Has the Builder Pledged Your Flat? RERA Section 11(4)(h) for Mumbai Buyers
Section 11(4)(h) of the RERA Act says a promoter shall not mortgage or create a charge on a flat after executing the agreement for sale, and that any such charge shall not affect the allottee's rights. This guide covers the encumbrance declaration under Section 4(2)(l)(B), the outgoings rule in Section 11(4)(g) and the steps Mumbai buyers can take.
A Mumbai buyer signs and registers an agreement for a flat on the 18th floor of a new tower in the suburbs, pays the slab instalments on time, and a year later reads a news item about the developer raising fresh construction finance. The worry is immediate: has the builder pledged my flat to a lender? If the builder defaults, can the bank sell the unit I have been paying for?
The Real Estate (Regulation and Development) Act, 2016 speaks to this worry directly. Section 11(4)(h) deals with mortgages and charges created after an agreement for sale is signed, and it says what happens to the buyer's rights if one is created anyway. This guide explains the clause, the related disclosure and outgoings rules, and what Mumbai buyers can check.
The short answer. Section 11(4)(h) says the promoter shall, after he executes an agreement for sale for any apartment, plot or building, not mortgage or create a charge on it, and 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 that apartment. The trade-off: the clause protects the flat you have agreed to buy, but it starts from the agreement for sale. Money paid before a registered agreement, and charges created before it, sit in a different position, which is why the order of steps matters.
What does Section 11(4)(h) actually say?
The wording is short. In the official text of the Act hosted by the Telangana regulator, Section 11(4)(h) says the promoter shall, after he executes an agreement for sale for any apartment, plot or building, as the case may be, not mortgage or create a charge on such apartment, plot or building, and 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 such apartment, plot or building.
Two parts stand out. The first is a bar: after the agreement for sale, the promoter shall not mortgage or create a charge on that unit. The second is a shield: if a mortgage or charge is created anyway, it shall not affect the allottee's right and interest. The phrase notwithstanding anything contained in any other law gives that shield priority over other laws in force.
Note also who is protected. The clause covers the allottee who has taken or agreed to take the unit, so it speaks to buyers in under-construction projects as well as those who have taken possession.
The Act as a whole carries a similar override. Section 89 says the provisions of the Act shall have effect notwithstanding anything inconsistent therewith contained in any other law for the time being in force. For a buyer, the practical point is that the allottee protection in Section 11(4)(h) is written to hold even where another law might otherwise point a different way. How that plays out in a specific dispute between a buyer, a builder and a lender is a matter for the Authority or a court, and it is worth taking legal advice if a lender has already acted against your unit.
When does the protection start?
At the agreement for sale. The trigger in Section 11(4)(h) is after he executes an agreement for sale. Section 13(1) adds that a promoter shall not accept more than ten per cent of the cost as an advance or application fee without first entering into a written agreement for sale and registering it under the law in force.
Read together, the two sections point to one habit for Mumbai buyers: do not let a large share of the price move before the agreement is signed and registered. Until that document exists, the event that sets off the Section 11(4)(h) bar has not happened.
| Stage | What the Act says | Section |
|---|---|---|
| At registration of the project | Promoter declares the land is free from all encumbrances, or gives details of encumbrances | 4(2)(l)(B) |
| Before the agreement for sale | Promoter shall not accept more than ten per cent of cost without a registered agreement | 13(1) |
| After the agreement for sale | Promoter shall not mortgage or create a charge on that unit | 11(4)(h) |
| If a charge is created anyway | It shall not affect the right and interest of the allottee | 11(4)(h) |
| Until physical possession is transferred | Promoter pays outgoings collected, including mortgage loan and interest related to the project | 11(4)(g) |
What does the builder have to disclose about existing loans?
The disclosure starts at registration. Section 4(2)(l) requires a declaration, supported by an affidavit and signed by the promoter or an authorised person, and clause (B) says it must state that the land is free from all encumbrances, or give details of the encumbrances on such land including any rights, title, interest or name of any party in or over the land.
That declaration forms part of the application the promoter files with the Authority for registration. Ask for it, and compare what it says with what the sales team tells you about construction finance. If the declaration lists an encumbrance, ask in writing how it affects your unit and when it will be released.
Our earlier report on land title declarations and insurance for Mumbai buyers covers the title side of the same affidavit in more detail.
Who pays the project loan until handover?
The promoter, from what was collected for it. Section 11(4)(g) says the promoter shall pay all outgoings until he transfers the physical possession of the real estate project to the allottee or the association of allottees, which he has collected from the allottees for the payment of outgoings. The list in brackets includes land cost, ground rent, municipal or other local taxes, charges for water or electricity, maintenance charges, including 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 deals with a promoter who does not pay. Where the promoter fails to pay any of the outgoings collected from the allottees, or any liability, mortgage loan and interest, before transferring the project, the promoter shall continue to be liable, even after the transfer, to pay such outgoings and penal charges to the authority or person to whom they are payable, and be liable for the cost of legal proceedings. For more on the outgoings rule in Mumbai, see our guide to Section 11(4)(g) outgoings before possession.
What can a Mumbai buyer do if a charge appears?
Start with the paper trail. Keep the registered agreement for sale, which fixes the date from which Section 11(4)(h) applies. Keep receipts for every payment. If you learn of a mortgage or charge on your unit created after the agreement, ask the promoter in writing for details and for confirmation that it does not affect your rights, quoting the clause.
If the answer does not satisfy you, Section 31(1) says any aggrieved person may file a complaint with the Authority or the adjudicating officer for any violation or contravention of the Act, rules or regulations against any promoter, allottee or real estate agent. Its explanation says person includes the association of allottees, which can matter where many units in a tower are affected.
Section 18(3) also says that if the promoter fails to discharge any other obligations imposed on him under the Act, rules or regulations, or under the agreement for sale, he shall be liable to pay such compensation to the allottees in the manner provided under the Act. Section 61 adds that a promoter who contravenes other provisions of the Act, other than sections 3 and 4, is liable to a penalty which may extend up to five per cent of the estimated cost of the project as determined by the Authority.
What should you check before and after signing?
- Ask for the encumbrance declaration under Section 4(2)(l)(B) that the promoter filed with the project's registration application.
- Ask the promoter in writing whether the project or your unit carries any mortgage or charge today, and keep the reply.
- Keep pre-agreement payments within ten per cent of the cost, as Section 13(1) requires.
- Sign and register the agreement for sale promptly, since Section 11(4)(h) applies after the agreement is executed.
- Keep the registered agreement and every receipt together as your record of the allottee's right and interest.
- Watch for news of fresh project finance and ask the promoter to confirm in writing that your unit is not charged.
- If a charge is created on your unit, complain to the Authority under Section 31(1) and seek compensation under Section 18(3).
Frequently asked questions
Can a builder mortgage my flat after I sign the agreement?
Section 11(4)(h) of the RERA Act says that after the promoter executes an agreement for sale for an apartment, plot or building, the promoter shall not mortgage or create a charge on it. If one is created anyway, it shall not affect the right and interest of the allottee, notwithstanding anything in any other law.
Does a builder's bank loan affect my rights as a buyer?
Section 11(4)(h) says any mortgage or charge made or created on an apartment after the agreement for sale shall not affect the right and interest of the allottee who has taken or agreed to take that apartment, and the clause applies notwithstanding anything contained in any other law for the time being in force.
Who pays the project loan interest before handover?
Section 11(4)(g) says the promoter shall pay all outgoings collected from allottees until physical possession is transferred, including mortgage loan and interest on mortgages related to the project. If unpaid before transfer, the promoter remains liable after transfer, along with penal charges and the cost of legal proceedings.
Where can I see if the project land has encumbrances?
Section 4(2)(l)(B) of the RERA Act requires the promoter's registration declaration, supported by an affidavit, to state that the land is free from all encumbrances or to give details of encumbrances, including rights, title, interest or name of any party in or over the land. It forms part of the registration application.
A builder's financing is not a buyer's business until it touches the buyer's flat. Section 11(4)(h) draws that line at the agreement for sale, so get the agreement registered, keep the paper, and ask direct questions. This is general buyer information, not legal advice.
Last updated 2026-10-27. PropNewz Team.
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