Let me answer your question: Can builder impose compound interest on buyer for delayed payment? In India, builders cannot unilaterally impose compound interest on homebuyers for delayed payments beyond what is explicitly permitted in the Sale Agreement. The relationship between builder and buyer is governed by contract and consumer law, particularly RERA and the Consumer Protection Act (CPA); unless the agreement clearly allows compounding, charging extra is considered a deficiency of service.
Can Builder Impose Compound Interest on Buyer for Delayed Payment?
Under RERA, any interest or compensation for payment delays must be based on contractual terms. The regulator often stipulates interest based on simple interest, typically aligned with the State Bank of India’s (SBI) MCLR plus a margin.
Builders enforcing compounded charges without explicit contractual clauses are likely violating RERA regulations.
Courts have repeatedly ruled against imposing compound interest unless expressly authorised. Consumer forums have rejected builders’ claims for exorbitant, compounding penalties, deeming them unreasonable.
Only simple interest defined in the agreement is enforceable; anything additional can be contested as unfair trade practice.
Buyers have strong legal recourse: they can file complaints with State RERA Authorities or Consumer Forums, seeking removal of compound interest clauses and enforcement of fair interest rates.
If builders have collected such charges, victims may claim refunds with interest and possibly compensation for wrongful charges under the CPA.
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Can Builder Impose Compound Interest on Buyer for Delayed Payment?
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2025-07-09T09:32:57+00:00 2025-07-31T14:18:49+00:00Comment
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