Builder Asking For More Than 10% Before Registration? Read Section 13

What does Section 13 of RERA say?

Section 13(1) of the Real Estate (Regulation and Development) Act, 2016 provides that a promoter shall not accept a sum more than ten per cent of the cost of the apartment, plot or building as an advance payment or an application fee from a person without first entering into a written agreement for sale with such person and registering the said agreement for sale under any law for the time being in force.

Two requirements sit in that sentence: a written agreement for sale, and registration of it. Both come before the payment crosses ten per cent, not after.

Section 13(2) adds that the agreement for sale must be in the form prescribed by the rules and must specify particulars such as the development of the project, including construction and amenities, the date and manner of payment, the date of possession, and the rates of interest payable by the promoter and the allottee on default. Most States have prescribed a model form in their RERA rules.

What does ten per cent mean in rupees?

Take a flat in Bengaluru with a cost sheet showing ₹75 lakh for the apartment. Ten per cent is ₹7.5 lakh. That is the most the promoter should take, whether called a booking amount, an application fee, an expression of interest or a token, until the agreement for sale is signed and registered.

A common pattern is a booking cheque of ₹2 lakh, followed within thirty days by a demand to make up 20 per cent, ₹15 lakh, with the agreement promised later. The second demand is where Section 13 bites.

The Act refers to the cost of the apartment, plot or building. Cost sheets often add parking, clubhouse charges, deposits and taxes. Ask the builder to confirm in writing what figure the ten per cent is calculated on, and work from the agreed cost of the unit rather than from a total that includes items such as maintenance deposits.

Is an allotment letter enough?

No. At booking stage, what most buyers hold is an allotment letter or a booking receipt. Those record that a payment was made and a unit was earmarked. They generally do not record the specification, the carpet area, the payment schedule, the possession date or the consequences of delay, which is the substance of what you are buying.

Paying thirty or forty per cent before that substance is documented means committing a large sum on terms not yet agreed. The negotiating position at that point is considerably weaker, because the money is already with the builder.

What to do at booking

• Keep the initial payment within ten per cent of the agreed cost until the agreement for sale is executed and registered.
• Ask to see the draft agreement before paying anything, not after, and compare it with the model form in your State's RERA rules.
• Check the RERA registration number of the project and verify it with the State authority.
• Confirm the carpet area, possession date, payment schedule and interest rates appear in the agreement rather than only in a brochure.
• Pay by cheque or bank transfer into the account named for the project, never in cash, and collect a receipt for every payment.
• Keep the allotment letter, receipts, brochure and price sheet together with any emails and messages.

The registration and stamping layer

Registration of the agreement is not only a RERA requirement. Section 17 of the Registration Act, 1908 deals with compulsory registration of instruments relating to immovable property, and under Section 49 an instrument that required registration but was not registered faces difficulties being received as evidence of the transaction.

Stamp duty is a separate obligation and is a State subject, so rates and methods vary. Some States apply the Indian Stamp Act, 1899 as amended for that State, while others, such as Maharashtra and Karnataka, have their own stamp Acts. An insufficiently stamped instrument faces admissibility problems under Section 35 of the Indian Stamp Act, 1899, or the equivalent provision of a State's own Act, such as Section 34 of the Maharashtra Stamp Act. Both points are worth confirming locally rather than assuming the builder has handled them.

One more point: the Information Technology Act, 2000 does not apply to a contract for the sale or conveyance of immovable property, which is listed in its First Schedule. Do not treat an emailed or electronically accepted agreement for sale as a substitute for a signed, stamped and registered document.

What if you have already paid more than 10%?

A great many buyers are in this position, often having paid a substantial proportion against an allotment letter alone. That does not extinguish your position, but it does change the practical approach, since the leverage of withholding payment is gone.

The immediate step is to press in writing for execution and registration of the agreement for sale, keeping a record of the request. A short email is enough: "I have paid ₹____ against the allotment letter dated ____, which exceeds ten per cent of the cost. Under Section 13(1) of the Real Estate (Regulation and Development) Act, 2016, please share the draft agreement for sale and a date for registration within 15 days."

Stop further payments until the agreement is registered, unless the demand is for something you have separately agreed in writing. Where the builder resists, that itself is information. A complaint can be made to the State RERA authority under Section 31, and the authority can impose penalties on a promoter who contravenes the Act. This is the point at which advice from an advocate who handles RERA matters is worthwhile.

Why builders push for more early

Understanding the motive helps in negotiation. Early money is cheap finance for the project. Before RERA, builders could collect a large share of the price through booking and early instalments and use it across projects. Section 13, together with the requirement in Section 4 that a large share of amounts realised from allottees be kept in a separate account for that project, was designed to stop buyers' money funding something other than their own building.

Many home loan lenders also ask for the registered agreement for sale before disbursing. A builder pressing you to pay 20 or 30 per cent from your own funds before registration may be avoiding that check. Saying politely that you will pay the balance once the agreement is registered is reasonable and is what the Act contemplates.

If the builder offers a discount for paying a large share upfront before registration, treat it with care. The discount is real, but so is the risk: your money is committed on terms not yet written down, and the saving can disappear in a single month of delay interest you would otherwise have been able to claim. Any upfront payment plan should still begin with a registered agreement.

Does Section 13 apply to every property purchase?

Section 13 places the obligation on a promoter, which under RERA broadly means the person who develops and sells units in a real estate project, including a builder, a development authority acting as developer, or a person selling plots. It is aimed squarely at sales by developers.

It does not govern a resale between two individuals. If you are buying a flat from its current owner, the advance you pay is a matter for your agreement to sell with that owner, and the usual protections are a careful title check, a written agreement and a modest token until the documents are verified. A separate guide on agreements to sell covers that situation.

Where a project claims to fall outside RERA registration, for example because it is below the size thresholds in Section 3, ask the builder to explain the basis in writing. A buyer in a genuinely exempt project still benefits from insisting on a registered agreement before paying a large share of the price, because the Registration Act and contract law protect a documented bargain far better than an allotment letter.

Red flags at booking

• A demand to pay beyond ten per cent within weeks, with the agreement promised after a construction milestone.
• A request for cash or for payment into an account not named for the project.
• Refusal to share a draft agreement before booking.
• A booking form that makes the booking amount entirely non-refundable from day one.
• No RERA registration number on the booking form, brochure or advertisement.
• Pressure to book within a day or two to secure a launch price or a preferred floor, before you have had time to read anything.