Legal Advice

Builder not obeying buy back clause of sale agreement

Question: I have purchased property with Maangalya Builder from Bangalore in September 2018 with Buy back agreement stating 100% ROI in the period of 18 months under subvention scheme. After payment of almost 90% cost the builder not obeying buy back clause of sale agreement. The property cost was 6188520 without registration. And I paid 10% which is 618852. And financed about 54 lakhs of loan via HDFC out of which 51 lakhs have been disbursed based on demand letter. As it was subvention scheme, I was not expected to pay PEMI. Following documents i have received from Builder in above regards:- 1. Receipt of Booking amount. 2. Allotment letter of unit. 3. Sale agreement 4. Supplementary Agreement which contains buyback date and return. 5. Tri Party agreement between Builder buyer and Bank. The tenure got over in March 2020, but till date (March 2022) Builder has not executed the buyback agreement and not refunded any amount. Moreover I was forced to pay PEMI from September 2020 till date to keep my credit rating not getting impacted. I have done several follow ups with the builder for buy back and the return of the amount + agreed committed profit + PEMI paid by me till date, but there is no response from the builder.  Please let me know my options, if consumer court + RERA could be an option, if I proceed legally. I am looking for the following:- 1. Stopping PEMI without affecting my credit rating. 2. Return of Original Booking amount 618852 3. 100% committed profit of 618852 4. PEMI return which is approximately around 600000 4. Loan closure 5. Penalty compensation from Builder for not honouring the agreement for 2 years already.


This is a case of breach of agreement by the builder. You have performed your part under the sale agreement and paid almost 90% of the total cost of the flat. Construction work is still in progress and you have not received flat as per the schedule mentioned in the sale agreement. 

According to the agreement, the builder agreed to buy back the flat at the current market rate if he fails to deliver the flat on time. He did not deliver the flat on the agreed date. Therefore, the buy back clause became operational. 

Also read: What to do when builder is not returning booking amount?

Hence, the builder should buy your flat as per the current market price. You should send a legal notice to the builder and inform him that you are ready to sell this flat according to terms of sale agreement. However, the bank is also a party in the said agreement, hence, you should also send an enclosure to the bank also. 

Buy back scheme is very much like an assured return on real estate investment. It prompts the buyers to invest in the ongoing project and get assured return on their investment. Under the buy back scheme, the builder is bound to buy the property at the current prevailing rate. You intimate the bank to stop the EMI and proceed further to recover the remaining amount out of the sale proceeds of the flat. 

In your case, the builder has breached the agreement and not obeying the buy back clause of the sale agreement. Hence, he shall be liable to pay the excess interest to the bank. This is a tripartite agreement hence, the sale agreement is also binding on the bank. You cannot get the booking amount or any other payment which you have made under the sale agreement. 

You‘ll get the balance amount after deduction of loan and other expenses from the sale proceeds. The builder will buy back your flat and the bank will recover the loan amount. If anything remains in your hands after deducting those amounts then that will be your profit.

Shivendra Pratap Singh


High Court Lucknow