New UP-RERA directive mandates sale agreement before 10 per cent advance; developers face a 5 per cent project cost penalty for handing over incomplete flats
The Uttar Pradesh Real Estate Regulatory Authority (UP-RERA) has issued a strict directive barring developers from handing over incomplete or "canvas flats" to buyers and warned of penalties up to 5 per cent of the total project cost for non-compliance. The authority also reminded developers that they cannot collect more than 10 per cent of the apartment, plot, or building cost as an advance or application fee without first signing and registering a written agreement for sale.
The order, issued on May 8 under Section 37 of the RERA Act, 2016, follows a growing number of complaints from buyers receiving bare-shell flats that lack promised amenities and basic fittings. The directive clearly states that possession is only legal after developers obtain a Completion Certificate (CC) or Occupancy Certificate (OC) and execute a registered sale deed, lease deed, or sub-lease deed.
“It has come to the notice of the Regulatory Authority that some of the promoters, when executing the Agreement for Sale (BBA), are making the allottees to agree to the condition of accepting physical possession of canvas flats and are, in fact, handing over possession of canvas flats to such allottees. Any such act by the promoters is contrary to the provisions of the Act and the Rules and defeats the object of protection extended to the allottees through the RERA Act,” the official notice stated.
Violators Face 5 per cent Penalty on Project Cost
Developers who violate the directive risk a penalty of up to 5 per cent of the total cost of the real estate project, as per Sections 38 and 61 of the RERA Act. Mahendra Verma, Secretary of UP-RERA, confirmed, “The promoters found violating these rules can be fined up to 5 per cent of the total project cost under Sections 38 and 61 of the RERA Act.”
The directive aims to put an end to the industry practice of prematurely handing over unfinished units, often leaving buyers in financial and legal limbo. The authority stressed that such practices contradict the core protections laid out under the RERA framework.
10 per cent Advance Rule Reinforced
UP-RERA also reinforced a key financial safeguard for homebuyers under Section 13(1) of the Act. Developers are barred from collecting more than 10 per cent of the property's cost without first entering into a signed and registered agreement for sale.
As the Act states: "A promoter shall not accept a sum more than ten per cent of the cost of the apartment, plot, or building as the case may be, as an advance payment or an application fee, from a person without first entering into a written agreement for sale with such person and register the said agreement for sale, under any law for the time being in force."
The rule is intended to prevent financial exploitation and ensure buyers are protected with a legally enforceable contract before any substantial payment is made.
What Does This Mean For Homebuyers As Per Realty Leaders?
Many developers have expressed support for UP-RERA’s firm stance, viewing it as a move that strengthens buyer trust and enhances market credibility.
Bipin Agarwal, Chairman and Managing Director, Nimbus Group, said, “For too long, the handover of incomplete or ‘canvas flats’ has kept buyers waiting, stuck with unfinished homes, mounting costs, and endless delays. This move shuts the door on such uncertainty… It protects genuine buyers, simplifies the homebuying process, and brings long-overdue discipline to the industry.”
Salil Kumar, Director (Sales & Marketing), CRC Group, said, “We are in complete agreement with the recent directive of the UP RERA mandating real estate developers to hand over the apartment to the buyers not only after it is fully inhabitable, but most importantly, the entire project, including all amenities, should also be complete in every respect. Developers like CRC... have been religiously following the above prescription for a positive buyer experience.”
Neeraj Sharma, Managing Director, Escon Infra Realtors, said, "We have seen over the years how homebuyers have continuously faced challenges due to increasing costs and delays in flat possession. UP RERA has regulated this move in the interest of homebuyers, and this will bring more investments in the real estate sector in the years to come.”
He added that Greater Noida had seen the steepest rise in property prices among NCR cities, with an average increase of 98 per cent between Q1 2020 and Q1 2025, according to an Anarock report.