Homebuyer Denied Flat And Rise In Property Value Can Claim Higher Compensation: Karnataka RERA
The Karnataka Real Estate Regulatory Authority (RERA) on 7 October held that compensation to a homebuyer may be higher when cancellation of an allotment deprives the buyer of both possession of the apartment and appreciation in its market value.
Adjudicating Officer Maheshwari S. Hiremath directed Bengaluru-based developer Casagrand Lotus Private Limited to pay Rs. 5 lakh to homebuyer Agarwal for mental agony, financial loss and loss of opportunity. The officer found that the developer had unilaterally cancelled her allotment and allotted the apartment to a third party despite receiving substantial consideration. She observed:
“Where possession is eventually delivered, compensation may ordinarily be lower since the allottee receives benefit of appreciation. However, where refund alone is directed, compensation may be higher as the allottee is deprived of both, possession and escalation in value.”
Agarwal booked a three-bedroom apartment, Unit T1-1411, on the 14th floor of Tower 1 in Casagrand's Casablanca project in Bengaluru.
On 30 December 2024, Casagrand issued an allotment letter for the 1,270 sq. ft. apartment, which included one parking space, for approximately Rs. 1.65 crore, inclusive of Goods and Services Tax (GST). Under the agreed payment schedule, Agarwal had to pay 10% at booking, 30% in 2025 and the balance in instalments linked to construction progress from 2026.
To arrange funds for the purchase, Agarwal sold immovable property through a registered sale deed dated 18 January 2025. The following day, she paid Rs. 15,50,016 towards the booking amount. Despite repeated requests, Casagrand did not execute the Agreement for Sale. On 12 February 2025, it raised a revised payment demand of Rs. 57.74 lakh instead of Rs. 35 lakh.
On 28 June 2025, Agarwal received an email asking for her bank details to process a refund, although she had not requested cancellation. Casagrand subsequently informed her that it had not cancelled the allotment. However, during a project visit on 30 October 2025, she discovered that the developer had allotted the apartment to another buyer.
Agarwal approached the RERA under Section 31 of the Real Estate (Regulation and Development) Act, 2016, seeking Rs. 15 lakh for mental agony, Rs. 25 lakh for financial loss and loss of opportunity, and litigation costs. Casagrand failed to appear despite notice, prompting the Authority to proceed ex parte.
The Authority found that Casagrand had accepted Rs. 16,50,016 without executing an Agreement for Sale, in violation of RERA, and subsequently allotted the apartment to a third party.
Referring to Section 72 of the Act, the Authority explained that no fixed formula governs compensation for mental agony. It held that the amount must account for the money paid, the period for which the developer retained it and the returns the homebuyer could have earned had the funds remained available. It observed:
“This forum has to determine the financial loss caused to the complainant/home buyer. Loss could be assessed on the basis of quantum of amount which complainant could have earned had the money been at his command.”
Further, the Bench stated that monetary compensation cannot fully remedy mental suffering and can, at best, be “akin to applying a cooling balm on the burns.” Emphasising the need to consider the homebuyer's circumstances, it held:
“it is quite necessary for this forum to step into the shoes of the aggrieved as practicable as possible to determine the amount of compensation that could be proportionate to the mental agony and financial loss undergone by the complainant, that might have compelled him to spend many sleepless nights and the struggle they had made to mobilize funds for legal battle to recover the money they had invested with such great hope.”
Moreover, the Authority found that Agarwal had lost the opportunity to possess and enjoy the apartment despite paying part of the sale consideration. It awarded her Rs. 5 lakh for mental agony, financial loss and loss of opportunity, along with Rs. 7,000 towards litigation costs.
Accordingly, the RERA directed Casagrand to pay the compensation within 60 days and imposed interest at the Marginal Cost of Funds-based Lending Rate (MCLR) plus 2% per annum from the date of the order until realisation if the developer failed to meet the deadline. It clarified that Agarwal's separate complaint seeking a refund with interest remained pending adjudication.
Appearances for complainant (Nidhi Agarwal): Advocate Arnav Dayanand.