Real Estate & Property
Builder Buyer Agreement India: Rights, Delays, Refunds & RERA 2025
Buying a flat in India is likely the largest financial decision of your life. The builder-buyer agreement is the legal foundation of that transaction — and most buyers sign it without reading it properly. RERA changed the landscape dramatically, giving buyers powerful rights they are unaware of. This guide explains every right you have and every red flag to spot before signing.
What RERA Changed for Homebuyers
The Real Estate (Regulation and Development) Act 2016 (RERA) fundamentally shifted power from builders to buyers:
- ✅ Mandatory RERA registration: Every project with 8+ units or 500 sq mt must be registered with State RERA before selling
- ✅ 70% escrow rule: 70% of buyer funds must be maintained in a separate account, used only for that project
- ✅ Carpet area basis: Prices must be quoted on carpet area — not super built-up area
- ✅ Delay compensation: Buyers get interest for every month of possession delay
- ✅ Defect liability: Builder responsible for structural defects for 5 years after possession
- ✅ Model agreement: State RERA model agreement cannot be unilaterally modified by builder
10 Things to Check Before Signing a Builder-Buyer Agreement
1. RERA Registration Number
Verify the RERA registration number on your State's RERA portal before paying a single rupee. Check: project name, phase, land area, completion date, number of approved units, and whether there are any complaints pending against this registration.
2. Carpet Area Commitment
The agreement must specify carpet area (usable floor space within walls), not super built-up or saleable area. If carpet area is under-delivered at possession — even by 3% — you're entitled to a proportional refund or price reduction under RERA.
3. Possession Date with Grace Period
Look for the committed possession date. Builders typically add a 6-month or 18-month "grace period" before RERA delay compensation kicks in. The shorter the grace period, the more buyer-friendly. Verify the grace period matches the RERA registration date commitment.
4. Payment Schedule Milestones
Construction-linked plan is safer than time-linked (prevents paying for a stalled project). Verify each milestone (foundation, plinth, each floor) is clearly defined. No milestone payment should exceed what's physically achieved.
5. Penalty Symmetry
Many agreements charge the buyer 18% p.a. for delayed payment but give the builder only 9% p.a. for delayed possession. Under RERA, both buyer and builder delay penalties should be at the State RERA prescribed rate. Negotiate symmetrical penalties.
6. Force Majeure Scope
Builders often use excessively broad force majeure clauses ("any government action, market conditions, labor shortage") to avoid delay penalties. Under RERA, force majeure is narrowly defined. A builder cannot use labor shortage or market downturn as force majeure to escape possession delay penalties.
7. Parking Allocation
Supreme Court has held that builders cannot sell parking spaces separately — stilt/surface parking must be provided with the flat. Covered basement parking is a common amenity. The agreement must specify: type, level, and location of parking. Any "parking charges" must be reasonable and itemized.
8. Maintenance Charges and Society Formation
Check: what maintenance amount is locked in for year 1, when is the Residents' Welfare Association (RWA) formed, and who maintains common areas until RWA formation. Builders often lock in inflated maintenance contracts — check if maintenance can be re-tendered by the RWA.
9. Alteration Restrictions
Many agreements prohibit any structural alterations post-possession (RERA compliant) but also unreasonably restrict cosmetic changes like painting, flooring, or installing modular kitchen. Check what alterations require builder consent vs what the buyer is free to do.
10. Cancellation and Refund Terms
If you cancel (buyer's default): builder typically retains 10–15% of agreement value as forfeiture. If builder cancels or delays significantly: you're entitled to full refund with RERA-prescribed interest. Verify the refund timeline (typically 60–90 days) is stated.
Common Red Flags in Builder-Buyer Agreements
🚩 No RERA number in the agreement — Never sign without the RERA registration number explicitly stated
🚩 Super built-up area pricing — RERA mandates carpet area pricing. Any mention of "loading" percentage is a red flag
🚩 Unlimited construction timeline — Vague "completion subject to government approvals" without a committed date is a planning violation
🚩 Asymmetric penalties — Buyer pays 24% penalty for late payment but builder pays only 6% for late possession
🚩 One-sided modification rights — Builder can change flat specifications, floor plan, or amenities with only "reasonable" notice to buyer
Your Rights Under RERA: Delay Compensation
Under Section 18 of RERA, if the builder misses the possession date:
- Option 1 — Exit: Full refund of all amounts paid + interest at State-prescribed rate from payment date to refund date + compensation for mental distress (at RERA's discretion)
- Option 2 — Stay: Interest for every month of delay at State-prescribed rate. This compounds until possession is given
Most state RERA rates: SBI MCLR + 2% (currently ~10.4–11%). On a ₹70 lakh flat paid over 3 years with 18-month delay, this can be ₹8–12 lakhs in compensation.
Review Your Builder-Buyer Agreement Before Signing.
ContractShield identifies missing RERA clauses, asymmetric penalties, overbroad force majeure, and possession timeline risks in your flat purchase agreement.
Analyze Your Contract Free →Frequently Asked Questions
What compensation can a buyer claim for builder delay in India?
Under RERA (Section 18), buyers can either withdraw and get a full refund with interest, or stay and receive interest for the delay period at the State RERA prescribed rate (typically SBI MCLR + 2%).
Is registration of a builder-buyer agreement mandatory in India?
Yes. Registration under the Registration Act 1908 is mandatory. Unregistered agreements cannot be used as evidence of title in legal proceedings.
Can a builder cancel a buyer's allotment?
Under RERA, a builder can only cancel allotment after issuing a 30-day notice and only if the buyer is in payment default. Unilateral cancellation entitles the buyer to a full refund with interest.
Related reads: Rent Agreement Guide India · Agreement to Sell Property India · Stamp Duty on Agreements India