Flat Booking Cancellation Refund Rules in Karnataka (2026)

If the builder is at fault, for example by missing the possession date, Section 18 of the RERA Act entitles you to a full refund with interest. This guide sets out each scenario with worked numbers, what K-RERA and the Supreme Court have held, and a step-by-step process.

Which stage are you at? It decides the rules

• EOI only, no unit allotted: the EOI form governs. Read the refund clause; EOIs are usually meant to be fully refundable.
• Allotment letter issued, agreement not yet registered: the allotment letter governs. In Karnataka, the model letter fixes maximum deductions.
• Agreement for sale registered: the agreement governs. Karnataka's prescribed format allows forfeiture of the booking amount on voluntary withdrawal.
• Builder default at any stage: Section 18 and the agreement's default clauses give you a full refund with interest.

Cancellation before the agreement: the K-RERA deduction table

K-RERA's model form of allotment letter (clause 9) says that if you cancel, the deduction cannot exceed the following, counted from the date the allotment letter was issued to the date your cancellation letter is received:

• Within 15 days: nil.
• 16 to 30 days: 1% of the cost of the unit.
• 31 to 60 days: 1.5% of the cost of the unit.
• 61 days or later: 2% of the cost of the unit.
• The balance is refundable without interest within 45 days of receipt of your cancellation letter. If not paid in 45 days, interest runs at the State Bank of India's highest MCLR plus 2%.

Worked example: cancelling before the agreement

You are allotted a ₹1.2 crore flat and pay a ₹10 lakh booking amount. The allotment letter is dated 1 March.

• Your letter reaches the developer on 12 March (day 11): deduction nil. Refund ₹10 lakh within 45 days.
• It reaches on 20 March (day 19): maximum deduction 1% × ₹1.2 crore = ₹1.2 lakh. Refund at least ₹8.8 lakh.
• It reaches on 15 May (day 75): maximum deduction 2% × ₹1.2 crore = ₹2.4 lakh. Refund at least ₹7.6 lakh.
• If that ₹7.6 lakh is paid 60 days after the 45-day deadline, interest is due. At 10.7% (SBI MCLR of 8.7% plus 2%, the rate K-RERA applied in a 2023 order; check the current rate) it is ₹7,60,000 × 10.7% × 60 ÷ 365 = about ₹13,368.

What if the builder never sends the agreement?

The model allotment letter gives two months from the letter to execute and register the agreement, extendable by mutual agreement. If you do not come forward, the builder must serve a 15-day notice, and only then cancel and keep up to 2% of cost, refunding the rest within 45 days of the notice period ending.

If it is the builder who delays registration while holding more than 10% of the price, K-RERA has ordered full refunds with interest. In Complaint No. 00902/2023 (order of 22 September 2023), buyers who had paid ₹9,01,040 under an unregistered agreement were awarded ₹9,40,912, including interest at MCLR plus 2%, payable within 60 days.

Cancellation after the agreement for sale is registered

Karnataka's Agreement for Sale Rules, notified in June 2020, prescribe the agreement's text. Clause 7.5 lets you cancel or withdraw as provided in the Act. Where you withdraw without any fault of the promoter, the promoter is entitled to forfeit the booking amount paid for the allotment, and must return the balance within 60 days of cancellation.

Two limits apply. First, the agreement is meant to be in the prescribed form, so a draft with a heavier penalty than the model deserves a lawyer's review before you sign; see The Builder-Buyer Agreement: Clauses You Must Check. Second, courts will not enforce a forfeiture that works as a penalty.

On 3 February 2025 the Supreme Court held that a developer's forfeiture of 20% of the basic sale price on a buyer's cancellation was excessive and amounted to a penalty under Section 74 of the Contract Act, and upheld forfeiture of 10% of the basic sale price as reasonable earnest money. In the same case it set aside the interest that the national consumer commission had awarded on the refund. The judgment is not a Karnataka order, but it binds all forums.

In a 2023 complaint reported by LiveLaw in April 2024, buyers paid ₹1 lakh to book flats after being pressed to decide the same day, then found a forfeiture clause and asked to cancel. K-RERA ordered the full ₹1 lakh refunded. It reasoned that the builder would receive the same money when someone else booked the flat, and had already held the buyers' money for about a year. The order also noted that builders in many cases deduct 10% of the booking amount and refund the rest without interest.

The lesson: small booking sums held for a long time are hard for a developer to keep, and the facts of how you were sold the unit matter. Keep messages and emails that show pressure or missing information.

When do you get a full refund with interest?

Section 18(1) of the RERA Act: if the promoter fails to complete or give possession by the date in the agreement, or stops business because its registration is suspended or revoked, you may withdraw and get back the full amount paid, with interest at the prescribed rate and compensation. If you stay, you get interest for every month of delay until possession. See Possession Delayed? What Buyers Can Do Under RERA for the choice between the two.

Karnataka sets the numbers. Rule 16 of the Karnataka RERA Rules, 2017 fixes the interest rate at SBI's highest MCLR plus 2%, and Rule 17 requires refunds with interest and compensation to be paid within 60 days. The prescribed agreement (clause 9.2) mirrors this: on builder default you may terminate and receive everything paid under any head, with interest, within 60 days of your termination notice.

Section 2(za) adds a fairness rule: the interest rate a builder charges you for late payment must equal the rate it pays you on default, and the builder's interest runs from the date it received your money.

Step by step: how to cancel and claim your refund

• Find your stage: EOI form, allotment letter or registered agreement. Read the cancellation clause in that document.
• Work out the maximum deduction using the table or clause, and the refund deadline (45 days under the allotment letter, 60 days under the agreement or Rule 17).
• Send a dated cancellation letter by email and registered post, quoting project, unit, K-RERA number, amounts paid with dates, and your bank details. Ask for the refund amount and date in writing.
• If you are cancelling because of builder default, say so and cite Section 18. That changes the refund from 'less deduction' to 'full amount plus interest'.
• If the refund is late or short, file a complaint under Section 31 on the K-RERA portal's complaint page. Compensation claims go to the adjudicating officer under Section 71, who must decide within 60 days or record reasons.
• If K-RERA orders a refund that is not paid, K-RERA has a circular on recovery of reliefs, and it publishes lists of promoters referred for recovery as arrears of land revenue.
• A consumer commission is an alternative forum; Section 71 also allows a buyer to withdraw a pending consumer complaint, with permission, and move it to the adjudicating officer.

What to put in your cancellation letter

• Your name, the allotment letter or agreement number and date, the project name and its K-RERA registration number, and the unit number.
• A table of every payment: date, amount, mode and receipt number.
• The clause you are cancelling under, and whether the cancellation is voluntary or due to builder default (with the reason, such as a missed possession date).
• The refund you expect, with the arithmetic: amount paid, minus the maximum deduction allowed, or the full amount plus interest on default.
• The deadline: 45 days under the allotment letter, or 60 days under the agreement and Rule 17.
• Your bank account for the refund, and a request for written confirmation of receipt of the letter, because the deduction table runs to the date the letter is received.

How to lower your cancellation risk before booking

Most cancellation pain is avoidable. Use the 15-day nil-deduction window in the allotment letter to read the draft agreement and get a lawyer's view. Keep the booking amount modest within the 10% cap. Run The 9-Point RERA Checklist Every Buyer Should Run before paying. If timing is uncertain, a finished home removes most of this risk: compare options in Under-Construction vs Ready-to-Move in Bangalore: Costs, GST, RERA and Risk Compared (2026) and on Ready To Move, Bangalore.