The short answer
Buying under construction can mean a lower price and a choice of unit, in exchange for construction and delivery risk. The Real Estate (Regulation and Development) Act, 2016 (RERA) reduces that risk: projects must be registered, sales are on carpet area, the builder cannot take more than 10 per cent before a registered agreement for sale, 70 per cent of buyers' money must sit in a separate account, a delayed buyer can claim interest or a refund, and structural defects must be fixed for five years after possession.
RERA does not make a weak builder strong. It gives you remedies, and remedies take time. Your best protection is still choosing the project carefully, paying in step with construction, and keeping every receipt and letter.
Two taxes behave differently for an under-construction home: GST applies until the completion certificate is issued (5 per cent without input tax credit, or 1 per cent for affordable housing), and the buyer must deduct TDS when the price is ₹50 lakh or more.
Step 1: check the project on the state RERA portal
Under RERA, a project on more than 500 square metres of land or with more than eight apartments must be registered with the state's real estate regulatory authority before it is advertised or sold. Get the RERA registration number from the builder and look it up on the state portal.
On the portal, read: the promoter's details and past projects; the sanctioned plan and the commencement certificate; the title and encumbrance documents the promoter uploaded; the declared completion date; the quarterly progress updates; and any complaints or orders against the project. A project whose quarterly updates have stopped is a warning sign.
Our RERA register links to each state's records, and the RERA number guide explains the number formats state by state.
What RERA guarantees you
Sale on carpet area. RERA defines carpet area as the net usable floor area within the walls, and prices must be stated against it. Super built-up area can still appear in a brochure, but the agreement must state carpet area.
A cap on the advance. Section 13(1) says a promoter shall not accept more than ten per cent of the cost of the apartment, plot or building as an advance or application fee without first entering into a written agreement for sale and registering it. If a builder asks for 20 per cent at booking with only an allotment letter, that is a breach.
Seventy per cent in a separate account. Section 4(2)(l)(D) requires 70 per cent of the amounts realised from buyers to be deposited in a separate bank account and used only for the land and construction cost of that project. Withdrawals must be certified by an engineer, an architect and a chartered accountant as being in proportion to the completion of the project.
Interest or refund for delay. Under section 18, if the promoter fails to complete or give possession by the date in the agreement, a buyer who wishes to withdraw is entitled to a refund of the amount paid with interest at the prescribed rate, plus compensation; a buyer who stays is entitled to interest for every month of delay until possession. The rate is fixed by your state's RERA rules; many states set it at the State Bank of India's highest marginal cost of lending rate plus two per cent.
Five years of defect liability. Section 14(3) says that if a structural defect or a defect in workmanship, quality or services is brought to the promoter's notice within five years of possession, the promoter must fix it without charge within thirty days, failing which the buyer is entitled to compensation.
GST on an under-construction home
GST applies to the sale of a residential unit that is still under construction. Since April 2019 the rate is 5 per cent without input tax credit for ordinary residential units, and 1 per cent without input tax credit for affordable housing. These rates were not changed by the GST rate restructuring that took effect on 22 September 2025.
Affordable housing for this purpose means a unit with a carpet area of up to 60 square metres in metropolitan cities or 90 square metres elsewhere, and a gross amount charged of not more than ₹45 lakh. Both conditions must be met; if either fails, the 5 per cent rate applies. The GST rate notification also treats a part of the amount as the value of land, so the effective tax on the total price is lower than the headline rate; your builder's invoice should show the calculation.
No GST applies where the entire consideration is received after the completion certificate has been issued by the competent authority, or after first occupation, whichever is earlier (Schedule III of the CGST Act, 2017). That is why a ready-to-move flat with a completion or occupancy certificate carries no GST, while instalments paid before the certificate do.
Illustrative example, not a quote: a non-affordable flat with an agreed price of ₹80 lakh, all paid before completion. GST at the 5 per cent rate applies to each instalment as it is billed, after the land deduction allowed by the notification. Ask the builder for the exact GST on each milestone in writing before signing, and compare it with what the agreement says about taxes.
TDS: the buyer's duty
When the consideration for an immovable property (other than agricultural land) is ₹50 lakh or more, the buyer must deduct tax at source at 1 per cent from each payment to a resident seller and deposit it against the seller's PAN. From 1 April 2026 this sits in section 393(1) of the Income-tax Act, 2025, which replaced section 194-IA of the Income-tax Act, 1961.
For an under-construction flat, the deduction applies to each instalment as it is paid, including payments a lender makes directly to the builder on your behalf. The deduction is computed on the higher of the consideration and the stamp duty value. Missing it is the buyer's liability, with interest and fees.
Our TDS calculator works out the deduction for each instalment, and the TDS guide explains the filing steps.
Payment plans: construction-linked vs subvention
A construction-linked plan ties each instalment to a stage — foundation, each slab, brickwork, finishing, possession. It is the plan RERA's structure expects, and it is the safest for buyers because you pay only as the building rises. Before paying any stage demand, check the quarterly update on the RERA portal or visit the site.
A subvention or 'no EMI till possession' scheme works differently: the lender disburses a large part of your loan to the builder early, and the builder promises to pay the interest (pre-EMI) until possession. If the builder stops paying, the loan is still yours, and the lender will come to you.
This has happened at scale. On 19 July 2019, the National Housing Bank told housing finance companies to desist from loan products in which builders service the borrower's dues, and said disbursement must be strictly linked to construction stages, with no upfront disbursal for incomplete projects (Policy Circular No. 96/2019-20). In 2024 and 2025 the Supreme Court took up complaints from National Capital Region buyers under subvention schemes and directed the CBI to investigate an alleged builder-bank nexus.
If you are offered a subvention plan, ask: Is the tripartite agreement clear that disbursement is linked to construction stages? What happens to the pre-EMI if the builder defaults? Can the builder cancel your unit if you complain? A construction-linked plan avoids most of these questions.
Documents to collect
The RERA registration certificate and a printout of the project page. The registered agreement for sale, in the state's prescribed format, stating carpet area, price, payment plan, possession date and the delay interest clause.
The allotment letter, every payment receipt, every demand letter, and every TDS certificate. The sanctioned building plan and commencement certificate. If you take a loan, the sanction letter, the tripartite agreement and the disbursement statements.
At possession: the completion or occupancy certificate, the possession letter, and a list of defects you have reported, with dates.
What to do if possession is delayed
Write to the builder first, by email and registered post, referring to the possession date in your registered agreement and asking for a revised date and the delay interest due under section 18.
If the response is unsatisfactory, file a complaint with the state RERA authority under section 31. You choose between refund with interest and staying in the project with monthly delay interest. In Newtech Promoters and Developers v. State of Uttar Pradesh (2021), the Supreme Court described the right to a refund under section 18 as unconditional where possession is not given as agreed.
Compensation, as distinct from interest, is decided by the RERA adjudicating officer under section 71. Keep a record of every payment date, because delay interest is calculated from the dates you paid.
Talk to other buyers. A complaint backed by a buyers' association, with shared evidence of the construction status, is harder to delay.
Common mistakes
Paying more than 10 per cent on an allotment letter. Insist on the registered agreement for sale first.
Comparing on super built-up area. Compare the price per square foot of carpet area.
Not checking the RERA portal's quarterly progress before paying a stage demand.
Accepting a revised possession date in a new letter without reading it: signing it may be argued as consent to the delay.
Forgetting TDS on instalments paid by the bank.
Common questions
How much can a builder take as booking amount under RERA?
Not more than 10 per cent of the cost as an advance or application fee before a written agreement for sale is executed and registered (section 13 of RERA).
What is the GST on an under-construction flat?
5 per cent without input tax credit for ordinary residential units and 1 per cent for affordable housing (carpet area up to 60 sq m in metros or 90 sq m elsewhere, and price up to ₹45 lakh). No GST applies once the full price is paid after the completion certificate.
Can I get a refund if the builder delays possession?
Yes. Section 18 of RERA lets you withdraw and claim a refund with interest at the rate in your state's rules, plus compensation, or stay and claim interest for every month of delay.
Is TDS applicable on under-construction property?
Yes, when the consideration is ₹50 lakh or more: 1 per cent on each instalment, under section 393(1) of the Income-tax Act, 2025 (formerly section 194-IA of the 1961 Act).
Are subvention schemes safe?
They carry builder-default risk: if the builder stops paying the interest, the lender recovers from you. The National Housing Bank told housing finance companies in 2019 to link disbursement to construction stages and stop products where builders service buyers' loans.
How long is the builder responsible for defects?
Five years from possession for structural and workmanship defects reported in that period, to be fixed free within thirty days (section 14(3) of RERA).
Sources
- Real Estate (Regulation and Development) Act, 2016 — sections 3, 4(2)(l)(D), 13(1), 14(3), 18, 31 and 71 (indiacode.nic.in; indiankanoon.org); checked 2 October 2026
- Supreme Court of India, Newtech Promoters and Developers Pvt. Ltd. v. State of Uttar Pradesh, 2021; checked 2 October 2026
- Notification No. 11/2017-Central Tax (Rate) as amended from 1 April 2019, and Schedule III, paragraph 5 of the CGST Act, 2017; rates unchanged by the GST changes effective 22 September 2025; checked 2 October 2026
- Income-tax Act, 2025, section 393(1) (in force from 1 April 2026; replaces section 194-IA of the Income-tax Act, 1961); checked 2 October 2026
- National Housing Bank, Policy Circular No. 96/2019-20, 19 July 2019 (nhb.org.in); reports of Supreme Court directions to the CBI on NCR subvention schemes, 2024–2025; checked 2 October 2026
Last checked 2026-10-02.