The Trap of Hefty Advance Payments
Before the enactment of the Real Estate (Regulation and Development) Act, 2016 (RERA), many homebuyers were forced to pay hefty advance amounts without any legal guarantee of project completion. Builders would routinely demand 20% to 30% of the property value upfront, leaving buyers financially exposed if the project was stalled or abandoned. RERA has put a strict end to this practice.
The Strict 10% Rule Under Section 13
To protect the financial interests of buyers, Section 13 of the RERA Act establishes a clear and unbreakable sequence for property transactions.
Under Section 13, a promoter cannot accept more than 10 percent of the cost of the apartment, plot, or building as an advance payment or application fee without first entering into a written agreement for sale with the buyer. Furthermore, the law mandates that this written agreement for sale must be registered under the applicable registration law.
Why the Sequence Matters
This law forces the moment of contractual commitment—with all terms, possession dates, and specifications disclosed—to arrive before your money crosses the 10 percent line. By capping the advance collection at 10% and forcing registration, the law ensures the promoter's obligations crystallize early in a document that courts can enforce.
What if the Builder Violates this Rule?
If a developer demands a higher booking amount before signing a contract, they are operating in direct violation of real estate laws.
- Unregistered Agreements Do Not Count: A signed or notarized but unregistered agreement does not satisfy Section 13. Paying beyond 10 percent against such a document surrenders the protection the law built for you.
- Your Right to Complain: If the promoter violates Section 13, the buyer has the right to file a formal complaint with the RERA authority to halt the illegal demands.
As a smart homebuyer, you must calculate the total money out of your pocket against the registered agreement's existence. If the sum demanded exceeds 10 percent of the total price before registration, it violates the law.