Hello! I purchased a flat worth 53Lakhs in Himachal Pradesh on March 10, 2023. The builder asked for 20Lakhs as cash payment - we requested if we could pay via cheque or online but he refused. So we paid 20Lakhs cash and 3Lakhs through online mode Rest 30Lakhs was supposed to be through loan. The builder assured us that based on my income receipts and ITR, loan will easily get approved. Also since 20Lakhs was taken in cash, there was no mention of it in the registered sale agreement but only 3Lakhs which was through online transfer. **Note after repeated requests, they didn't include a clause in the sale agreement regarding refund of deposit if loan doesn't get approved. However I did get it in writing with revenue receipt from the builder sales guy who received 20Lakhs from us Background about the loan process - due to my mother's ongoing long term illness, i took unpaid leave of 3 months(Jan 10-April 10) initially which I conveyed to the bank manager when the builder guy took us to apply for the loan. We had a good interaction and the bank manager said that loan will easily get approved without any issues and usually the process takes 2-3 days for a person residing in Himachal but since I am from outside Himachal (from Delhi), it will take some more time around 1-2 weeks for bank, office, address verification, etc. to be completed. My only reason to buy a property in Himachal was because of my mother's lung illness - I thought to settle my parents there for a better air quality, etc. Based on the conversation with the bank manager, it felt like the loan will be sanctioned and disbursed by end of March at the max before my leave ends. BUT that never happened and I followed up with the bank in April and they didn't even email my office for verification until I asked about the loan status. By then I had to get my leave further extended for another 3 months. Now the bank tells me since I am not receiving income for more than 3 months now, they will need to get approval from bank's higher authorities but that approval never came and now they keep saying that once my first salary gets credited, only then they will sanction the loan. They took almost 4 months to process a loan which was supposed to be "easily" sanctioned. My main purpose of shifting my parents to Himachal is still not solved. Now builder is putting the blame on me for delaying the loan. When I said the bank manager never mentioned this clause that they will disburse the loan ONLY after my first salary gets credited, he said that is obvious and I should have known. I also gave bank 2 other options to approve my loan by adding either my mother as a coapplicant (she is a pensioner) or my father (issue loan against his agricultural land in Himachal). They refused both options and keep saying once I join back my office, they will take the loan process further. I feel really stuck and don't know how to get my money back since I don't have 20 lakhs mentioned in the agreement.
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you are at liberty to cancel your booking but in such case builder will forfeit earnest money paid by you
if builder refuses to refund balance amount you can file complaint against builder before RERA for refund of money paid by you
3) the problem will be with Rs 20 lakhs paid in cash by you . i presume you are aware that both giving and taking cash is an offence and penalty can be imposed upon you by income tax department
Dear Client,
Sure, here is the rewritten text:
You have the right to cancel your booking at any time before the project is completed. However, if you do so, the builder will forfeit the earnest money that you have paid.
If the builder refuses to refund the balance amount of money that you have paid, you can file a complaint against the builder with the Real Estate Regulatory Authority (RERA) for the refund of your money.
Here are the steps on how to file a complaint with RERA:
If the RERA office rules in your favor, the builder will be required to refund the balance amount of money that you have paid.
You have done mistake by giving cash of Rs.20 lakh and that too without valud receipt from builder. Now in case of cancellation on booking on account of non sanctioning of loan, the liability of builder would be limited to Rs. 3 lakh only. Now so far bank is concern, bank is within its rights to refuse sanction of loan as your salary which is vital proof of your employment was not credit in your given account. The only option is that you should join your duty and draw salary, get approved loan and complete the sale otherwise you will have to forego Rs. 20 lakh.
Based on your situation, here are the actions you can consider taking:
Demand Refund in Writing: Write a formal letter to the builder demanding a refund of the 20 Lakhs paid in cash, along with a copy of the receipt where the builder's sales guy acknowledged receiving the cash payment. Clearly state the reasons for the refund request and set a reasonable timeframe for the refund.
Approach Consumer Forum: If the builder refuses to refund the cash payment, you can approach the Consumer Forum in Himachal Pradesh to file a complaint against the builder for unfair trade practices and lack of transparency. Provide all the relevant documents and communication as evidence.
Complain to RERA: If the project is registered under RERA (Real Estate Regulatory Authority), you can file a complaint with RERA against the builder for non-compliance or any misrepresentation regarding the payment terms.
Complain to Banking Ombudsman: If you believe the bank has been unfair in its loan processing or communication, you can file a complaint with the Banking Ombudsman, an authority that handles grievances related to banking services.
Negotiate with the Bank: Continue to communicate with the bank regarding the loan process and explore the possibility of alternative options for loan approval, such as adding your mother as a co-applicant or using your father's agricultural land as security.
I wasn't aware about the penalty on buyer incase cash is paid to seller. What are the implications on the buyer though?
When a buyer pays cash to the seller in a real estate transaction, there can be several implications and penalties for the buyer. Here are some of the potential consequences:
Tax Evasion: One of the most significant implications of paying cash is the possibility of tax evasion. Cash transactions can be used to conceal the actual purchase price and evade taxes. In India, real estate transactions are subject to stamp duty, registration charges, and capital gains tax. By paying in cash and not disclosing the actual amount, the buyer risks being involved in tax evasion, which is illegal.
Non-Compliance with Anti-Money Laundering (AML) Laws: Cash transactions can also raise concerns under anti-money laundering laws. In an effort to combat money laundering and other illegal activities, many countries have strict AML regulations in place. Paying large sums of cash without proper documentation may raise suspicions and could lead to investigations.
Dispute Resolution Challenges: In case of disputes between the buyer and seller, it becomes difficult to prove the actual payment made if it was in cash. This lack of proper documentation can weaken the buyer's position in a legal dispute.
Loan Approval Difficulties: When a buyer pays a significant amount in cash, it may affect the loan approval process. Banks and financial institutions usually require proper documentation of the entire transaction, including the down payment. If the buyer cannot demonstrate the source of funds for the cash payment, it may impact their loan eligibility or result in delays in loan processing.
Impact on Property Valuation: Paying a significant amount in cash may artificially lower the registered sale price of the property. This can distort property valuation in the area and affect the property's resale value.
Penalties and Fines: If the tax authorities discover a cash payment made by the buyer, penalties and fines may be imposed on the buyer for tax evasion and non-compliance with tax laws.
It's important to note that cash transactions in real estate are generally discouraged and may have serious legal and financial implications. It is always advisable to conduct real estate transactions through proper banking channels and with complete documentation to ensure compliance with the law and protect the interests of all parties involved.
Penalty would be nominal if builder would be at fault and would be higher if you would be required to pay penalty. Go through agreement. There must be clause in agreement that in case of delay in making payment being buyer you shall be liable to pay penalty.
The penalty for late payment will be lower if the builder is at fault, and higher if you are at fault. Please review the agreement carefully to ensure that there is a clause stating that you are liable to pay a penalty in the event of a delay in making payments.
For buyer you will have to explain source of funds for making payments of Rs 20 lakhs in cash
On the basis of the receipt for receiving this money through a revenue receipt acknowledgement, you may file a money recovery suit against the builder by cancelling the sale agreement.
You cannot claim innocence of law and also you are aware that any transaction by cash beyond Rs. 20000 is an offence and punishable under anti money laundering act.
Whatever, you may file the money recovery suit.
Thank you to each of you for responses. I also have another query - while I understand now that the cash payment may attract some sort of penalties on us but all of this was our legal money. We had to get cash arranged through a jeweller. We paid the jeweller via cheque to get liquid cash and the jeweller did issue an invoice for the jewellery which includes GST, etc. I am also concerned how would this impact the jeweller or us if we file a court case?
Your best option is not to cancel the deal
obtain loan against existing property owned by you or your parents and pay the builder
3) if any notice is issued to you by income tax department you have to disclose the source of funds that jeweller gave you cash
For now there is no problem for filing a suit for recovery on the basis of the cash receipt the developer had acknowledged.
This will be a matter of trial when the defendant will raise a question in this regard, you can produce the documentary evidences at that time when the details are required to be produced.
Money received from jewelleries by sale does not establish that the same was paid to builder. If you have valid receipt from builder of receopt of payment of Rs. 20 lakh then only your version could be relied. Without supporting evidence such claim can not be relied. Jeweller would be required to join investigation, to give statement in police and also in court.
I would advise against canceling the deal. Instead, you can explore the option of obtaining a loan using an existing property owned by either you or your parents. By doing so, you can secure the necessary funds to pay the builder.
In the event that you receive a notice from the income tax department, it is important to transparently disclose the source of funds you received in cash from the jeweler.
You need to cover the same as it’s an evidence against you it’s difficult to hide and cover gst transaction without strong set up
