• Tax benefit for delayed possession beyond 3 years

Hello Lawyers Team,

I have recently booked apt in June 14 (paying 5 lkhs), which was in prelaunch stage, from an reputed builder (through Marketing Channel Partner) on their commitment (verbal) that the possession will happen by Dec 2017. We (all the buyers including the channel partner) had the same understanding until we asked the builder (Mid Aug) to mention the same in the agreement copy. Then they completely changed their version and started claiming that they will give possession by May 18 (which will be mentioned in agreement + 6 months grace period) and said they never told us about Dec 17. Now they are pushing us to sign the agreement by 15th Sept  with payment of 20% (including the booking amount) and next 10% by 30th sept. (Launch is expected now in 1st wk of sept. Earlier told to us as 15th July, which later changed to 15th Aug)

Further as per their booking form fine print, if one cancels the booking before agreement, there is a penalty of 75,000 rps (& after agreement it is 25% of agreement value)

In between we made a group of people (30-40 people) and were addressing all the issues and concerns through the group.

Now we understand we will be eligible for tax benefit (2,00,000 Lkhs/yr), only if the possession happens within 3 years from the date of loan sanction letter (please correct if i am wrong). But if i take loan in Dec 14 , the possession has to happen on or before Dec 17 in order to enjoy the tax benefit. The possession beyond this will limit the interest tax benefit to 30,000/yr throughout the loan tenure (20 yrs). We requested the builder, with this concern, to defer the payment beyond 20% (which i will pay upfront) after April 2015, but they denied for it. Instead as per their payment schedule they expect us to pay 47.5% of the value by May 15. 

So to get the tax benefit over the loan tenure, we have to avail the avail the loan from banck after May 2014,for which we have to pay 47.5% of money from our pocket which is not possible.

In between, there are some important points to be noted - 
1) Builder changed floor plan layout which was showed to us during the booking and increased carpet area (from 1457 to 1496 sqft for some of us. He shared with us and demands more money for the increased area. Does it hold any legal value to cancel an Apt.?
2) The Property is a joint development (Residential part will be build by Builder and Commercial areas to be build by land owner > we came to know in beginning of Aug) Builder & Land Owner has signed and JDA but they are not sharing us saying that it is confidential and cannot be disclosed. If some one wants to see it can get it through RTI. Builder promised as showing in brochure a retail space which is not under his control or authority. Does it hold any cheating or mis-communication clause? 
3) Builder giving infeasible dates of payment where approval from nationalized banks are yet to come.
4) He asked for 20% without sharing any documents which we raised our voice against through mail. Does it hold any legal value of mistrust for cancellation?
5) We do not have any written proof of the early commitment of Dec 17 as Possession date.
6) offcourse not to mention that the agreement looks very one-sided, safeguarding the builder in all situations

My Questions :
1. Is the above understanding on the tax rebate is correct ?
2. Is there any binding or guideline for Builder to deliver the project within 3 years in order to safeguard the buyers interest. Are there any legal instruments/laws which safeguard buyers from such unfair practices
3. What do we do at this point of time to secure our interest which legally can get support. What should be our stand and What could be best amicable solution.
4. Is there any way legally or commercially, which avoid us restricting the payment to 20-25% until may 2015 and the rest of payment happens through bank ( since i want to get the bank loan only after April 2015 to secure the interest part of taxation)
5. We have signed the booking form mentioning 75,000 rps penalty. But as it is not on stamp paper does it hold any legal value? Can they claim 75000 from me, if i can want to cancel my booking.
Thanks in Advance
Buyer from Bangalore
Asked 4 years ago in Property Law from Bangalore, Karnataka
1) the mistake you made was booking flat in pre launch stage . you should only book flat after building plans are sanctioned by muncipial corporation and commencement certificate and IOD issued . please note that it is illegal for builders to sell flat at pre launch stage . builders can do so only after plans are sanctioned by corporation 

2) i do hope that payment of Rs 5 lakhs was made by cheque and you have receipt issued by builder . 

3)the builder has shrewdly not given any document in writing wherein he makes commitment that building would be completed by December 2017 

4)builder cannot arbitrarily increase the size of flat and demand more consideration for the same . if you have any evidence that flat would be of particular area only you can refuse to accept the increase size of carpet area of flat 

5)the agreement you sign with the builder would mention the period of completion of project . in case builder fails to complete project within stipulated period provided in contract he would bound to pay flat owners compensation for delay in completion of project unless it is due to force majeure conditions 

6)you are entitled to ask for inspection of documents of title .builder is bound to furnish you the same . only if title is clear and marketable should you invest in project . 

7) since you are a group of 40 investors you should gang up together and force builder to later terms of payment clause 

8) if you have agreed to payment of penalty of Rs 75,000 in case of cancellation of booking the builder would seek to enforce said provisions in the contract signed by you . even if it is not on stamp paper it would be binding . 

9) you have the option of moving consumer against the builder for deficiency in service and for refund of Rs 75,000 as cancellation amount . you would have to make out case that you were forced to cancel the contract as builder arbitrarily changed the terms of contract and refused to listen to reason . 

10) it is better to contact local lawyer . all documents signed by you need to be vetted for detailed advice
Ajay Sethi
Advocate, Mumbai
45747 Answers
2692 Consultations

5.0 on 5.0

Hi, you have not suppose to book a flat with proper verification of the documents and in the agreement it has to be mention the date of Completion of the project and mode payment at different level of constructions so on going to the entire agreement you have to book the flat or other wise you will be in trouble and builder will not suppose to put a such a clause for the cancellation of the agreement and it will become illegal and you can cancel the agreement and if the builder refuse to pay the amount go the consumer forum for  refund of the amount.
Pradeep Bharathipura
Advocate, Bangalore
4551 Answers
203 Consultations

4.5 on 5.0

It is better to issue a notice for deficiency of services and for delayed possession and claim damages for the same.get the amount back from him by file a suit for specific performance.file a cheating case too.
Jeshma Mohandas KP
Advocate, Kozhikode
567 Answers
1 Consultation

4.5 on 5.0


2.builder has to complete project as per stipulated time stated in agreement.

3.best is to cancel booking.

4.after cancellation no such steps needed.

5.yes, builder can claim but you file consumer complaint in CF for refund of Rs.75 k.
R.K. Nanda
Advocate, New Delhi
457 Answers

4.7 on 5.0

A.	When a home loan is obtained under any construction, property, the tax benefit in respect of interest can be reckoned only when the construction of the property is completed. For more clarification, contact local charted accountant expert.

B.	Generally, period of delivery of Possession or completion of construction would be reckoned from the date of Commencement Certificate or approved plan. In your case, without compliance the above the builder had completed flat booking. So the builder has violated the basic principles of the law. The builder has bounden duty to show all legal documents pertaining to your flat and the builder cannot increase carpet area against the approved plan.

C.	Unless verified the legal documents that don’t transfer 20% amount to the builder and you can issue notice by way of mail or written letter to avoid the payment by asking a query regarding clinch title and status of project approval.

D.	Unstamped paper can be stamped by paying sufficient stamp duty and penalty even after execution of the deed. The builder cannot recover Rs. 75,000/- penalty for you unless established compliance of proper duty and obligation within the purview of the law.

E.	You can approach the Consumer Forum under the deficiency in service and unfair trade practice from the builder side and you are entitled to get compensation with respect to the same. And contact local advocate for verification of JDA,GPA, Sharing Agreement and verify the BBMP Approved Plan along with legal documents
B.T. Ravi
Advocate, Bangalore
833 Answers
57 Consultations

5.0 on 5.0

1. You can avail the tax benifit only after taking possession of the property,

2. Whatever has been mentioned in the brichure for booking the flats or in the Agreement for Sale has to be complied with by the builder, Any deviation may push the builder before the Consumer Forum,

3.The standard practice is that the builder handsover all the documents including the land owner's title deed, builder's Joint Venture Agreement with the land owner, sanctioned building plan etc. The builder may charge some amount towards photocopying charge. Some builders also charge payment of Rs.5 to 10 k to be refundedif anything wrong is found with the papers,

4. After collecting  such documents, the prospective buyers make thorough search from the registry offices and also courts to ensure that the there is no encumbrances on the title of the land and also that there is litigation in connection with the said land,

5. After being satisfied with genuinity of the papers and the projects, prospective buyers enter in to agreement of sale with the builder or land owner, as the case may be,

6. You have grossly deviated from the standard operation practice for buying such properties,

7. If you have agreed to refund Rs. 75 K if you cancel the booking then such agreement paper is valid even if it has not been signed on a stamp paper,

8. However, you can cancell the booking claiming back the entire Rs.75 K if you can prove that booking was made in your name showing that the area 1457 SFT which  has been changed to 1496 sqf which you are noot interested in taking.
Krishna Kishore Ganguly
Advocate, Kolkata
18547 Answers
449 Consultations

5.0 on 5.0

1. You did not practice due diligence while purchasing the property. When you are buying a property, a due diligence is essential to avoid getting entangled in legal issues later. A flat should never be booked at a pre-launch stage as at this stage the plans have not been scrutinized and sanctioned by the municipal authorities. With respect to an under construction property, you can claim tax benefit in respect of interest on the housing loan availed only once the construction of the property is completed. The interest paid for the period prior to the FY in which the construction of the property is completed shall be deductible in five equal annual installments commencing from the FY in which the construction of the property has been completed.

2. Builder is obligated to honour the promises which he made in the brochure. If he deviates therefrom legal proceedings can be brought against him in a court of law. 

3. If the builder has not in in writing acknowledged to deliver the possession by December 2017 he will deny having said so when you go to court. 

4. If the agreement does not authorize the builder to increase the area and seek consideration for the increase then you may reject the increase.

5. Not paying the stamp duty does not vitiate the agreement. Since you have agreed to pay the penalty of Rs.75,000 builder will enforce this through court. You have diluted your remedy by agreeing to pay the penalty. 

6. You have the right to drag the builder to the consumer forum for deficiency in service and claim the amount of 75,000 paid to him and also compensation. 

7. Consult a lawyer personally and show him all the documents to chart out your legal recourse.
Ashish Davessar
Advocate, Jaipur
22977 Answers
634 Consultations

5.0 on 5.0

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