In a measure aimed at safeguarding homebuyers and reducing their financial exposure during construction, the Maharashtra government plans to restrict developers from collecting the entire property consideration before the project receives final completion registration. Under the proposal, developers would be allowed to collect up to 80% of the total consideration when executing the Agreement for Sale (AFS), with the remaining 20% payable upon project completion and final registration.
How will things change for homebuyers?
Maharashtra Revenue Minister Chandrashekhar Bawankule recently said the state was considering a legal change allowing developers to collect only 75% to 80% of the property’s total value at the agreement-to-sell stage, with the remaining 20% paid at the time of final registration.
“At the time of agreement for sale, developers will be allowed to collect not more than 75% to 80% of the payment from the homebuyers. The remaining 20% will be collected from the homebuyers at the time of final registration. We are going to call for final registration going further, and we plan to amend the Registration Act. It will no longer be the case that registration is completed and money collected from homebuyers, while there is no assurance that construction will be completed,” Bawankule said in a video posted from his X account.
What is the current provision?
Under Section 13(1) of the Real Estate Regulatory Act (RERA) Act, 2016, a promoter cannot accept more than 10% of the cost of an apartment, plot or building as an advance/application fee from an allottee without first entering into and registering a written Agreement for Sale.
The MahaRERA has also specifically clarified in its FAQs that even if a buyer voluntarily agrees to pay more than 10% without registering the agreement, the promoter cannot accept such payment. Therefore, a registered Agreement for Sale is mandatory once the amount collected exceeds the 10% threshold.
However, neither the RERA Act nor MahaRERA currently prescribes a maximum cap on the total amount a developer can collect from an allottee during the construction period, provided the payments comply with the registered Agreement for Sale and other applicable provisions.
Why is the Maharashtra government putting a cap on developers?
According to Maharashtra government officials, the proposed change aims to address a long-standing concern among homebuyers, particularly those purchasing under-construction homes, who can end up paying a substantial portion of the apartment’s cost well before receiving possession. Under the proposed framework, the buyer would retain at least 20% of the consideration until the property reaches final registration.
Bawankule had said the proposed measure was intended to safeguard flat buyers and reduce their financial exposure during the construction period.
Maharashtra government officials said that the proposal, however, should not be interpreted as an immediate rule applicable to developers. The government is considering a change in the law, and the precise wording, applicability and implementation mechanism will therefore depend on the legislation that the state eventually introduces and gets approved in the state assembly.
