When a builder misses the possession date in your agreement, Section 18 of RERA entitles you to interest on the money you have paid. Knowing how that figure is worked out helps you check the builder's own calculation and write a precise claim.
In short: interest = the amount you paid, multiplied by the rate your state prescribes, for the period of delay. The rate is the part that varies from state to state, so check it first.
What Section 18 gives you
If the builder cannot hand over possession by the date in the agreement, you have two choices:
- Stay in the project. The builder must pay you interest for every month of delay until possession is handed over, at the prescribed rate (proviso to Section 18(1)).
- Withdraw from the project. You can claim a refund of the amounts paid, with interest at the prescribed rate (Section 18(1)).
This article is about the first choice. The calculation method is similar for a refund, but the end date differs (see the comparison near the end).
The three inputs
- The amount you have paid. Interest runs on the money you actually paid to the builder towards the flat. Authorities do not all treat GST, stamp duty and other charges the same way, so check how your state authority treats them and keep the receipts.
- The rate. The Act says "such rate as may be prescribed", so the rate comes from your state's rules. See the next section.
- The period of delay. This starts on the possession date promised in your agreement (for any amount you paid after that date, from the date of payment, because interest under the Act is counted from the date the promoter received the money; see Section 2(za)). It ends when possession is handed over. In practice, authorities and tribunals often treat a valid offer of possession (with the Occupancy or Completion Certificate) as the end point. For example, in a 2026 UP Appellate Tribunal case the delay period was counted up to the date of the offer of possession and not the later date of physical possession.
Which interest rate applies?
| Where | Prescribed rate | Source |
|---|---|---|
| Union Territories without a legislature (e.g. Chandigarh) and the central model | SBI's highest marginal cost of lending rate (MCLR) plus 2% | Central rules, reported at the time of notification |
| Uttar Pradesh | UP-RERA and the UP Real Estate Appellate Tribunal have applied SBI MCLR plus 1%, relying on the UP Agreement for Sale rules of 2018 | UP REAT orders (for example Parsvnath Developers v. Pankaj Agarwal, 2021) |
| Other states | Check your state's rules. Some states use MCLR + 2% (the central model), others differ, so do not assume either. | State RERA rules |
In Uttar Pradesh, the Supreme Court in Newtech Promoters and Developers Pvt. Ltd. v. State of U.P. (11 November 2021, paragraphs 74 and 77) recorded that the prescribed rate is MCLR plus 1%, notified by the UP Government, leaving the authority no discretion to change it. The UP model Agreement for Sale under the 2018 rules (clauses 9.2(ii) and 9.3(i)) uses the wording "MCLR on home loan of State Bank of India + 1%", both for the promoter's refund interest and for the allottee's late-payment interest. Because the central rules refer to SBI's highest MCLR, check which tenor and which date your authority applies. Rates and rules can be amended, so confirm the rate in the current UP notification before you file.
Two points to keep in mind:
- MCLR changes. The base rate moves when banks revise it. Use the SBI MCLR that your authority applies (often the rate on a particular date, such as the date of the order or of the claim).
- The rate can be higher when the agreement penalises you at a higher rate. Section 2(za) says the interest the promoter pays the allottee must equal the interest the promoter charges the allottee for default. In 2026 the Allahabad High Court (Lucknow bench) used this to uphold 24% per year in a case where the builder's agreement charged a defaulting buyer 24% (Aims Max Gardenia Developers v. Pratibha Gupta). This was one case decided on its own facts, and many authorities still apply the lower MCLR-based rate. If your agreement has a harsh late-payment clause for you, mention it in your claim.
The formula
Interest = Amount paid × Rate ÷ 12 × Months of delay
For part-months, use a daily method:
Interest = Amount paid × Rate × Days of delay ÷ 365
Delay interest is generally calculated as simple interest (no compounding). Both formulas give nearly the same result, so use whichever your authority uses.
Worked example
All figures here are illustrative. We assume an SBI MCLR of about 8.8% purely for the example; this is not a confirmed current rate. Replace the rate with the one that applies in your state on the date you calculate. The same facts give two different answers depending on the state rule:
- Amount paid to the builder before the possession date: ₹50,00,000
- Delay: 18 months
| Uttar Pradesh style (MCLR + 1%) | Central model style (MCLR + 2%) | |
|---|---|---|
| Assumed rate (illustrative) | 9.8% per year | 10.8% per year |
| Annual interest | ₹4,90,000 | ₹5,40,000 |
| Monthly interest | ₹40,833.33 | ₹45,000 |
| Interest for 18 months | ₹7,35,000 | ₹8,10,000 |
Check with the daily method for the 10.8% case (18 months taken as 547 days): ₹50,00,000 × 10.8% × 547 ÷ 365 = about ₹8,09,260. The small difference is only due to rounding months into days.
When payments are made in stages
Interest runs on each amount from the later of two dates: the promised possession date, or the date that amount was paid. Using the illustrative central-style 10.8% rate and an 18-month delay in total (at an illustrative UP-style 9.8% the total on the same facts would be ₹7,84,000):
| Payment | Amount | Paid on | Interest runs from | Months of interest | Interest |
|---|---|---|---|---|---|
| Instalment 1 | ₹20,00,000 | Before possession date | Promised possession date | 18 | ₹3,24,000 |
| Instalment 2 | ₹30,00,000 | Before possession date | Promised possession date | 18 | ₹4,86,000 |
| Instalment 3 | ₹5,00,000 | 6 months after possession date | Payment date | 12 | ₹54,000 |
| Total | ₹55,00,000 | ₹8,64,000 |
Authorities differ in detail, so treat this as the usual approach and check the practice of your state authority.
Things that change the number
- Rate changes. MCLR moves over time. Check which date your authority uses for the rate.
- GST and other charges. Some orders count only the basic price paid, others count more. Ask for a breakdown from the builder and keep your GST receipts.
- Bank loan interest. If you took a home loan, the builder's delay interest is paid to you and your loan interest is a separate cost. Compensation for loan interest, rent or other loss is a different claim, which is decided by the Adjudicating Officer under Section 71.
- Subvention schemes. If the builder agreed to pay your pre-EMI, read the tripartite agreement closely, because it may affect what you can claim for the same period.
- Your own late payments. Section 19(7) makes you liable to pay interest at the prescribed rate on late payments to the builder, and Section 2(za) ties the two rates together. The builder may try to adjust this against your claim, so keep your own payment dates clear.
- Extensions and force majeure. If the possession date in the agreement is lawfully extended, the period of delay may be shorter than it first appears. Do not accept a builder's claim of extension without seeing the basis.
- Taking possession. The UP Real Estate Appellate Tribunal held in a 2026 order (Appeal No. 340 of 2024, decided 6 May 2026) that taking possession without protest does not wipe out your right to delay interest. Even so, record your claim in writing at the time of possession.
Delay interest vs. refund interest
| Staying in the project | Withdrawing for a refund | |
|---|---|---|
| What you get | Interest for every month of delay until possession | All amounts paid, with interest |
| Interest counted from | Promised possession date (or later payment date) | Date each payment was made |
| Ends | At handing over (often treated as valid offer of possession) | When the refund is paid |
| Rate | Same prescribed rate | Same prescribed rate |
See our article on getting a full refund under RERA.
Checklist before you claim
- Agreement for Sale and the stated possession date
- All payment receipts and bank statements, with dates
- Your state's current prescribed rate (check the state rules) and the SBI MCLR your authority applies
- A month-by-month or day-by-day table for each instalment
- Any extension orders for the project's registration
- Any letter from the builder about delay or offer of possession
Frequently asked questions
Does the builder have to pay interest every month? The Act provides for interest for every month of delay until handover. In practice, many allottees receive it as an adjustment at possession or through an order, so you may need to claim it in writing or through a complaint.
Can the builder deduct delay interest from my final payment? Builders often adjust it against dues at possession. Make sure the adjustment is shown clearly in writing, with your calculation attached.
Which rate should I use in my complaint? Use the rate in your state's rules and cite it. If you are in Uttar Pradesh, the Appellate Tribunal has applied MCLR + 1%, so do not claim MCLR + 2% as a certainty. You may also point out Section 2(za) if your agreement charges you a higher rate for late payment.
This article is for general information and is not legal advice. Rates and rules change and differ by state. Verify the current rate on your state RERA website or with a lawyer before acting.