How RERA Protects an Under-Construction Home Buyer in Karnataka
A buyer of an under-construction home pays in stages for a flat that is still being built. The Real Estate (Regulation and Development) Act, 2016, known as RERA, sets rules for how the developer handles that money, what is promised and what follows when a promise is broken. This guide sets out each protection, the section behind it and the way a buyer in Bangalore puts it to use.
Where RERA Applies
The Act has been fully in force since 1 May 2017, and Karnataka notified its rules in July 2017. The Karnataka Real Estate Regulatory Authority (K-RERA) registers projects, keeps the public record of each one and hears complaints. A developer needs the registration before advertising, taking a booking or accepting any money.
Two kinds of project are outside the registration rule under section 3: those on land of 500 sq m or less, and those with eight apartments or fewer, counting all phases. Every other apartment, villa and plotted project in the state must register. The protections below belong to the buyers of registered projects, which makes the registration number the first thing to verify.
The Protections at a Glance
The table lists the main safeguards with the section of the Act that carries each one.
| Protection | What the rule says | Section |
|---|---|---|
| Registration and disclosure | Title, approvals, plans and the completion date are filed with the Authority and shown online | 3, 4 and 11 |
| Separate project account | 70% of buyers' money stays in a dedicated bank account for land and construction cost | 4(2)(l)(D) |
| Limit on advance | At most 10% of the price before a registered agreement for sale | 13 |
| Fixed plans | Changes to the sanctioned plan need the consent of two-thirds of the buyers | 14 |
| Delay remedy | Refund with interest, or interest for each month of delay | 18 |
| Defect liability | Structural and workmanship defects set right for five years from possession | 14(3) |
| Complaint forum | The Authority and its adjudicating officer decide disputes | 31 and 71 |
How the Buyer's Money Is Ring-Fenced
Section 4 obliges the developer to place 70% of every amount received from buyers in a separate account with a scheduled bank. The account pays only for the land and the construction of that one project. Money moves out in step with the work completed, and each withdrawal is certified by an engineer, an architect and a chartered accountant.
The account is audited every year, and the audit confirms that withdrawals matched the progress on site. The rule addresses the old practice of using one project's collections to buy land for the next. The remaining 30% is free for the developer's other costs, so the account lowers the risk of a stalled site without removing it.
The 10% limit before the agreement
Section 13 stops a developer from collecting more than 10% of the cost of the home before a written agreement for sale is signed and registered. The agreement follows the form in the Karnataka rules and states the price, the payment stages and the date of possession. A demand for 20% on an allotment letter alone is a breach a buyer should refuse in writing.
What the Developer Must Disclose
The project page on the K-RERA portal carries the facts a brochure tends to leave out. The entries to read before booking are listed below:
- The registered name of the project and the promoter, with the land owners in a joint development
- The title documents and any mortgage on the land
- The sanctioned plan, the number of towers and floors and the number of homes
- The carpet area of each type of home
- The proposed date of completion
- Quarterly updates on construction progress and bookings
Carpet area has a single legal meaning under the Act: the usable floor area inside the home, including internal partition walls. External walls, service shafts, the balcony and the open terrace are excluded. The price in the agreement is tied to this figure, which lets a buyer compare two projects on equal terms.
Section 12 adds a remedy for false promises. A buyer who paid on the strength of an untrue statement in an advertisement or brochure is entitled to compensation, or to a full refund with interest on choosing to leave the project.
Plan Changes and Change of Developer
The sanctioned plan and the specifications shown at booking bind the developer under section 14. A minor change to one home needs that buyer's consent. Any other alteration to the layout, the buildings or the common areas needs the prior written consent of at least two-thirds of the buyers.
The same two-thirds consent, along with the Authority's approval, is required under section 15 before a developer hands the project to another company. An extra tower in the open space, or a quiet sale of the project, is therefore open to challenge.
Delay in Possession
The agreement for sale fixes the possession date, and section 18 gives the buyer two choices when it is missed. The first is to withdraw and receive the full amount paid with interest and compensation. The second is to stay in the project and receive interest for every month of delay until the home is handed over.
The Karnataka rules set the interest at the State Bank of India's highest marginal cost of lending rate plus 2%. The same rate applies to a buyer who pays an instalment late, so the term works in both directions. An extension of the project's registration by the Authority leaves the buyer's claim under the agreement intact.
Defects After Handover
Protection continues after the keys are handed over. Under section 14(3), a structural defect or a defect in workmanship, quality or services reported within five years of possession must be repaired by the developer free of charge within 30 days. A buyer is entitled to compensation where the repair is refused or delayed.
Section 17 covers the last step of the purchase. The developer must execute a registered conveyance deed in the buyer's favour and hand the common areas to the association of owners. Photographs and dated written complaints make a defect claim far easier to prove.
The Complaint Route
A complaint under section 31 is filed online on the K-RERA portal against the developer or an agent. The Authority decides claims for refund, interest and possession, and the adjudicating officer decides compensation under section 71. An order may be appealed to the Karnataka Real Estate Appellate Tribunal within 60 days.
Unpaid amounts under an order are recoverable as arrears of land revenue through the district administration. Recovery takes time when a developer is short of funds, so a strong order is only part of the outcome. Buyers also keep their remedies before the consumer commissions.
Limits of the Law
Registration records what a developer has declared, and the Authority gives no assurance on price, quality or the builder's finances. Title, approvals and the terms of the agreement still need a buyer's own legal check. Projects below the size threshold and homes completed before the Act came into force are outside most of these rules.
A home loan adds a second relationship that the Act leaves untouched. The bank expects its EMI or pre-EMI on time even while a project is delayed. Our EMI calculator shows the monthly outgo to plan for through the construction period.
Buyer's Checklist
These steps turn the rights in the Act into a routine for any under-construction purchase:
- Search the project on the K-RERA portal and note the registration number and completion date
- Match the towers, floors and carpet area on the portal with the brochure and the cost sheet
- Pay no more than 10% until the agreement for sale is registered
- Check that the possession date in the agreement agrees with the date filed with the Authority
- Make every payment by bank transfer to the project account named in the agreement
- Keep receipts, demand letters and all written exchanges with the developer
- Read the quarterly updates each year and compare them with the site
- Put any delay or defect in writing first, then file a complaint with the Authority
Our team shares the RERA details of any project listed with us. Write to us through the contact page with the project name.
