Mental Agony Compensation Under RERA Must Be Based On Actual Hardship: Karnataka REAT

The Karnataka Real Estate Appellate Tribunal (KREAT) on 8 July held that compensation for mental agony under the Real Estate (Regulation and Development) Act, 2016 cannot be awarded mechanically and must depend on factors such as the period of delay, financial burden on the allottee, promoter's conduct and the actual hardship suffered.

Chairperson Justice J.M. Khazi and Judicial Member Santhosh Kumar Shetty N partly allowed Adarsh Nivaas Private Limited's appeal and reduced the compensation for rental loss from Rs. 11.87 lakh to Rs. 7.84 lakh and compensation for mental agony from Rs. 4 lakh to Rs. 2 lakh, while upholding the homebuyer's entitlement to compensation for delayed possession. The Bench observed:

“The determination must necessarily depend upon the facts of each case, including the period of delay, whether the allottee was compelled to bear the dual burden of payment of rent and EMIs, the conduct of the promoter, whether repeated assurances were held out and breached, the age and personal circumstances of the Allottee and the nature and extent of the inconvenience, hardship and mental distress actually suffered.”

The dispute concerned Villa No. 393 in Adarsh Nivaas Private Limited's “Adarsh Palm Acres Phase” project at Huttanahalli, Bengaluru.

Kurra booked the villa on 30 December 2021 and executed a registered Agreement to Sell on 12 September 2022 for Rs. 4 crore. Alleging that the developer failed to hand over possession within the promised period, he shifted to Bengaluru, took alternative accommodation on lease through agreements dated 29 April 2024 and 1 November 2024, and approached the Karnataka Real Estate Regulatory Authority (Karnataka RERA) seeking compensation for rental loss and mental agony.

On 2 September 2025, Karnataka RERA directed Adarsh Nivaas Private Limited to pay Rs. 11.87 lakh towards rental loss, Rs. 4 lakh towards mental agony and Rs. 7,000 as litigation costs.

Adarsh Nivaas challenged the order before KREAT under Section 44(1) of the RERA Act (which provides for appeals against orders of the Authority). It argued that Karnataka RERA had relied on an incorrect possession date, failed to consider delays in payments by the allottee and ignored the extension granted due to the COVID-19 pandemic.

The Tribunal found that although the Agreement to Sell was executed on 12 September 2022, it incorrectly mentioned the possession date as 30 August 2021. It held that the date was a clerical error. It observed:

“Since the Agreement of Sale itself came into existence on 12.09.2022, there was no occasion for the Promoter to give an undertake to deliver possession on or before 30.08.2021. Hence, it is apparent that the date stipulated for delivery of possession in the Agreement of sale suffers from a typographical or clerical error and is prima facie incongruous.”

It relied on Clause 10 of the agreement, which provided that possession would be delivered within three months from the date of issuance of the Occupancy Certificate. Since the Occupancy Certificate was issued on 21 August 2024, the Tribunal held that the agreed possession date was 21 November 2024. It therefore reduced the compensation for rental loss from Rs. 11.87 lakh to Rs. 7.84 lakh.

On compensation for mental agony, the Bench held that such compensation cannot be granted on a fixed formula and must be based on evidence showing the actual hardship suffered by the allottee. It further held that the value of the apartment alone cannot determine the quantum of compensation.

Lastly, while reducing the compensation, the Tribunal noted that Kurra had not paid more than Rs. 58 lakh of the sale consideration. It also relied on an email dated 26 February 2025, where Kurra requested the developer to postpone wooden flooring until completion of his interiors, indicating continued cooperation between the parties. It held that Karnataka RERA had awarded excessive compensation for mental agony, and reduced it from Rs. 4 lakh to Rs. 2 lakh.

Accordingly, the KREAT directed Adarsh Nivaas Private Limited to pay Rs. 7,84,500 towards rental loss, Rs. 2 lakh towards mental agony and Rs. 7,000 towards litigation costs.

Appearances for appellant (M/s. Adarsh Nivaas Private Limited): Advocates Sheela L.S. and Archana Sindhe.

Appearances for respondent No. 1 (Mr. Anil Kumar Kurra): Advocate Srinivas V.

Appearances for respondent No. 2 (Karnataka Real Estate Regulatory Authority): Advocate I.S. Devaiah.