How much interest and penalty is a builder liable to pay for a delay in delivery, as per RERA Uttar Pradesh rules?

  • How much interest and penalty is a builder liable to pay for a delay in delivery, as per RERA Uttar Pradesh rules?

    Date : 25-01-2019 17:26

    The common delay in possession of the homes has been the biggest concern for the buyers of the real estate properties. For many of the homebuyers, across locations and with almost the builders, the delay has extended to almost six years or more now, with no possession in sight. In the absence of a regulator and with no rules in place, the builder-buyer battle appeared one-sided.

    In a bid to protect the interest of homebuyers as well as weed out non-serious and unscrupulous players from the market, the Real Estate (Regulation and Development) Act, 2016 (RERA) has proposed heavy penalties on builders who will henceforth either delay their projects or won’t comply with RERA norms.

    RERA recommends imprisonment for a term which may extend up to three years, or fine which may extend up to 10% of the estimated cost of the real estate project, or both, in case of non-compliance with the Act. Moreover, in case of any structural defects arising within five years of handing over the possession of project to buyers, developers will be liable to rectify such defects without further charge.

    Today buyers are not paying regularly as the projects themselves are held up. It is imperative that the construction process starts and the money movement begins. CREDAI, the real estate developer's body, has offered to help builders to complete their delayed projects and hand over possession as early as possible

    There are important provisions in RERA that may prevent the builders from delaying the projects and stick to deadlines rather than making a default:

    Written affidavit: The promoter's promise will now have legal standing to it. Along with all the required documents, the promoter has to give a declaration, supported by an affidavit stating the time period within which the project or the specific phase will get completed.

    Possession date will be sacrosanct: Further, the 'agreement of sale' will have to specifically carry the date of possession and the rate of interest in the case of any default. Remember, the time period could differ amongst builders.

    Free from encumbrances: Often, it has been seen that several projects get delayed due to encumbrances which can restrict the promoter's ability to transfer title to the property. A written affidavit has to be provided by the promoter that the land is free from all encumbrances.

    Maintaining separate account: Diversion has been the most common concern across the industry. Now, as per RERA, 70 percent of the amount realized for the real estate project from the buyers, from time to time, shall be deposited in a separate account to be maintained in a scheduled bank to cover the cost of construction and the land cost and shall be used only for that purpose.
    The withdrawals from the account will be according to the extent of the work completed after it is certified by an engineer, an architect, and a chartered accountant and will be subject to an audit every six-month.

    Clear title of the land: At times, the land on which the project is supposed to be built gets involved in disputes leading to a delay in construction and delivery. A written affidavit has to be provided by the promoter that the legal title to the land on which the development is proposed has legally valid documents with authentication of such title if such land is owned by another person.

    Making it an offence:In case of not adhering to the rules, the builder stands not only to lose the registration of the project too but may also be punishable by imprisonment for a term which may extend up to three years or with fine which may extend up to a further ten per cent of the estimated cost of the real estate project, or both.

    In UP, an ongoing project would be that for which development is going on and a completion certificate has not been issued. Projects that meet any of the four conditions would not have to register themselves with the authority:

    a) If the work for maintenance has been issued to the local authority.

    b) If the common areas and facilities have been handed over to the Residents Welfare Association for maintenance.

    c) If all the development work has been completed and the sale deed for 60 percent of units has been executed. 

    d) If all development work has been completed and an application has been made to the competent authority for issuing a completion certificate.


    Rules in UP include:

    1. As per UP RERA, you'll be eligible for an interest @ 12% at least.

    2. The builder cannot unilaterally change the date of possession as per law, but if both the parties agree to it, it is no legal infirmity.

    3. Yes. You should serve a legal notice to the Builder asking him to pay compensation interest @ 15% per annum failing which, you'll file a complaint against him. UP RERA had in that past through a notification prescribed interest rate as 10 or 12% or SBI MCLR +2 %.


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