Under the RERA Act, a buyer who pays an instalment late owes interest at the rate the state’s RERA rules prescribe, and that rate must equal the rate the builder would pay the buyer for its own default, such as late possession. In Maharashtra, Karnataka and Haryana the rate is SBI’s highest marginal cost of lending rate (MCLR) plus 2%, which is 10.95% a year with the MCLR in force from 15 October 2026.
The same rate works in both directions, so a builder who charges buyers interest on every late instalment should expect to pay it, at the same rate, on any delay of its own.
Where the rule comes from
- Section 19(7): “The allottee shall be liable to pay interest, at such rate as may be prescribed, for any delay in payment” of amounts due under the agreement for sale.
- Section 18(1): if the promoter fails to give possession on time, it must refund with interest if the buyer withdraws, or pay interest for every month of delay until possession if the buyer stays.
- Section 2(za): the rate chargeable from the allottee “shall be equal to the rate of interest which the promoter shall be liable to pay the allottee, in case of default”. The buyer’s interest runs from the date of default until the date of payment.
- Section 19(8): the buyer’s obligations and interest liability may be reduced when the promoter and buyer agree.
The rate in some states
| State | Rule | Rate |
|---|---|---|
| Maharashtra | Rule 18, RERA Rules 2017 | SBI highest MCLR + 2% |
| Karnataka | Rule 16, RERA Rules 2017 | SBI highest MCLR + 2% |
| Haryana | Rule 15, RERA Rules 2017 | SBI highest MCLR + 2% |
| Uttar Pradesh | Agreement for Sale/Lease Rules 2018 | SBI MCLR on home loans + 1% |
Uttar Pradesh’s RERA Rules 2016 do not state a rate. Rule 15 is headed “Rate of interest payable by promoter and allottee”, but by a misprint its text repeats rule 14(4), as the UP Real Estate Appellate Tribunal noted on 10 August 2021 (Appeal 08/2020). The rate comes instead from clause 9.3(i) of the model agreement in the 2018 Agreement for Sale/Lease Rules: a buyer who fails to pay two consecutive demands despite notice pays interest on the unpaid amount at SBI’s MCLR on home loans plus 1% “unless provided otherwise under the Rules”, and the promoter can claim it only if it is not itself in default. Clause 9.2 sets the same rate for refunds the promoter owes, and UP RERA and the Tribunal apply MCLR plus 1% to both sides. The rules do not say which MCLR tenor to use, so state the one you chose on the letter.
SBI’s highest MCLR, for the three-year tenor, is 8.95% from 15 October 2026, so the rate in the first three states is 10.95% a year. The MCLR changes whenever SBI revises it, so put the date of the rate you used on every interest calculation. For other states, read the state’s RERA rules; we have not checked them here.
A worked example (sample figures)
A buyer in Maharashtra owes a 7th-slab instalment of ₹5,00,000, due on 1 September, and pays it on 16 October: 45 days late. Worked as simple interest:
| Line | Amount |
|---|---|
| Overdue amount | ₹5,00,000 |
| Rate | 10.95% a year |
| Interest: 5,00,000 × 10.95% × 45 ÷ 365 | ₹6,750 |
| GST on the interest (5% effective, non-affordable flat) | ₹338 |
This sample uses 10.95% throughout, although the delay spans SBI’s revision of 15 October 2026, when the three-year MCLR rose from 8.80% to 8.95%. Two points for your CA: which day’s MCLR applies to a delay that spans a rate change, and whether your agreement compounds interest. The Act does not settle either; your agreement and your state’s rules do.
GST on the interest
Section 15(2)(d) of the CGST Act includes “interest or late fee or penalty for delayed payment of any consideration” in the value of the supply, and paragraph 9 of CBIC Circular 178/10/2022-GST says late-payment interest “should be assessed at the same rate as the principal supply”. For an under-construction flat that is 7.5% (1.5% for affordable housing). Because the interest is part of the value of the flat’s supply, paragraph 2 of Notification 11/2017-Central Tax (Rate), which deems land to be one third of the total amount charged, applies to it too: 5% effective, or 1% for affordable housing, the rates CBIC announced from 1 April 2019. In the example, 5% of ₹6,750 is ₹338.
That is our reading of the law; no circular, ruling or Tax Research Unit FAQ we found addresses interest on a flat buyer’s late instalment in terms. Charging 18% treats the interest as a separate service, which Circular 178 rejects. The cautious alternative is 7.5% on the full interest (₹506 in the example); agree the treatment with your CA.
Good practice
- Charge interest consistently, from the rules your team has approved, rather than case by case.
- Show the overdue amount, days, rate and its date on the demand letter, so the buyer can check it.
- Record every waiver under section 19(8), with the reason and who approved it.
- Track your own commitments too: a delayed possession date costs interest at the same rate.
How LoftRay calculates it
LoftRay calculates interest on late payment from the interest rules your team approves during setup, shows it on buyer statements and the overdue summary, and puts receipt cancellations, refunds and other changes behind approval. A second person signs off the rule set before it is used, so a rate change is a recorded, approved change rather than an edit to a spreadsheet.