UP RERA Cracks Down on Incomplete Flat Handover: Developers Face Up to 5% Penalty

The Uttar Pradesh Real Estate Regulatory Authority (UP RERA) has issued a strict directive to all real estate developers in the state, instructing them to immediately stop handing over incomplete apartments — commonly referred to as bare shell or canvas flats — to homebuyers. Issued on May 8, 2025, the order is a response to rising complaints from homebuyers who allege they were pressured into accepting possession of flats without basic internal finishes or promised amenities.

Clear Legal Position Under RERA

The directive is based on Section 37 of the Real Estate (Regulation and Development) Act, 2016. It reaffirms that possession can only be offered once an apartment is fully completed, including internal finishes such as flooring, doors, windows, electrical fixtures, plumbing, and fire safety measures. It also mandates that all promised amenities and services — such as lifts, parks, pools, and clubhouses — must be ready and in place before handover.

Importantly, possession can only be transferred after the developer secures a Completion Certificate (CC) or Occupancy Certificate (OC) from the competent authority. In cities like Noida, this requires multiple no-objection certificates, including fire safety clearance and verification that all dues are paid. Offering possession without an OC is deemed illegal.

Developers Risk Financial Penalties

UP RERA has warned that any violation of this order could lead to a penalty of up to 5% of the total estimated project cost. This penalty is imposed under Sections 38 and 61 of the RERA Act. The authority has taken serious note of the practice where developers include clauses in the builder-buyer agreements that compel allottees to accept unfinished units. These clauses, the authority stated, are in direct contradiction to the RERA framework.

Mahendra Verma, Secretary of UP RERA, clarified that the regulatory body aims to protect buyers from being misled or forced into unfair agreements. “It has come to the notice of the Regulatory Authority that some promoters are including conditions in the Agreement for Sale requiring allottees to take physical possession of canvas flats. This practice violates the RERA Act and its intent,” he said.

Scope of "Ready-to-Move-In"

According to Rule 1.8(3) of the UP Agreement for Sale Rules, 2018, a flat can be termed ready-to-move-in only when all internal works are complete and conform to what was promised in the sanctioned plans, brochures, and marketing material. The quoted price must include land cost, construction cost, development fees, and amenities. Any deviation from this is considered a default under RERA norms.

Furthermore, the authority has reiterated that developers must use the model builder-buyer agreement format as laid down under the U.P. Real Estate (Regulation & Development) (Agreement for Sale/Lease) Rules, 2018. They are not permitted to alter any terms or conditions.

Industry Reaction

The Confederation of Real Estate Developers’ Associations of India (Credai) has taken note of the directive. Dinesh Gupta, Secretary of Credai, acknowledged the legal requirement and emphasized the importance of delivering on commitments. “The developers must deliver the apartments once they complete the facilities as per the promises made in the builder-buyer agreement. They must also fulfil all legal formalities because this is related to safety,” he said.

However, some developers have expressed concerns about increasing compliance pressure. They point out that in many cases, delays in obtaining utility connections or final clearances from local authorities cause unavoidable postponements in obtaining the OC. These delays, they argue, can affect the timely handover of units even if internal works are complete.

The move by UP RERA is seen as an attempt to strengthen regulatory enforcement and ensure that developers comply with both the letter and spirit of the law. It also signals increased scrutiny of real estate delivery practices, especially in cities like Noida and Ghaziabad, where rapid urbanisation has led to a spurt in residential construction.

With this directive in place, all developers registered under UP RERA must align their practices with the requirements of the RERA Act and accompanying Rules. Builders must ensure that they do not include any misleading clauses in their agreements and that possession is only handed over when the apartment is genuinely ready for occupancy and supported by the relevant government-issued certificates. UP RERA has also indicated that it will monitor implementation closely and take action against violators, including financial penalties and possible blacklisting of errant projects.