NEW DELHI: If your housing project is delayed by years, should you still be paying interest on the home loan? If the builder fails to deliver, should not that person bear the financial burden caused by the delay? And if the Supreme Court itself had to bring in the National Buildings Construction Corporation (NBCC) to complete stalled projects, does not that reflect a deeper structural failure, not just buyer impatience?
In a judgment that has rattled homebuyers across India, the Supreme Court has now said developers cannot be made to reimburse interest paid on home loans, even if they failed to hand over the property on time. Buyers are entitled only to a refund of the principal amount, along with contractual compensation, nothing more.
A bench of justices Sanjay Karol and Prasanna B Varale observed that there cannot be multiple heads for awarding damages or interest beyond what is contractually agreed upon. The court further held: “A perusal of the judgment and orders of the commissions does not reveal any exceptional or strong reasons for the interest on the loan taken by the respondents to be paid by GMADA (Greater Mohali Area Development Authority). That apart, whether the 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. For, so far as they are concerned, such a consideration is irrelevant.”
The case was triggered by a complaint filed by Anupam Garg, who had booked a 2-BHK + Servant Room (Type II) flat under the ‘Purab Premium Apartments’ scheme launched by the GMADA in 2011. Garg paid Rs 5.5 lakh as earnest money, which was 10% of the Rs 55 lakh flat price.
Following a successful allotment through a draw of lots on March 19, 2012, GMADA issued a Letter of Intent (LOI) on May 21, 2012, outlining the flat’s price, payment schedule, layout, ownership conditions, and possession date, which was May 2015. The LOI clearly stated that in case of delay, a refund with 8% interest would be given.
By 2016, with no sign of progress, Garg demanded a refund. When GMADA refused, he approached the Punjab State Consumer Disputes Redressal Commission. In 2018, the Commission ruled in Garg’s favour, ordering a refund with 8% interest, Rs 60,000 for mental harassment, Rs 30,000 as litigation costs, and reimbursement of the home loan interest he had paid. The National Consumer Disputes Redressal Commission (NCDRC) upheld the order in 2019.
When GMADA challenged it at the Supreme Court, the bench partially allowed the appeal, but struck down the award of EMI interest reimbursement. “The one who is buying a flat is a consumer, and the one who is building it is a service provider. That is the only relationship between the parties. If there is a deficiency or delay in service, the consumer is entitled to be compensated for the same. Repayment of the entire principal amount along with 8% interest thereon, as stipulated in the contract, alongside the clarification that there shall be no other liability on the authority, sufficiently meets this requirement,” it said. The court directed that the amounts already deposited by GMADA before the Commission be released to the buyer, minus the loan interest reimbursement component.
But for thousands of homebuyers still caught in stalled housing projects across India, the judgment hits hard. From Amrapali to Supertech, Unitech to Jaypee — several developers have failed to deliver on promises, forcing the Supreme Court to assign the National Buildings Construction Corporation (NBCC) the responsibility to complete and hand over these projects. Yet the financial burden of delay continues to fall on the buyers.
According to advocate Vineet Jindal, the court’s ruling is rooted in the specifics of the case and prioritises contractual obligations. “The court’s conclusion is drawn from the specific facts before it, focusing mainly on the period lost due to delay,” he said. He clarified that the developer’s liabilities stem strictly from their agreement with the buyer and not from the buyer’s independent financing choices. “The legal obligations stem solely from the buyer-developer contract. What the buyer chooses to do for financing, whether taking a loan or paying upfront, is irrelevant to the developer’s liability,” he explained.
Jindal added that the Consumer Protection Act limits compensation strictly to tangible losses arising from deficient service. “The buyer’s decision to take a home loan is a separate financial act. Developers can’t be held accountable for how the buyer structures their payment,” he said.
Still, the ruling leaves a narrow window for exceptional cases. Advocate Sangram Singh Hooda explained, “In rare and extraordinary cases, where the developer’s breach leads to extreme financial hardship, courts may consider directing the builder to cover interest costs.” He noted that this would only apply when it is beyond doubt that normal compensation, even with interest on principal, is inadequate to address the buyer’s financial suffering.
“If the buyer is pushed into serious financial stress because of the developer’s failure, then returning only the principal and nominal interest may not do justice,” he said. Furthermore, “deliberate delays or fraudulent conduct that leaves the buyer trapped financially can’t be brushed aside.”
Hooda noted that the scope could be widened further in instances of manipulation, deception or collusion between builders and financial institutions. “If it becomes clear that the buyer was manipulated into entering the transaction or misled about the nature of the property and this is backed by hard evidence, then courts may go beyond the standard refund formula,” he said. In Noida and Greater Noida alone, NBCC is handling the delivery of over 46,000 stalled flats from Amrapali. The agency was recently allowed by the Supreme Court to raise funds by launching and selling new inventory, a move expected to cover 16,000 flats. NBCC has also applied for similar permission to work on 27,000 homes in 17 Supertech projects.
Yet, the recent ruling reinforces a critical principle: unless fraud or malice is proven, developers cannot be made to bear the cost of EMIs buyers continue to pay. For lakhs of people, this is not merely a technical interpretation, it is a denial of lived financial trauma.
Renu (name changed), who bought a Noida flat in 2017 for her elderly parents, continues to pay an EMI of Rs 35,000 along with Rs 25,000 in rent for a Delhi house. The possession date passed long ago. “I have paid more in EMIs than my original booking cost and there is no OC, no lift, no water. With this verdict, builders keep the advantage. We keep the debt,” she said.
RERA was expected to be the remedy the Real Estate (Regulation and Development) Act, 2016, mandates developers to deposit 70% of collected funds in an escrow for construction and meet timelines. But even nine years after its rollout, the law suffers from patchy implementation across states. Over 4.8 lakh housing units are still running behind schedule by more than three years, as per industry estimates.
In May 2025, Haryana RERA offered a glimmer of hope for delayed homebuyers by directing a defaulting builder to pay over Rs 65 lakh in interest to a buyer who had booked a home in 2013 for Rs 62 lakh, with a promised possession by December 7, 2015. The buyer, choosing not to withdraw from the project, sought compensation under Section 18 of RERA which allows buyers to claim interest for delay without cancelling their booking.
After examining the facts, Haryana RERA invoked Rule 15 of its regulations, pegging interest compensation at SBI’s highest MCLR plus 2%. On March 19, 2025, the authority ruled that the builder must pay 11.01% annual interest from 2015 until the actual handover of the property.
The Supreme Court may have clarified the limits of contractual liability but for lakhs of homebuyers paying EMIs for undelivered homes, the verdict feels more like a cold legal conclusion than a recognition of the emotional and financial crisis they endure month after month.
In July 2024 alone, more than 50,000 real estate cases were pending in consumer courts across the country. For many buyers, this battle is no longer just about walls and keys, it’s about dignity, justice, and not being punished for trusting a broken system.