Your Builder's Project Loan and Your Flat: RERA Section 11(4)(h) for Bengaluru Buyers

A Bengaluru tower may be built with a construction loan from a bank or a finance company, secured on the project. For a buyer who has just signed an agreement for sale, that raises an uncomfortable thought: if the builder borrows against the building, could the lender one day claim the flat you are paying for? The RERA Act addresses this in one clause, Section 11(4)(h), and it is worth knowing exactly what it says before you sign, and what it does not.

The short answer. Section 11(4)(h) of the Real Estate (Regulation and Development) Act, 2016 says that after the promoter executes an agreement for sale for any apartment, it shall not mortgage or create a charge on that apartment, and that if any such mortgage or charge is made or created, then, notwithstanding anything in any other law, it shall not affect the right and interest of the allottee who has taken or agreed to take it. Section 4(2)(l)(B) separately requires the promoter to declare on affidavit whether the land is free from encumbrances or to give their details. The trade-off: the Act protects your flat against charges created after your agreement, but a mortgage that already existed before you signed is a different situation, so the time to check is before the agreement, not after.

What does Section 11(4)(h) say?

Two things. First, a prohibition: 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. Second, a protection: if any such mortgage or charge is made or created, then, notwithstanding anything contained in any other law for the time being in force, it shall not affect the right and interest of the allottee who has taken or agreed to take that apartment, plot or building.

The timing in the clause is precise. It speaks of what happens after the agreement for sale is executed. That makes the date of your registered agreement important, because it marks the point from which the clause protects your unit.

The phrase "notwithstanding anything contained in any other law" gives the protection weight against other laws that might otherwise govern a lender's rights. It is the Act's way of putting the allottee's interest ahead of a later charge on the same unit.

What about a project loan taken before you signed?

That is where the declarations matter. Section 4(2)(l)(B) requires the promoter, in its registration application, to file a declaration supported by an affidavit stating that the land is free from all encumbrances, or giving details of the encumbrances on the land, including any rights, title, interest or name of any party in or over the land.

So a mortgage that existed when the project was registered should be on record in the promoter's declaration. Section 11(1) requires the promoter to enter the details provided under Section 4(2) on its web page on the Authority's website for public viewing. Read that declaration before you sign the agreement for sale.

If the declaration shows a mortgage, ask the builder and the lender what arrangement exists for your unit, for example how and when your flat will be released from the charge. Get the answer in writing. Our guide to searching for hidden mortgages covers registry checks you can run alongside the RERA page.

Who pays the project loan, and until when?

The promoter. Section 11(4)(g) says the promoter shall pay all outgoings until it transfers physical possession of the project to the allottees or the association, which it has collected from allottees for the payment of outgoings. The clause lists outgoings to 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 adds that where any promoter fails to pay all or any of the outgoings collected from allottees, or any liability, mortgage loan and interest, before transferring the project, it shall continue to be liable, even after the transfer, to pay them and any penal charges to the authority or person to whom they are payable, and to bear the cost of any legal proceedings taken for them.

We covered outgoings and mortgages together in our earlier explainer on builder mortgages and outgoings under Section 11. This piece focuses on the protection for your individual unit and the checks before you sign.

How does the separate project account fit in?

It is the other half of the money picture. Section 4(2)(l)(D) requires seventy percent of the amounts realised from allottees to be deposited in a separate account in a scheduled bank to cover the cost of construction and the land cost, and used only for that purpose. Withdrawals are to be in proportion to the percentage of completion, certified by an engineer, an architect and a chartered accountant in practice.

For a buyer, the two rules work together. The separate account is meant to keep your payments tied to building the project. Section 11(4)(h) is meant to keep your unit free of charges created after your agreement. Neither replaces your own checks, but both give you something specific to ask about.

If the project's quarterly updates on the RERA page show slow progress while demand letters keep coming, ask the builder how withdrawals from the separate account are being certified. That question sits squarely within what the Act requires.

What can you do if a lender acts against your flat?

Rely on the clause and your documents. If a lender takes steps against a unit covered by a registered agreement for sale, Section 11(4)(h) says a mortgage or charge created after that agreement shall not affect the allottee's right and interest. Your registered agreement, its date and your payment records are the evidence of that right and interest.

Write to the lender and the builder, citing the clause and attaching your agreement. Section 31(1) lets any aggrieved person file a complaint with the Authority or the adjudicating officer for any violation of the Act. Section 18(3) makes the promoter liable to pay compensation for failing to discharge any other obligation under the Act or the agreement for sale.

A situation involving a lender and a builder's loan can turn technical quickly, especially where the charge predates your agreement. Take legal advice on your specific facts before you respond to any lender notice.

Does the protection carry over if you buy the flat on resale?

The Act's definition of allottee suggests it can. Section 2(d) defines an allottee as the person to whom an apartment has been allotted, sold or otherwise transferred by the promoter, and includes the person who subsequently acquires the allotment through sale, transfer or otherwise. A buyer who takes over an under-construction flat from the original allottee steps into that definition.

The practical point is the date. The protection in Section 11(4)(h) runs from the execution of the agreement for sale, so ask the seller for the original registered agreement and check its date against any charge you find in a registry search. Make sure the transfer is recorded with the promoter, and ask the promoter to confirm in writing that no charge has been created on the unit since the original agreement.

What should Bengaluru buyers check before signing?

Use this checklist before you sign an agreement for sale:

1. Read the promoter's encumbrance declaration on the RERA project page.
2. Ask whether the project has a construction loan and from which lender.
3. Ask in writing how your unit will be released from any existing charge.
4. Run an encumbrance and registry search on the land and your unit.
5. Register your agreement for sale and keep its date and copy safe.
6. Pay through traceable channels and keep every receipt and bank record.
7. Watch quarterly updates for progress against the demands you receive.

Section 11(4)(h) gives a buyer of an under-construction flat a specific protection. It works best when the buyer has done the checks that make it easy to rely on.

Bengaluru buyer FAQs on builder mortgages and your flat

Can a builder mortgage my flat after I sign the agreement for sale?

Section 11(4)(h) of the RERA Act says that after the promoter executes an agreement for sale for an apartment, it shall not mortgage or create a charge on that apartment. If such a mortgage or charge is created, it shall not affect the right and interest of the allottee.

Does a later mortgage affect my rights in the flat?

Section 11(4)(h) of the RERA Act says that if a mortgage or charge is made or created on the apartment after the agreement for sale, then, notwithstanding anything in any other law for the time being in force, it shall not affect the right and interest of the allottee who has agreed to take it.

Where can I see whether the project land is mortgaged?

Section 4(2)(l)(B) of the RERA Act requires the promoter to declare on affidavit that the land is free from all encumbrances or to give details of the encumbrances. Section 11(1) requires these details on the project's web page on the Authority's website, so check the K-RERA portal.

Who pays the builder's project loan?

Section 11(4)(g) of the RERA Act says the promoter shall pay all outgoings it collected from allottees, including mortgage loan and interest, until physical possession is transferred, and that if it fails to pay them before the transfer, it continues to be liable for them even after the transfer.

Last updated 2026-10-23. PropNewz Team.