How RERA Protects an Under-Construction Home Buyer in Karnataka

A couple who booked an under-construction flat a few years before RERA watched their builder take their money, stall the project, and quietly move funds to another site, leaving them with neither a home nor a clear way to get their savings back. Stories like that, once distressingly common across Indian cities, are exactly what the Real Estate Regulation Act was built to prevent, and largely why it was brought in at all. For a Bengaluru buyer weighing an under-construction home today, RERA is not fine print, it is the set of protections that decide how safe your money really is while a home you have paid for is still being built.

The short answer. RERA gives an under-construction buyer real protections: most of your money must sit in a project escrow account, the sale must be on carpet area, the builder must commit to a possession date with interest payable on delay, and you have a defined complaint route, according to this guide to RERA buyer rights. The trade-off: these protections apply only to registered projects, so verifying registration before you pay is the step that unlocks all the rest.

Why does RERA matter for an under-construction buyer?

Because an under-construction purchase is an act of trust: you pay in stages for a home that does not yet exist, relying on the builder to deliver what was promised, on time and as described. Before RERA, that trust was often abused, with delays, fund diversion and vague area calculations leaving buyers exposed. RERA, the Real Estate Regulation Act, replaced much of that uncertainty with enforceable rules that a builder must follow rather than merely promise, and a strengthened enforcement layer described as RERA 2.0 was introduced in 2026 to tighten and better enforce them further.

For a buyer, the practical effect is that many of the old risks now carry legal remedies. Your money is better protected, the area you pay for is defined, the possession date is committed, and there is a proper forum to complain to, with the power to award compensation, if the builder falls short. Knowing these rights in advance turns you from a hopeful customer into a genuinely informed one, which is exactly the position to be in when committing to a large, staged payment spread over the years it takes to build a project.

How does the 70 percent escrow rule protect your money?

It ring-fences most of what you pay. Under RERA, a large share of the amounts collected from buyers for a project, commonly 70 percent, must be kept in a separate escrow account and used only for that project's land and construction cost, as the source above explains. The builder cannot freely siphon your money into another venture, which is the very mechanism that sank so many pre-RERA projects, where money paid for one tower quietly financed land or launches elsewhere while the buyers who paid it waited in vain.

The strengthened rules add third-party audits and regular fund reporting, making fund diversion much harder to hide from buyers and regulators alike. For you, the takeaway is that your payments are meant to stay tied to the project you are buying into, drawn down in stages as construction actually progresses and is certified. It is not a guarantee against every problem, but it materially lowers the risk that your money quietly funds someone else's project while the one you are counting on stalls for want of cash.

What other protections does RERA give you?

Three stand out alongside the escrow rule: sale on carpet area, a committed possession date, and a defects liability period. RERA requires apartments to be sold on carpet area, the usable floor area within your walls, rather than an inflated super built-up number, which makes prices comparable across projects. The agreement must specify a possession date, and a delay entitles you to compensation, typically interest for each month of delay, or the option of a refund of your money with interest for unreasonable delays. After handover, a defects liability period, commonly five years, obliges the builder to fix structural defects at no cost. The table summarises these.

Because the sale is on carpet area, it helps to understand exactly what that means, which our guide to carpet area versus super built up area explains. Together these protections cover your money, your space, your timeline and the quality of what you receive, which are the four things most likely to go wrong in an under-construction purchase.

Why does registration come first?

Because the protections attach to registered projects. RERA requires projects above a threshold size to be registered with the state authority, and it is that registration which brings the escrow rule, the carpet-area requirement and the rest into force for your purchase. A project that is not registered when it should be is a serious red flag, and buying into it can leave you outside the very framework designed to protect you.

This is why verifying registration is the first step, not an afterthought. On the Karnataka RERA portal you can confirm a project is registered and read its declared details before you pay a rupee, and our guide to verifying a Karnataka RERA project walks through how. Only once you have confirmed registration for yourself do the other protections become something you can actually rely on in a dispute.

What can RERA not do for you?

RERA is powerful, but it is not a magic shield, and treating it as one is its own risk. It reduces the chance of fund diversion and gives you remedies for delay, yet it cannot force a genuinely troubled builder to conjure money that no longer exists, and recovering a refund with interest can still take time and persistence through the complaint process. Nor does registration certify that a project is a good buy or a fair price, only that it is registered and has declared certain details, so a poor project can still be registered and a fair-looking price can still be too high for what you get.

Some categories also fall outside its full reach, such as very small projects below the registration threshold and, in practice, resale transactions between individuals, where the escrow and possession protections do not apply in the same way. So RERA should sit alongside your own due diligence, not replace it. Verify the title, check the approvals, read the agreement line by line, and treat RERA as a strong foundation on which you still build your own careful checks rather than a substitute for the diligence every large purchase deserves.

How should a buyer use RERA in practice?

Work through this checklist for any under-construction purchase, so the protections actually work for you.

1. Confirm the project is registered on the Karnataka RERA portal before paying.
2. Check the committed possession date written into your agreement.
3. Ensure the price is quoted and agreed on carpet area.
4. Note that most of your payments should sit in the project's escrow account.
5. Keep every payment receipt and the registered agreement safely.
6. Know that a delay entitles you to interest or a refund with interest.
7. Use the state RERA complaint route if the builder defaults.

If you are considering a registered project such as Concorde Sienna, look up its RERA registration number and read the declared possession date and project details for yourself rather than relying on the sales pitch. The registration record is the version that counts if anything is ever disputed, and it costs nothing to read before you commit.

What is the takeaway for a Bengaluru buyer?

RERA has shifted the balance toward the buyer, but only for those who use it. Verify registration first, insist on carpet-area pricing and a written possession date, understand that most of your money is meant to stay in the project's escrow account, and keep every document. If the builder defaults, the state RERA route gives you a real remedy, before an adjudicating officer with the power to order compensation, rather than years lost in ordinary courts. Treated as your checklist rather than the builder's paperwork, RERA is the strongest protection an under-construction buyer has. The buyers who benefit most are simply the ones who read the registration, keep their paperwork and know their rights before a problem arises, rather than discovering them only after a project has slipped.

What is the 70 percent escrow rule under RERA?

Under RERA, a large share of the money collected from buyers for a project, commonly 70 percent, must be kept in a separate escrow account and used only for that project's land and construction. It stops a builder from diverting your money to other ventures, which reduces the risk of a project stalling for lack of funds.

Does RERA require sale on carpet area?

Yes. RERA requires apartments to be sold on carpet area, which is the usable floor area within your walls, rather than an inflated super built-up figure. This makes the per square foot price genuinely comparable across projects and ensures you are paying for space you can actually use rather than a share of common areas.

What happens if the builder delays possession?

The agreement must specify a possession date, and if the builder misses it you are generally entitled to compensation, typically interest on the money you have paid for each month of delay. For an unreasonable delay you can also withdraw and seek a refund with interest. The exact rate follows the prescribed formula.

How do I complain against a builder under RERA?

You can file a complaint with your state RERA authority, which routes it to an adjudicating officer for a decision and any compensation. This route is designed to be faster and cheaper than ordinary courts. Keep your registered agreement and payment receipts, since they are the evidence your complaint will rest on.

Last updated 2026-09-21. PropNewz Team.