Unlockable Space under RERA: A ‘Virtual’ Label Cannot Erase a Builder’s Promise of Possession [Read Order]
Imagine paying the full price for an office unit, receiving a “No Dues” certificate, and then being told years later that what you bought was never a real, lockable office at all, but only a “virtual” share in a leasing pool, and therefore outside the reach of the real estate regulator. For many investors in commercial projects across Noida and the NCR, this is not hypothetical. It is the defence builders increasingly raise when buyers come asking for their money back.
A recent ruling of the Uttar Pradesh Real Estate Appellate Tribunal, Lucknow (UP REAT) in Appeal No. 78 of 2026, decided on 13 November 2026, has put a firm check on this tactic. The Tribunal made it clear that the question of unlockable space under RERA is decided by what the agreement actually promises, not by a convenient annexure produced to avoid liability.
What Is Unlockable Space under RERA, and Why Does It Matter?
In commercial real estate, “virtual”, “non-lockable” or “unlockable” space refers to an investment in a share of a larger commercial floor that is pooled and leased out, rather than a demarcated unit handed over to the buyer. The buyer typically earns an assured return or proportionate lease rent, but never receives the keys.
Earlier in 2026, in M/s Diograzia Realcon Pvt. Ltd. v. Bhutani Group (Appeal No. 382 of 2024, decided on 19.05.2026), UP REAT held that a genuinely virtual space, where the agreement itself confines the buyer to a share in lease rent, does not fall within RERA, which primarily regulates physical real estate units. That ruling understandably encouraged developers to argue that their commercial sales were all “virtual” and therefore beyond the regulator’s jurisdiction.
The latest ruling answers a sharper question: who decides whether a unit is unlockable space under RERA, the builder’s defence or the contract’s own words?
The Tribunal’s Analysis on Unlockable Space under RERA
1. The Main Agreement Prevails Over a Disconnected Annexure
The builder relied on an annexure to the Builder-Buyer Agreement which authorised it to lease out “unlockable space”. The Tribunal rejected this argument on a plain reading of the agreement. The main body of the contract described the property simply as an office space, promised completion by a fixed date, and expressly bound the promoter to hand over possession after obtaining the occupancy or completion certificate. Nothing in the operative clauses linked the allotted unit to the leasing annexure.
The Tribunal distinguished both Diograzia and an earlier ruling in Anchal Garg v. WTC Noida Development Company Pvt. Ltd. (Appeal No. 762 of 2022), since in those cases the agreements themselves stated that possession would not be given and that the buyer would receive only lease rent. Where the contract promises possession, the unit is a standard physical unit, and the complaint is maintainable.
2. Courts Cannot Rewrite a Contract
Applying settled principles of contractual interpretation, including Rajasthan State Industrial Development & Investment Corporation v. Diamond & Gem Development Corporation Ltd., (2013) 5 SCC 470, the Tribunal held that an agreement must be read by giving its words their plain meaning. A forum cannot read into the agreement an unwritten restriction on possession merely because one party now finds it convenient.
Refund with Interest: Section 18 Meets the Equal-Interest Rule
Once the unit was held to be a real unit, Section 18(1) of RERA was applied with full force. The provision states that if the promoter “fails to complete or is unable to give possession of an apartment, plot or building” in accordance with the agreement, “he shall be liable on demand to the allottees, in case the allottee wishes to withdraw from the project, without prejudice to any other remedy available, to return the amount received by him in respect of that apartment, plot, building, as the case may be, with interest at such rate as may be prescribed in this behalf including compensation in the manner as provided under this Act”. The Supreme Court in M/s Newtech Promoters and Developers Pvt. Ltd. v. State of U.P., 2021 INSC 716, has recognised this right of refund as unconditional where possession is not delivered as agreed.
The more striking part of the ruling concerns the rate of interest. In UP, refunds are ordinarily granted at MCLR + 1%. Here, however, the builder had itself fixed 18% per annum as the rate for delayed payments by the buyer. Relying on Explanation (i) to Section 2(za), which provides that “the rate of interest chargeable from the allottee by the promoter, in case of default, shall be equal to the rate of interest which the promoter shall be liable to pay the allottee, in case of default”, and on the Allahabad High Court’s decision in Lucknow Development Authority v. Upasana Duggal, 2023 SCC OnLine All 3998, the Tribunal directed refund of the entire deposit with interest at 18% per annum from the date of each deposit until payment.
The lesson is simple: a builder who drafts a steep interest clause against the buyer will be held to the same rate when the default is its own.
Section 13 Violation: Full Payment Without a Registered Agreement
Section 13(1) of RERA provides that “a promoter shall not accept a sum more than ten per cent. of the cost of the apartment, plot, or building as the case may be, as an advance payment or an application fee, from a person without first entering into a written agreement for sale with such person and register the said agreement for sale, under any law for the time being in force.” In this case, the builder had collected the entire consideration on an unregistered agreement.
The Tribunal treated the word “shall” as mandatory and held that the breach exposed the promoter to penalty under Section 61, which may extend up to five per cent of the estimated cost of the project. It directed UP RERA to initiate penalty proceedings. It further held that, under Section 17(1)(f) of the Registration Act, 1908 as amended for Uttar Pradesh, such an agreement is compulsorily registrable, and directed that the unregistered agreement be sent to the District Collector for recovery of deficient stamp duty and penalty from the promoter under the Indian Stamp Act, 1899.
Key Takeaways for Investors in Unlockable Space under RERA
Read the main agreement, not just the brochure. If the operative clauses promise possession, a separate leasing annexure cannot turn your unit into virtual space.
Truly virtual units are a different risk. Where the agreement itself says you will only receive lease rent and not possession, the regulator may decline jurisdiction, and remedies may lie elsewhere.
Check the interest clause. If your builder charges you a high rate on delayed payments, Section 2(za) may entitle you to the same rate on refund.
Insist on registration. Paying more than 10% without a registered agreement for sale is a statutory red flag for the promoter, not a favour to you.
Stopped assured returns are a warning sign. They often signal deeper project trouble and should prompt an immediate review of your options.
Are You Holding an ‘Unlockable’ Commercial Unit?
If your builder is now calling your office unit “virtual”, has stopped paying assured returns, or has taken full payment without registering your agreement, your rights may be stronger than you have been led to believe. At S&D Legal Associates, we regularly represent allottees before UP RERA, UP REAT and the Allahabad High Court in refund, delay interest and recovery matters. A careful reading of your Builder Buyer Agreement is often the difference between a dismissed complaint and a full refund with interest.
Conclusion: Substance Over Labels
The debate on unlockable space under RERA is not about terminology; it is about honesty in drafting. The Tribunal has drawn a fair and workable line. Where an investor knowingly buys a share in a leasing pool, the law respects that bargain. Where a builder promises an office, collects every rupee, and then reaches for a disconnected annexure to escape accountability, the law looks at the promise.
For the market, the ruling sends a quiet but clear message: the words in the contract will be read as written, interest obligations will be read as equal, and statutory duties like registration will be enforced. For buyers, it is a reminder that the most important document in any real estate investment is not the brochure, but the agreement itself.
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Disclaimer: This article is for general information only and does not constitute legal advice. The views expressed are based on the Tribunal’s order as pronounced and may be subject to further appellate proceedings.
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