denominator.

How the routes sit together. Sections 18(1) and 88 of the RERA Act and section 100 of the Consumer Protection Act keep remedies open side by side, while section 79 closes the civil court. The texts do not say what follows when one grievance is put before both the Authority and a consumer commission.