Maharashtra May Cap Builder Payments at 80 Percent Until Property Registration

Maharashtra is considering a change to its property registration law that would prevent builders from collecting the full purchase price from homebuyers before a property is finally registered, Revenue Minister Chandrashekhar Bawankule said, according to ETRealty.

Under the proposed change, developers would be allowed to collect about 75% to 80% of the property value when an agreement to sell is signed. The remaining 20% would be payable only at the time of final registration of the property.

Bawankule said the state government is amending the Registration Act to introduce the provision. The move is intended to protect buyers who have paid the entire or substantial consideration for a property but are still waiting for construction, completion or registration.

“Getting the registration done regardless of whether the house or flat has actually been built or not, that is not right,” Bawankule said, as reported by ETRealty.

The proposed rule would change the payment dynamic between homebuyers and developers. Instead of the buyer having little financial leverage after making full payment, a portion of the purchase price would remain outstanding until the final registration stage.

The announcement comes against the backdrop of the Maharashtra government's wider action against unauthorised construction, particularly in Nagpur. Bawankule said some builders had obtained approvals for building plans but subsequently made excessive deviations from those sanctioned plans.

The minister said the government would act against builders who had cheated buyers while allowing developers with minor deviations an opportunity to regularise them.

The state has also set a three-month deadline for builders to correct deviations or other shortcomings, obtain occupancy certificates and complete registration-related requirements, according to the report.

The proposed payment cap is therefore part of a broader push to ensure that regulatory compliance and completion of a property precede the final transfer of the buyer's money.

For homebuyers, the most significant change could be the retention of 20% of the purchase price until registration. That could provide buyers with greater financial protection where a project faces delays in obtaining approvals or completing the required formalities.

However, the exact impact will depend on the final amendments to the Registration Act and the rules governing their implementation. The government has so far described the measure as a proposed change rather than an enacted law.

For Maharashtra's large residential market, the proposal could also put greater pressure on developers to complete construction and statutory compliance before seeking the final tranche of payment from buyers.

The state government's message, as outlined by Bawankule, is straightforward: builders should not be able to complete the financial collection from buyers while key steps required to legally complete and register the property remain pending.

If enacted in its proposed form, the measure would give that principle a stronger legal footing in Maharashtra.

Sources https://realty.economictimes.indiatimes.com/news/residential/maharashtra-mulls-new-law-to-cap-upfront-payment-at-80-for-agreement-to-sell/133254690