K-RERA Section 38 Defaulter Watch May 2026: 440+ Bengaluru Projects on Notice

K-RERA's Section 38(1) read with Section 60 of the Real Estate (Regulation and Development) Act is the strongest accountability mechanism the Karnataka regulator has executed in five years, and the May 2026 enforcement cycle is the first one buyers can actually use as a pre purchase due diligence filter. The authority had already levied roughly Rs 40 crore on 440 Bengaluru projects for FY22-23 annual audit non submission. The fresh FY24-25 Form 7 deadline of 31 December 2025 is now past, the January 2026 circular on Section 38(1) plus Section 61 penalties for late quarterly progress reports is in force, and the April 2026 action window against FY23-24 defaulters is operational. For Bengaluru buyers committing to a new project booking in the next 60 days, the K-RERA defaulter watch is the single highest leverage check you can run, and most buyers still skip it. This is what the verification actually looks like and why it matters.

What is K-RERA Section 38(1) and why does it matter for buyers?

Section 38(1) of the RERA Act gives the regulatory authority the power to investigate a project, summon documents and witnesses, and impose penalties for non compliance. Read with Section 60, it gives K-RERA the explicit authority to impose annual penalties on promoters who fail to file mandatory project disclosures, including the Form 7 annual audit report and the quarterly progress reports (QPRs). Section 61 covers the residual non compliance penalty schedule. The structural reason this matters for buyers is that promoters who skip Form 7 are usually skipping it because the audit would reveal a cash flow or construction progress problem. A defaulter list flag is therefore not just a regulatory infraction. It is a leading indicator of project delivery risk that often shows up 12 to 24 months before the construction problem surfaces visibly.

What is the FY24-25 Form 7 penalty schedule in 2026?

K-RERA's penalty schedule for FY24-25 Form 7 non submission past the 31 December 2025 deadline is graduated by project size. Projects under Rs 25 crore face a penalty of Rs 20,000. Projects between Rs 25 and 50 crore face Rs 25,000. Projects in higher tiers face Rs 50,000 and progressively scaled amounts, with the maximum penalty in extreme cases reaching 5 percent of estimated project cost. The penalty applies cumulatively. A promoter who has skipped both the FY23-24 and FY24-25 audits faces stacked penalties plus the residual Section 38(1) discretion to escalate. The 0.5 percent of project value penalty applied to the 440 FY22-23 defaulters demonstrated that K-RERA is willing to apply the percentage based escalation, not just the flat fee, when the non submission pattern is repeat.

How many Bengaluru projects are currently on the K-RERA defaulter list?

The FY22-23 defaulter list covered roughly 440 Bengaluru projects on which K-RERA levied approximately Rs 40 crore in cumulative penalties. As of May 2026, the FY23-24 action window is operational, with penalty action initiated from 1 April 2026 against promoters who failed to file the FY23-24 annual audit report between 20 January and 31 March 2026. The FY24-25 list, with the 31 December 2025 deadline now past, is the next layer building. The combined defaulter universe across the three financial years is materially larger than 440 projects when stacking is included. K-RERA publishes the cumulative list on rera.karnataka.gov.in, and buyers should treat any project name appearing on this list as requiring elevated due diligence before booking.

How does a buyer actually check a project's K-RERA status before booking?

The check runs in four steps and takes roughly 30 minutes on rera.karnataka.gov.in. Step one, navigate to the Project Information section and search for the project name or RERA registration number. Step two, on the project detail page, locate the Annual Audit section and confirm that the FY24-25 Form 7 has been filed, with a filing date on or before 31 December 2025. Step three, scroll to the Quarterly Progress Reports section and verify that all four QPRs for FY25-26 have been filed within their respective deadlines (typically 30 days post quarter end). Step four, check the Notices and Orders section for any Section 38(1), Section 60 or Section 61 orders against the promoter or the specific project, and check the Revenue Recovery defaulter list for the promoter entity name. A project that fails any of these four steps does not necessarily mean the buyer should walk away, but it does mean the buyer should require written explanation and timeline commitments from the seller before proceeding.

What is the Section 60 escalation pathway?

Section 60 of the RERA Act provides for penalty escalation when a promoter does not comply with the authority's orders. The schedule starts at the fixed amounts cited under Section 38(1), but Section 60 allows daily compounding of the penalty until compliance. A small Rs 20,000 base penalty on a Rs 24 crore project can compound to Rs 6 lakh or more over six months if the promoter continues to ignore the order. The 5 percent of project cost cap is the upper bound, and K-RERA has shown willingness to push toward this ceiling in repeat default cases. The 440 FY22-23 defaulters faced a 0.5 percent of project value penalty, which on Rs 100 crore worth of cumulative project value already produced Rs 40 crore in regulatory revenue. The escalation potential under Section 60 is therefore significant and provides K-RERA with both deterrent and revenue rationale.

Which Bengaluru projects sit cleanly clear of the defaulter list?

Large listed builder projects with strong audit and disclosure track records typically file Form 7 and QPRs on time, partly because their promoter entities are publicly accountable to shareholders and partly because their compliance teams are larger. Prestige Garden Breez on Sarjapur Road, Prestige Devanahalli at Poojanahalli, Sobha Altair on Sarjapur Road, and Brigade Red Earth Devanahalli are examples of large listed builder projects whose RERA filings buyers can verify on rera.karnataka.gov.in before booking. The verification exercise is the same whether the builder is listed or unlisted. A clean Form 7 and QPR record on rera.karnataka.gov.in is the standard, not a builder size proxy.

What is the buyer side remedy if a booked project is later flagged?

If a buyer has already booked into a project and the promoter is subsequently flagged on the K-RERA defaulter list, three remedies are available. The first is to file a complaint under Section 31 of the RERA Act, which gives K-RERA the authority to issue compliance orders against the promoter, impose penalties, and in extreme cases order refund with interest. The second is to request the project's revised Form 4 disclosure, which would surface any construction progress delay or escrow fund leakage that the defaulter status may reflect. The third, in cases where the regulator suspends the project's RERA registration, is to file for refund under the suspension order, which K-RERA can direct the promoter to pay within 45 days. Each of these remedies works better when the buyer has documented the booking and payments cleanly from day one.

Are there false positives on the defaulter list?

Occasionally yes. Some projects appear on the FY22-23 or FY23-24 defaulter lists due to filing system errors rather than actual non submission, particularly during the K-RERA portal migration of late 2024 which created some transitional filing gaps. A promoter whose project appears on the defaulter list should be willing and able to produce documentary evidence of timely filing (the filing acknowledgement receipt, the audit report stamped copy, and the regulatory correspondence). If a promoter cannot produce this evidence within 48 hours of a buyer request, the defaulter list flag should be treated as genuine. False positives exist, but they are the exception, and the burden of proof sits cleanly with the promoter.

What does the January 2026 QPR penalty circular add?

The January 2026 circular extended Section 38(1) read with Section 61 to cover late quarterly progress reports, with a separate penalty schedule. The QPR penalty is meaningfully smaller than the Form 7 penalty in absolute terms but applies on a per quarter basis, so cumulative QPR non compliance can stack to material amounts over a financial year. The structural significance for buyers is that K-RERA now has both an annual (Form 7) and a quarterly (QPR) enforcement cadence, which makes the regulatory feedback loop on construction progress meaningfully tighter than it was in 2024 or earlier. For projects with possession dates in 2026 or 2027, this is the first enforcement cycle where QPR cadence is materially auditable as a delivery risk signal.

What should buyers do in the next 30 days?

Three concrete moves. First, run the four step rera.karnataka.gov.in check on every project on your shortlist before any further conversation with the seller, including the Form 7 status, the QPR cadence, the Notices and Orders section, and the Revenue Recovery defaulter list. Second, ask the seller in writing to confirm the project's K-RERA registration number, the most recent Form 7 filing date, and the most recent QPR filing date, and disqualify any project where the seller cannot answer this in 48 hours. Third, when finalising the agreement, include a clause that links any future K-RERA suspension or order against the project to refund with interest within 45 days, which gives the buyer a documented remedy if the regulatory profile deteriorates post booking. The 30 minutes of verification work this requires is the single highest leverage protective check a Bengaluru buyer can run in 2026, and the May 2026 enforcement cycle has finally made the data robust enough to act on.

By PropNewz Team