A property deal may not always end in the way we want it to. It can happen, sometimes, that a deal is cancelled mid-way even after a few payments have already been made. The deal may be abandoned halfway through the process by either the buyer or the seller, for some reason. The buyer may decide not to go ahead with his plans, because of unexpected and sudden events. The seller can also have a change of heart and decide to go with another offer which is better than the present one. There can be a variety of reasons for which a deal can be cancelled. What is the impact of property cancellation? Let us look at some of the repercussions when a property deal is cancelled. When the world is experiencing the effects of the ongoing Covid-19 pandemic, the global economy is in a bad shape and businesses are affected, it is natural that people are cynical about taking up a financial liability. The lockdown situation due to the Covid-19 pandemic resulted in many property deals being dropped even after the token amount was paid. Why a property deal is cancelled? There can be many reasons why the homebuyers will decide to cancel after booking a property.
- Sometimes, the buyer gets second thoughts about his choice.
- There might be a sudden change in his financial position due to loss of job etc.
- The buyer might also want to cancel because he has issues with the project or the developer.
- The buyer may not be able to secure a loan due to some reason.
What will happen to the token amount if a property deal is cancelled? Whenever there is a purchase of a property, the buyer will generally pay a token amount. This amount will differ, it can be a small amount or even a significant per cent of the property value. If the seller is backing off from the deal and the property deal is cancelled, there will be no immediate consequences financially, except for the fact that the home buyer will then get the right to file a case in the court of law. However, it may not happen generally. In the case of the buyer backing out of the deal, the seller will have the right to forfeit the token amount that has been paid. The buyer won’t be able to claim any income tax benefits with regards to this forfeited amount when a property deal is cancelled. The forfeited token amount will be considered as the income of the seller and will be taxed under the ‘income from other sources’ heading. When a property deal is cancelled, can you expect the refund of stamp duty? For all property-related transactions, the buyer will an amount as the stamp duty. This amount is paid along with the registration charges, which is determined by the state government. Hence, the rules for the refund of the stamp duty amount will depend on the respective state government. Stamp duty can be a fixed amount or even a per cent of the market value of the property. It is to be paid before the document is executed. There will be a certain GST charge levied by the developer when any buyer books an under-construction property. The rate depends on whether the property is coming under the ‘affordable housing’ category and the developer has availed the GST. If a property deal is cancelled, the developer may agree for refunding the booking amount and the instalments which have been paid. However, the developer may or may not refund the GST amount which has been collected from the buyer. The developer might have deposited the amount to the government. The developer will not be entitled to claim any refund with respect to the GST, as the services have already been rendered. Impact of property cancellation If the agreement has not been registered, the seller won’t deduct any money from the advance amount. If the buyer-seller agreement, the buyer will have to forfeit a part of the booking amount when a Cancelling A Home Booking and it depends on the terms and conditions of the agreement.
- Unless the buyer-builder agreement has been registered, the buyer has no rights legally over the property.
- Receipts should be collected from the seller for every transaction.
- Make sure to read the clause pertaining to the cancellation of the booking very carefully.
- The buyer should get it changed if it is mostly in favour of the seller.
- The buyer can hire a legal advisor to carry out this procedure.
A buyer can approach the RERA in their respective state for any grievances when a property deal is cancelled. Takeaway In this article, we read about the impact of property cancellation. Homebuyers may choose to end their home-purchase journey suddenly, for any reasons which may be beyond their control. There have been many cases when a property deal is cancelled due to sudden loss of income, change of mind of the buyer or when there is an issue with the property.