Builder Loans and Unpaid Dues: How RERA Section 11 Shields Bengaluru Buyers
Section 11(4) of the RERA Act makes the promoter pay project outgoings until possession, protects buyers against mortgages created after the agreement for sale, and limits cancellation. Here is how a Bengaluru buyer can use those rules.
Most Bengaluru buyers learn about a builder's project loan the hard way: a line in a bank's encumbrance search, a notice on a site gate, or a neighbour's question in a WhatsApp group about why property tax for the land has not been paid. By then the buyer has signed an agreement for sale and paid a substantial share of the price.
The Real Estate (Regulation and Development) Act, 2016 anticipates exactly this situation. Section 11(4) lists the promoter's continuing obligations, and two clauses deal directly with money: the promoter must pay all outgoings until possession is handed over, and must not mortgage or create a charge on your flat after executing the agreement for sale. This guide reads those clauses from the Act and explains how a Bengaluru buyer can check and use them.
The short answer. Under Section 11(4)(g) of the RERA Act, the promoter must pay all outgoings it has collected from buyers, including land cost, ground rent, municipal taxes, water and electricity charges, maintenance and mortgage loans and interest related to the project, until it transfers physical possession, and remains liable for unpaid amounts even afterwards. Under Section 11(4)(h), after executing an agreement for sale, the promoter must not mortgage or create a charge on that flat, and any such mortgage does not affect your right and interest. The trade-off: these protections work best for buyers with a registered or documented agreement and a clean paper trail, so the burden of keeping records stays with you.
What does RERA Section 11(4)(g) say about outgoings?
Section 11(4)(g) of the Real Estate (Regulation and Development) Act, 2016 in its Gazette text says the promoter shall pay all outgoings until it transfers the physical possession of the real estate project to the allottee or the association of allottees, which it has collected from the allottees for the payment of outgoings.
The clause then lists what outgoings include: land cost, ground rent, municipal or other local taxes, charges for water or electricity, maintenance charges, mortgage loan and interest on mortgages or other encumbrances, and other liabilities payable to competent authorities, banks and financial institutions related to the project.
The proviso closes a common gap. Where a promoter fails to pay any of the outgoings collected from allottees, or any liability, mortgage loan and interest, before transferring the project, the promoter continues to be liable even after the transfer of the property to pay those outgoings and any penal charges to the authority or person to whom they are payable, and is liable for the cost of any legal proceedings taken for them.
For a buyer, the practical meaning is simple. If you paid amounts towards taxes, charges or maintenance as part of your payment plan, the law expects the promoter to pass them on, and leaves the promoter on the hook if it does not.
Can a builder mortgage your flat after the sale agreement?
Section 11(4)(h) answers this directly. After the promoter executes an agreement for sale for any apartment, plot or building, it shall not mortgage or create a charge on that apartment, plot or building. If any such mortgage or charge is made or created, then, notwithstanding anything in any other law in force, it shall not affect the right and interest of the allottee who has taken or agreed to take that unit.
Two points follow. First, the protection is tied to the agreement for sale, so the date and execution of your agreement matter. Second, the clause protects your right and interest in the unit; it does not, on its face, deal with loans the promoter took on the land or project before your agreement.
That second point is why an encumbrance search still matters before you sign. A project loan created before your agreement is a fact you want to know, and our guide to the encumbrance certificate for Bengaluru buyers explains how to read one. Ask the promoter whether the project lender will issue a no objection letter or release for your flat.
Which other promoter duties in Section 11(4) protect buyers?
Clauses (g) and (h) sit inside a longer list. The table below sets out the duties in Section 11(4) and Section 11(5) that most often matter to a Bengaluru buyer.
| Clause | What the promoter must do | Why it matters to you |
|---|---|---|
| 11(4)(a) | Remain responsible for obligations under the Act and the agreement until conveyance of all units | The promoter's duties do not end at your handover; defect liability continues after conveyance |
| 11(4)(b) | Obtain the completion or occupancy certificate and make it available | You can ask for the certificate rather than rely on a possession letter |
| 11(4)(d) | Provide and maintain essential services on reasonable charges until the association takes over | Maintenance before handover to the association is the promoter's job |
| 11(4)(g) | Pay all outgoings collected from allottees until physical possession is transferred | Taxes, charges and project loan dues you funded must be paid on |
| 11(4)(h) | Not mortgage or charge your unit after the agreement for sale | A later mortgage does not affect your right and interest |
Section 11(5) adds a further safeguard: the promoter may cancel an allotment only in terms of the agreement for sale. If you are aggrieved by a cancellation that is not in accordance with the agreement, unilateral and without sufficient cause, the proviso allows you to approach the Authority for relief.
Two other clauses in the same list are worth knowing. The proviso to Section 11(4)(a) says the promoter's responsibility for structural and other defects, for the period in Section 14(3), continues even after conveyance deeds for all units are executed. And Section 11(4)(e) requires the promoter to enable the formation of an association of allottees under applicable laws; where there is no local law, the association must be formed within three months of a majority of allottees having booked. An association gives buyers a collective voice when questions about project loans and unpaid dues arise, so it helps to know when one should exist.
How can a Bengaluru buyer check a project's loans and dues?
Start with the encumbrance position. A search covering the project land will show registered mortgages and charges, and comparing their dates with your agreement for sale tells you which side of Section 11(4)(h) they fall on. Our explainer on checking for pending litigation before you buy covers the related court records search.
Next, ask the promoter about the project lender. Ask for the name of the lender, whether units are being released by a no objection letter, and whether the lender's approval is needed for your sale. Ask the promoter to explain that process in writing.
Then look at what you have paid. If your payment plan includes deposits or charges for property tax, electricity, water or maintenance, keep the receipts and ask the promoter, in writing, for confirmation that those amounts have been paid to the authorities. If you are comparing large projects, such as the one in our review of Prestige City on Sarjapur Road, ask each promoter for a clear schedule of every such charge.
What can you do if the promoter has not paid?
Write first. Ask the promoter to confirm, with receipts, that the outgoings you funded have been paid, and that no mortgage or charge has been created on your unit after your agreement. Keep the request and the reply.
If the answer is unsatisfactory, the Act gives you a forum. Section 31(1) allows any aggrieved person to file a complaint with the Authority or the adjudicating officer for any violation or contravention of the Act or the rules and regulations against a promoter. In Karnataka, that is the state's real estate regulatory authority for registered projects.
The proviso to Section 11(4)(g) also matters after handover. Because the promoter remains liable for unpaid outgoings and penal charges even after transferring the property, a demand from an authority for dues that arose before possession should be directed back to the promoter, with copies of your receipts.
What should you check before and after signing?
A short routine covers both sides of Section 11(4). Use this checklist:
- Get an encumbrance search on the project land before you sign the agreement for sale.
- Ask the promoter to name the project lender and explain how units are released.
- Ask whether a no objection letter from the lender will be issued for your unit.
- Keep the executed agreement for sale and note its date carefully.
- Keep receipts for every amount paid towards taxes, utilities and maintenance.
- Ask in writing for confirmation that those outgoings were paid to the authorities.
- Direct any pre-possession dues demand back to the promoter with your receipts.
None of this requires you to audit the builder. It requires you to keep the documents that let the Act's protections apply to your flat.
What do Bengaluru buyers ask about builder loans and dues under RERA?
Can a builder take a loan against my flat after I sign the sale agreement?
Section 11(4)(h) of the RERA Act says that after executing an agreement for sale, the promoter shall not mortgage or create a charge on that unit. If it does, the mortgage or charge shall not affect the right and interest of the allottee who has taken or agreed to take the unit.
Who pays property tax and utility dues before possession?
Section 11(4)(g) requires the promoter to pay all outgoings collected from allottees, such as land cost, ground rent, municipal taxes, water and electricity charges and maintenance, until physical possession is transferred. The promoter stays liable for unpaid amounts and penal charges even after the transfer.
Can a builder cancel my allotment?
Section 11(5) says the promoter may cancel an allotment only in terms of the agreement for sale. If a cancellation is not in line with the agreement, is unilateral and is without sufficient cause, the allottee may approach the Authority for relief. Keep your agreement and payment records ready.
Does Section 11(4)(h) cover project loans taken before my agreement?
The clause bars mortgages or charges on your unit after the promoter executes your agreement for sale. It does not, on its face, address loans created before that date, which is why an encumbrance search and a lender's no objection letter for your unit are worth getting before you sign.
Last updated 2026-10-17. PropNewz Team.
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