How Interest on a RERA Refund Is Counted: Section 2(za) and Each Payment, for Bengaluru Buyers

A Bengaluru buyer paid a builder in three instalments over two years. The flat never came, and RERA ordered a refund with interest. The order lands, and so does the first question: interest on what, from when? On the full amount from the first payment? On each instalment from its own date? The RERA Act answers this in a definition most buyers skip, Section 2(za), and the answer changes the number on the cheque.

The short answer. The explanation to Section 2(za) of the Real Estate (Regulation and Development) Act, 2016 says interest payable by the promoter to the allottee runs from the date the promoter received the amount, or any part of it, till the date the amount or part and the interest on it is refunded. It also says the rate the promoter charges an allottee on default shall be equal to the rate the promoter pays the allottee on default. The rate itself is prescribed by the state; in one Karnataka refund order reported by The Realty Today, K-RERA applied the State Bank of India MCLR plus 2 percent. The trade-off: counting interest instalment by instalment takes more work than a single figure, but it is how the Act frames the calculation, and getting it right can matter more than any argument about the rate.

What does Section 2(za) say about interest?

Section 2(za) defines "interest" as the rates of interest payable by the promoter or the allottee, as the case may be. Its explanation then adds two rules that do most of the practical work.

The first rule is symmetry. Clause (i) of the explanation says the rate of interest chargeable from the allottee by the promoter, in case of default, shall be equal to the rate of interest which the promoter shall be liable to pay the allottee, in case of default. Our explainer on the same interest rate for late payment and delay looks at that rule closely.

The second rule is timing. Clause (ii) says interest payable by the promoter to the allottee shall be from the date the promoter received the amount or any part thereof till the date the amount or part thereof and interest thereon is refunded. Interest payable by the allottee to the promoter runs from the date the allottee defaults till the date it is paid.

Why does "any part thereof" matter so much?

Because buyers rarely pay in one go. A booking amount, an agreement-stage payment, and several construction-linked instalments each reach the promoter on a different date. The words "the amount or any part thereof" in clause (ii) point to each part running from the date the promoter received it.

That means a refund calculation should look like a table, not a single line. Each payment gets its own row with its own start date, and interest on each row runs till the date of refund. An early booking amount will carry more interest than a late instalment of the same size, because it was with the promoter for longer.

Check how your order describes the calculation. Orders may state the period and rate in their own words, and the reported Karnataka order, for instance, set interest from 14 February 2020 to 12 June 2025 and continuing from 13 June 2025 until realisation, with payment directed within 60 days, according to The Realty Today.

How would a staggered refund be counted?

Take a simple illustration. The rate here is assumed at 10 percent a year for easy arithmetic and treated as simple interest; it is not the prescribed rate, and your order will state the actual rate and method. Suppose a buyer paid ₹5 lakh, then ₹10 lakh a year later, then ₹15 lakh a year after that, and the refund is made two years after the last payment.

The last row shows why the method matters. Running interest only from the final payment date, on the whole amount, would understate the interest in this example. Running it on the whole amount from the first payment would overstate it. Clause (ii) of the explanation points to neither shortcut: each part runs from the date it was received.

Which sections give you the right to a refund with interest?

Several, depending on what went wrong. Section 18(1) makes the promoter liable, if it fails to complete or give possession as agreed, to return the amount received with interest at the prescribed rate and compensation to an allottee who wishes to withdraw. Its proviso provides interest for every month of delay, till possession, to an allottee who stays.

Section 19(4) gives the allottee the right to claim a refund with interest and compensation where the promoter fails to give possession in accordance with the agreement for sale, or due to discontinuance of business on suspension or revocation of registration. Section 12's proviso returns the entire investment with interest and compensation to a person who withdraws because of a false statement in an advertisement, prospectus or model apartment.

In each case, the Act says interest is at the rate prescribed, which comes from the state rules. Section 2(za) then tells you how the period is counted.

What if you stay in the project instead of withdrawing?

Then the calculation runs differently. The proviso to Section 18(1) says that where an allottee does not intend to withdraw from the project, he shall be paid, by the promoter, interest for every month of delay, till the handing over of the possession, at such rate as may be prescribed. The period here is the delay, counted month by month until possession, rather than the time each payment sat with the promoter.

That makes the starting point the possession date in your agreement for sale, since Section 18(1) ties the promoter's liability to possession in accordance with the terms of the agreement or by the date specified in it. The end point is the actual handing over of possession. Keep the agreement's possession clause, any revised dates the builder sent, and the possession letter together, because those three documents fix the period.

The rate is still the prescribed rate, and the symmetry in clause (i) of the explanation to Section 2(za) still applies: the promoter's rate on its own default equals the rate it charges you on yours. If your builder has charged you interest for a late instalment, the rate it used is a useful point of comparison when you check the delay interest it offers you.

What should you do once a refund order is passed?

Turn the order into a schedule. List every payment with its date and amount, using your receipts and bank statements. Apply the rate and period the order states to each payment. Compare your total with what the builder offers to pay, and ask for its working if the two differ.

Watch the deadline in the order. If the builder does not pay within the time allowed, the Act's recovery provisions come into play. Section 40(1) says interest, penalty or compensation not paid by a promoter is recoverable as an arrears of land revenue. Our guide to recovering money when a RERA order is not paid explains the next steps.

Keep the paper trail tight. Proof of each payment date is what anchors each row of the calculation, so bank records matter more than builder receipts if the two ever disagree. If part of your payment came from a home loan disbursed directly to the builder, ask your lender for the disbursal dates, since those are the dates the promoter received that money.

What should Bengaluru buyers check in a refund calculation?

Use this checklist when you receive an order or a builder's offer:

1. List every payment you made with its exact date and amount.
2. Match each payment to a bank statement entry, not only a builder receipt.
3. Note the interest rate and the period the order states, including any end date.
4. Calculate interest on each payment from the date the builder received it.
5. Check that interest runs till the date of actual refund, not an earlier cut off.
6. Ask the builder for its working if its figure differs from yours.
7. Track the payment deadline in the order and the recovery route if it is missed.

The arithmetic is not difficult once the payments are laid out. Errors are easiest to make when that step is skipped.

Bengaluru buyer FAQs on RERA refund interest

From which date does interest on a RERA refund run?

The explanation to Section 2(za) of the RERA Act says interest payable by the promoter to the allottee runs from the date the promoter received the amount or any part of it till the date the amount or part and the interest on it is refunded. Each payment runs from its own date.

Is the interest rate the same for buyer and builder defaults?

Yes. Clause (i) of the explanation to Section 2(za) of the RERA Act says the rate of interest chargeable from the allottee by the promoter, in case of default, shall be equal to the rate of interest which the promoter is liable to pay the allottee, in case of default.

What interest rate has K-RERA applied on refunds?

In one Karnataka refund order reported by The Realty Today, K-RERA applied the State Bank of India Marginal Cost of Funds Based Lending Rate plus 2 percent, and directed payment within 60 days. The rate in your case will be stated in your order under the applicable state rules.

Can I get a refund if I withdraw from a delayed project?

Section 18(1) of the RERA Act makes the promoter liable, if it fails to give possession as agreed, to return the amount received with interest at the prescribed rate and compensation to an allottee who wishes to withdraw. Section 19(4) gives the allottee a matching right to claim it.

Last updated 2026-10-23. PropNewz Team.