K-RERA Orders Builder to Refund Rs 52.74 Lakh for Excess GST and Unfair Practices in Apartment Booking

In a significant ruling aimed at upholding transparency in the real estate sector, the Karnataka Real Estate Regulatory Authority (K-RERA) has directed Casagrande Garden City Builders Private Limited to refund Rs 52.74 lakh to homebuyers Ramkumar and Pushpalatha. The order, issued by Hon’ble Chairman Shri Rakesh Singh on December 16, 2025, stems from a complaint alleging inflated Goods and Services Tax (GST) charges and unfair trade practices during the booking of a 2BHK apartment in the Casagrand Vivacity project. This decision reinforces the protective provisions of the Real Estate (Regulation and Development) Act, 2016 (RERA), emphasizing the homebuyer's right to accurate pricing and refunds for any misrepresentation. The case highlights ongoing challenges in the industry, where builders sometimes manipulate cost breakdowns to inflate project prices, leaving consumers vulnerable.

Case Background

The dispute originated in May 2024 when Ramkumar and Pushpalatha, residents of Bengaluru, booked a 2BHK apartment (Flat No. 402, Tower I) in the Casagrand Vivacity project, located at Sy.No. 93 & 99, Chikkanagamangala Village, Sarjapura Hobli, Anekal Taluk, Bengaluru Urban. The project, registered with K-RERA under No. PRM/KA/RERA/1251/308/PR/220424/006830 (valid until April 4, 2029), is a residential development promoted by Casagrande Garden City Builders Private Limited.

At the time of booking, the builder quoted a total cost of Rs 79.98 lakh for the 1,292 sq ft (120 sq m) super built-up area apartment, including a GST liability of Rs 8.57 lakh. The couple paid an initial booking amount of Rs 33.49 lakh on May 27, 2024, formalized through an Agreement for Sale executed on the same day. Subsequent payments brought their total investment to Rs 46.32 lakh by January 2025, including Rs 32.99 lakh in direct payments, Rs 41,650 in franking charges for the sale deed registration, and Rs 30,476 in Tax Deducted at Source (TDS), which the builder agreed to adjust in future demands. Additional payments of Rs 5.94 lakh on January 16, 2025, and Rs 6.54 lakh on January 27, 2025, along with further TDS of Rs 11,428, were also acknowledged by the respondent.

The issue surfaced when the complainants discovered a discrepancy in the GST calculation. The actual GST liability, as per standard rates, should have been only Rs 3.80 lakh, resulting in an excess charge of Rs 4.76 lakh. Despite repeated requests, the builder refused to provide a written cost breakup, allegedly altering figures under various heads, including GST, to inflate the overall price. This lack of transparency led the couple to file Complaint No. 00729/2024 on August 16, 2024, under Section 31 of the RERA Act, seeking a full refund of Rs 46.32 lakh plus interest. The complaint was supported by documents such as the sale agreement, payment receipts, allotment letter, and email correspondences evidencing the builder's reluctance to confirm the cost details.

The case was heard multiple times between December 2024 and April 2025, with notices issued to both parties. While the complainants were represented by advocate K.S. Rajesh Gowda, the builder appeared through advocates M. Umashankar and others but failed to file any statement of objections or counter-evidence.

Arguments Presented

The complainants argued that the builder's actions constituted a clear violation of RERA's core principles, particularly around transparency and fair dealing. They contended that the inflated GST figure was a deliberate misrepresentation to escalate the apartment's total cost, forcing them into overpayment. Ramkumar and Pushpalatha highlighted that the builder's refusal to issue a formal cost breakup—essential for tax compliance and financial planning—amounted to an unfair trade practice. They supported their claims with electronic evidence, including chat logs and emails, demonstrating the builder's evasive responses and inconsistent pricing heads. The couple emphasized that they had already incurred additional costs like franking charges and TDS, which should be refunded alongside the principal amount, given their intent to withdraw from the project due to the breach of trust.

Further, in their additional statements, the complainants reiterated violations of Sections 12 (veracity of advertisements and prospectus), 13 (prohibition on collecting excess amounts), and 19 (right of allottee to obtain information) of the RERA Act. They sought relief under Section 18, which mandates refunds with interest for failures in project obligations or agreements. The total claim escalated to Rs 46.32 lakh as more payments were made during the proceedings, underscoring the ongoing financial burden caused by the builder's opacity.

The respondent, Casagrande Garden City Builders Private Limited, did not mount a substantive defense. Despite appearing through counsel during hearings on dates including December 23, 2024, January 20, 2025, February 3, 2025, and others up to April 22, 2025, they refrained from filing objections or adducing evidence to challenge the allegations. This absence of rebuttal left the complainants' narrative unchallenged, allowing the authority to accept their version of events as undisputed. The builder's silence on key issues, such as the GST calculation and cost transparency, was interpreted as tacit admission of the irregularities.

Legal Analysis

K-RERA's reasoning centered on the builder's non-compliance with RERA's mandatory provisions designed to protect homebuyers and ensure accountability in real estate transactions. The authority found that the respondent's inflation of GST liability by Rs 4.76 lakh violated Section 13, which prohibits promoters from demanding or collecting amounts beyond those disclosed in the agreement. Similarly, the failure to provide a transparent cost breakup breached Section 19(6), which entitles allottees to full project details, including financial breakdowns. The judgment also invoked Section 12, stressing that any false or misleading information in promotional materials or agreements undermines buyer confidence and constitutes an unfair practice.

The core legal principle applied was the allottee's unqualified right to refund under Section 18(1) of the RERA Act, triggered when a promoter fails to adhere to agreement terms or provides inaccurate information leading to withdrawal from the project. Chairman Shri Rakesh Singh noted that the complainants' evidence, including electronic records of conversations, proved the builder's engagement in manipulative pricing tactics, making the excess payments recoverable with interest.

The ruling drew on two key Supreme Court precedents to bolster its analysis. In M/s Newtech Promoters and Developers Private Limited v. State of UP & Others (Appeal Nos. 6750-57/2021), the apex court affirmed that Section 18(1) grants homebuyers an absolute right to seek refunds with interest if possession is delayed or project terms are not met. The judgment quoted: “Section 18(1) of the Act spells out the consequences... the allottee/home buyer holds an unqualified right to seek refund of the amount with interest at such rate as may be prescribed.” This was directly relevant, as the misrepresentation here effectively prevented the complainants from proceeding confidently with the purchase.

Similarly, in M/s Imperia Structures Limited v. Anil Patni & Another (Civil Appeals Nos. 3581-3590 of 2020), the Supreme Court clarified the dual remedies under Section 18: withdrawal with full refund or continuation with interest on delays. Paragraph 23 was cited: “In terms of section 18 of the RERA Act, if a promoter fails... the allottee is entitled to refund with interest... The right so given to the allottee is unqualified.” This precedent distinguished the complainants' choice to withdraw due to foundational breaches like pricing fraud, rather than mere delays, justifying the refund without prejudice to other remedies.

The authority distinguished this case from routine delay complaints by focusing on the "societal impact" of pricing manipulations, which erode trust in the real estate market—a sector plagued by historical malpractices that RERA sought to curb. No other precedents were cited, but the analysis underscored RERA's broader objectives: promoting efficient project execution, enhancing accountability, and safeguarding purchaser interests through timely dispute resolution.

Key Observations

The judgment extracted several pivotal observations to highlight the builder's lapses and the authority's rationale:

1. "The Respondent illegally shown excess amount of Rs.4,76,057/- (Four Lakhs Seventy Six Thousand and Fifty Seven Only) as GST liability." This quote establishes the factual basis of the overcharge, directly tying it to the refund quantum.

2. "The Respondent is indulging in unfair trade practice of showing more GST liability to increase the total cost." Emphasizing the intentional nature of the misconduct, this underscores violations of RERA's anti-misrepresentation clauses.

3. "The Respondent/Promoter failed to provide basic service of giving a written confirmation of cost breakup that was shown and agreed upon while booking the Flat." This points to the breach of informational duties under Section 19, central to the complainants' grievance.

4. "The claim of the Complainants remained unchallenged and undisputed." Reflecting the respondent's default, this observation justified accepting the evidence at face value.

5. "The purport and object of RERA Act is to develop and promote Real Estate Sector and at the same time to safe guard the interest of purchasers." This encapsulates the legislative intent, positioning the ruling as a protective measure for the sector.

These excerpts, drawn verbatim from the judgment, illustrate the authority's evidence-based approach and commitment to RERA's consumer-centric framework.

Court's Decision

In its final order under Section 31 of the RERA Act, K-RERA allowed the complaint in full, directing Casagrande Garden City Builders Private Limited to refund Rs 52,74,231 (principal Rs 46,32,374 plus interest of Rs 6,41,857) to Ramkumar and Pushpalatha within 60 days from December 16, 2025. The interest was calculated at SBI's Marginal Cost of Funds based Lending Rate (MCLR) plus 2%, applied from each payment date up to November 5, 2025, with ongoing accrual at the same rate post that date until full payment. The order specified: "The Respondent is here by directed to pay Rs. 52,74,231/- ... towards refund with interest calculated at the rate of SBI MCLR + 2% from 05.05.2024 to 05.11.2025 to the Complainants within 60 days from the date of this order."

No costs were awarded, but the complainants were granted liberty to pursue further legal action if the refund is not complied with. The delay in issuing the order beyond the 60-day limit under Section 29(4) was attributed to procedural adjournments requested by parties.

This decision carries substantial practical implications for the real estate landscape in Karnataka and beyond. It empowers homebuyers to challenge opaque pricing, particularly GST manipulations, which have been a recurring issue since the tax's implementation in 2017. By awarding interest at a benchmark rate like MCLR + 2%, the ruling incentivizes builders to maintain accurate disclosures, deterring future overcharges. For legal professionals, it serves as a template for RERA complaints involving financial misrepresentations, potentially increasing filings against non-transparent promoters.

Broader effects include heightened scrutiny on project registrations and cost verifications. As RERA authorities across states handle similar disputes— with over 50,000 cases resolved nationwide since 2017—this precedent could streamline refunds, reducing litigation burdens on civil courts. It also aligns with the Act's goal of fostering a transparent market, potentially boosting investor confidence and stabilizing property prices. However, builders may face tighter compliance, possibly leading to revised pricing strategies or enhanced documentation practices. For affected homebuyers like Ramkumar and Pushpalatha, the refund restores financial equity, allowing them to pursue alternative housing without irrecoverable losses.

In the context of India's booming real estate sector, valued at over $200 billion, such rulings are crucial for weeding out malpractices and ensuring equitable dealings. Legal experts anticipate this could influence upcoming GST audits in property transactions, promoting a more buyer-friendly ecosystem.