You booked a flat for Rs 50 lakh. You paid Rs 5 lakh as booking money. Later you cancelled. The builder says the agreement lets him keep 20 percent of the price, so he forfeits Rs 10 lakh and refunds the rest. Can he do this? In most cases, no. The Supreme Court has held that a builder can normally keep only about 10 percent of the Basic Sale Price as reasonable forfeiture. Anything more is a penalty, and you can recover the extra through the consumer forum.
This is the rule from Godrej Projects Development Ltd v Anil Karlekar, decided by the Supreme Court on 3 February 2025. This page explains the rule, why a 20 percent clause is treated as unfair, and how to get back the excess money. It is different from a delay refund where the builder fails to deliver the flat.
When you cancel a flat booking yourself, the builder can keep a reasonable amount as earnest money. The Supreme Court has accepted that around 10 percent of the Basic Sale Price is reasonable. More than that is treated as a penalty under Section 74 of the Indian Contract Act 1872, and a one-sided clause forcing it is an unfair trade practice.
| Situation | What the law allows |
|---|---|
| Builder forfeits about 10 percent of Basic Sale Price | Reasonable. Treated as earnest money. Usually allowed. |
| Builder forfeits 20 percent or more on a one-sided clause | Penalty. Excess struck down. Unfair trade practice. |
| You cancel the booking yourself | Builder keeps reasonable forfeiture near 10 percent. Rest refunded. |
| Builder delays or fails to deliver the flat | You can claim a full refund with interest. This is a RERA Section 18 matter. |
The key idea is balance. The forfeiture must be a fair estimate of the builder's loss. It cannot be a one-sided number written only to punish the buyer.
In the Godrej case, the buyers booked a flat in the Godrej Summit project in Gurugram. They later cancelled after possession was offered. The builder relied on a clause allowing forfeiture of 20 percent of the Basic Sale Price.
The Supreme Court made these points.
The Court affirmed that the builder could keep only 10 percent. The extra money had to be refunded to the buyers.
One important detail. In this case the Court did not award interest on the refund. The buyers had cancelled after possession was offered, during a fall in property prices. Because the cancellation was the buyer's own market choice and not a builder default, the Court found no reason to add interest. So interest on a refund is not automatic when you are the one who cancels.
The Godrej ruling follows a settled line of Supreme Court cases on earnest money and penalties.
Together these decide the rule. Reasonable forfeiture near 10 percent is fine. A bigger forfeiture under a one-sided clause is a penalty and unfair.
If a builder has forfeited more than about 10 percent on your cancellation, you can claim the excess back. Follow these steps.
You do not need a lawyer to file a consumer complaint, though one can help in larger claims.
This page is about a booking you cancelled yourself. That is different from a builder failing to deliver.
If the builder is late or never hands over the flat, you have a stronger right. Under Section 18 of the Real Estate Regulation and Development Act 2016, a buyer can withdraw and claim a full refund of all money paid, with interest, when the builder fails to give possession on time. There is no question of forfeiture there, because the default is the builder's.
So check who caused the cancellation.
Picking the right path decides what you can claim.
Dr. Shrawan Kumar Pathak booked a flat in a Pune project for Rs 80 lakh in 2023. He paid Rs 12 lakh in stages. In 2024 he cancelled for personal reasons. The builder forfeited 20 percent of the price, that is Rs 16 lakh, and even sent him a small bill for the gap.
Dr. Pathak refused. He calculated 10 percent of Rs 80 lakh, which is Rs 8 lakh. He wrote to the builder citing the Godrej Projects v Anil Karlekar ruling and Section 74 of the Contract Act, and demanded refund of the Rs 4 lakh already paid above 8 lakh. When the builder ignored him, he filed a consumer complaint. The forum treated the one-sided 20 percent clause as unfair, capped the forfeiture at the reasonable level, and ordered the builder to refund the excess with cost. The figures here are illustrative, but the path is real.
Usually no. The Supreme Court in the Godrej ruling held that a 20 percent one-sided forfeiture is excessive and unfair. Reasonable forfeiture is around 10 percent of the Basic Sale Price.
It comes from Section 74 of the Indian Contract Act 1872, which allows only reasonable compensation and strikes down penalties. Courts and the National Consumer Commission have settled around 10 percent as reasonable forfeiture.
No. It is the usual reasonable benchmark, not a rigid statutory number. The forum looks at the actual loss. But forfeiture far above 10 percent on a one-sided clause is treated as a penalty.
File a consumer complaint. A homebuyer is a consumer and a one-sided forfeiture is an unfair trade practice. The District, State, or National Commission hears it depending on the amount claimed.
Not always. In the Godrej case the Court did not award interest because the buyers cancelled on their own during a price fall. Interest is more likely when the builder is at fault.
RERA Section 18 applies when the builder fails to deliver the flat on time. Then you get a full refund with interest and no forfeiture. The 10 percent rule applies when you cancel by your own choice.
RTI works against public authorities and government housing bodies, not private builders. But if a public authority or its allotment is involved, you can seek records. Use our tools below to draft an application or a first appeal.