How RERA Penalties Work: What a Fine on Your Bengaluru Builder Means for You
A guide for Bengaluru buyers on RERA penalties: how they are linked to the estimated project cost, the limits for non-registration and other defaults, where penalty money goes, penalties on agents and allottees, and how to read a penalty order.
A headline says a Bengaluru builder has been fined a percentage of its project cost by the real estate regulator. Buyers in that project read it two ways. Some think the money will come to them. Others wonder whether the fine means anything at all for their delayed flat. Both reactions miss how penalties under the Real Estate (Regulation and Development) Act, 2016 actually work.
The Housing Ministry's FAQs on the Act explain the penalty structure in a series of short answers. This guide sets out how penalties are linked to a project's estimated cost, what each level of penalty applies to, where penalty money goes, and why a penalty on a builder is different from the compensation or interest a buyer can claim.
The short answer. According to the Ministry of Housing and Urban Affairs FAQs on RERA, penalties on promoters under Chapter VIII are based on the estimated cost of the real estate project, which section 2(v) defines to include land cost, taxes, cess, development and other charges. Failing to register can attract up to ten percent of that cost, and defaults on the registration application or other provisions up to five percent. Under section 76, penalties recovered go to the Consolidated Fund of India or the State account. The trade-off: a penalty punishes the builder, but buyers need their own claim to recover money.
How does RERA measure a penalty on a builder?
By reference to the estimated cost of the real estate project. The FAQs explain that section 2(v) defines this as the total cost involved in developing the project, including the land cost, taxes, cess, development and other charges. They add that the definition is necessary because Chapter VIII of the Act provides that penalties on promoters for violations are imposed based on that estimated cost.
Linking penalties to project cost means the potential penalty scales with the size of the project. A percentage of the cost of a large township is a very different figure from the same percentage of a small building. The FAQs set the caps as percentages; the actual penalty in any case is for the regulator or Appellate Tribunal to decide within those limits.
For a buyer, the figure that matters is usually not the penalty itself but what the regulator's finding says about the project. A penalty for failing to register, for example, tells you the project was marketed without the registration the Act requires. We looked at a penalty order against a Bengaluru developer in our earlier coverage of a five percent penalty on a Bengaluru developer.
What are the penalty limits for promoters?
The FAQs set out several tiers. For non-registration, section 59 makes a promoter who fails to register a project that must be registered liable to a penalty of up to ten percent of the estimated cost. If the promoter consistently defaults or does not comply with the regulator's directions on registration, the promoter is liable to an additional fine of up to ten percent of the estimated cost, or imprisonment of up to three years, or both.
For defaults on the registration application, section 60 provides a penalty of up to five percent of the estimated cost where a promoter defaults on matters under section 4. For contravening any other provision of the Act or its rules and regulations, section 61 provides a penalty of up to five percent.
Penalties sit alongside the regulator's wider powers. The FAQs explain that sections 35 to 38 empower the regulator to call for information, conduct investigations, issue interim orders or directions, and impose penalty or interest. A penalty is often one part of an order that also directs the promoter to take or stop some action.
Non-compliance with orders is treated separately. Under section 63, a promoter who fails to comply with the regulator's orders is liable to a penalty for every day of default, which may cumulatively extend up to five percent of the estimated cost. Under section 64, failure to comply with the Appellate Tribunal's orders attracts a daily penalty which may cumulatively extend up to ten percent, or imprisonment of up to three years, or both.
The table below summarises the promoter penalties as the FAQs describe them.
| Default by the promoter | Section | Maximum under the FAQs |
|---|---|---|
| Failing to register a project that must be registered | 59 | Up to 10 percent of estimated project cost |
| Continued default on registration | 59 | Further fine up to 10 percent, or up to 3 years' imprisonment, or both |
| Default on section 4 application matters | 60 | Up to 5 percent of estimated project cost |
| Contravening other provisions | 61 | Up to 5 percent of estimated project cost |
| Not complying with Tribunal orders | 64 | Daily penalty up to 10 percent, or up to 3 years' imprisonment, or both |
Does penalty money go to buyers?
No. The FAQs explain that, as per section 76, penalties recovered under the Act are deposited in the Consolidated Fund of India where the regulator was established by the Central Government, and in the State account where it was established by a State Government. Under section 75, grants, fees and interest accrued are credited to the Real Estate Regulatory Fund instead.
That is the key point for a buyer reading a penalty headline. A penalty is a sanction paid to the government, not a payout to the people affected. Money a buyer is owed comes through a different route: refunds, interest and compensation under sections 12, 14, 18 and 19, which the FAQs say the adjudicating officer decides, or interest and compensation ordered by the regulator.
Compensation is assessed on its own terms. The FAQs explain that, when deciding disputes under sections 12, 14, 18 and 19, the adjudicating officer must have regard to the amount of disproportionate gain or unfair advantage, the amount of loss, the repetitive nature of the default and other factors necessary in furtherance of justice. Those factors look at the buyer's loss and the builder's conduct, not at the size of any penalty.
The two can arise from the same facts. A builder that delays a project may face a penalty for breaching the Act and, separately, orders to pay interest or refunds to buyers. A buyer who wants money back needs to file or join a complaint, rather than wait for a penalty to filter down.
Do agents and buyers face penalties too?
Yes, on a different base. For real estate agents, the FAQs explain that section 62 makes an agent who fails to register liable to a penalty of up to ten thousand rupees for every day of default, which may cumulatively extend up to five percent of the cost of the plot or apartment whose sale the agent facilitated. Under sections 65 and 66, an agent who fails to comply with orders of the regulator or Appellate Tribunal faces daily penalties up to five and ten percent of that cost respectively, with up to one year's imprisonment possible for Tribunal orders.
Allottees are covered as well. The FAQs explain that, under section 67, an allottee who fails to comply with the regulator's orders faces a daily penalty that may cumulatively extend up to five percent of the plot or apartment cost, and under section 68, up to ten percent or up to one year's imprisonment, or both, for failing to comply with the Appellate Tribunal's orders.
The FAQs also explain that, under section 70, offences punishable with imprisonment may be compounded on terms set by the appropriate Government's rules, with any fine in lieu of imprisonment not exceeding the maximum fine for that offence.
How should a Bengaluru buyer read a penalty order?
As information, and as a prompt to check your own position. Unpaid amounts can be recovered; the FAQs explain that interest, penalty or compensation imposed under the Act and not paid becomes recoverable as an arrear of land revenue, a route we covered in our guide to what happens when a RERA order is not paid. Whether your project is a development such as Prestige Falcon City on our project pages or a smaller one, these steps help.
- Find the order on the regulator's website and read the findings, not just the amount.
- Note which section the penalty was imposed under, such as 59, 60, 61 or 63.
- Check whether the finding relates to your project phase and your flat.
- Remember that the penalty goes to the government, not to buyers.
- Decide whether you have your own claim for refund, interest or compensation.
- Collect your agreement, receipts and correspondence before filing.
- Take legal advice on whether to file a complaint or join one already pending.
A penalty order can strengthen a buyer's complaint, because it records a finding by the regulator. It does not replace the complaint. The buyer still has to ask for the remedy they want.
What do Bengaluru buyers ask about RERA penalties?
How are RERA penalties on builders calculated?
The Housing Ministry's FAQs say Chapter VIII penalties on promoters are based on the estimated cost of the real estate project, which section 2(v) defines as the total cost of developing it, including land cost, taxes, cess, development and other charges. The caps are set as percentages of that cost.
What is the penalty for selling a project without RERA registration?
Under section 59, as the Housing Ministry's FAQs explain, a promoter who fails to register a project that must be registered is liable to a penalty of up to ten percent of the estimated project cost, with a further fine of up to ten percent or imprisonment for continued default.
Do buyers get the penalty money paid by a builder?
No. The Housing Ministry's FAQs explain that under section 76, penalties recovered under the Act go to the Consolidated Fund of India or the State account. Buyers recover money through their own claims for refund, interest or compensation under the Act.
Can a buyer be penalised under RERA?
Yes. The Housing Ministry's FAQs say an allottee who fails to comply with the regulator's orders faces a daily penalty up to five percent of the unit cost under section 67, and up to ten percent or imprisonment for Tribunal orders under section 68.
Last updated 2026-10-19. PropNewz Team.
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