Under-construction property is the largest segment of new home sales in India and historically the riskiest for NRI buyers. Possession delays of 3-7 years, builders going insolvent, properties built without approvals — these stories are common. The Real Estate (Regulation and Development) Act 2016 (RERA) has dramatically improved buyer protection, but NRIs must know how to use it. This guide covers how to evaluate an under-construction project, structure payments, and exercise RERA rights from abroad.
Should an NRI buy under-construction or ready-to-move property?
Under-construction property is typically priced 20-30% lower than ready property in the same project, has flexible payment plans linked to construction milestones, and avoids GST in some cases on ready inventory. However, it carries possession risk, construction quality risk, and builder default risk. Ready-to-move-in property (with Occupancy Certificate) costs more but eliminates the timing and delivery risk — what you see is what you get. For NRIs who cannot easily make site visits, ready property is generally lower risk; under-construction makes sense only when the developer has a strong track record, the project is well past foundation stage, and price advantage is meaningful.
What is RERA and how does it protect NRI buyers?
The Real Estate (Regulation and Development) Act 2016 (RERA) requires every real estate project (above 500 sq m or 8 units) to be registered with the state RERA authority before any marketing or sale. RERA mandates: 70% of buyer money to go into a project-specific escrow account used only for construction; quarterly disclosure of construction progress; financial penalties for delays; defect liability period of 5 years; and a RERA Tribunal for buyer complaints with strict timelines. RERA gives NRI buyers the right to: refund with interest if possession is delayed beyond agreed date, assured carpet area (not super built-up), standardised buyer agreement, and a fast-track complaint mechanism.
How can an NRI verify a builder and project before buying?
Pre-purchase due diligence checklist:
(1) RERA registration — every legitimate project has a unique RERA number; verify it on the state RERA website (Maharashtra MahaRERA, Karnataka K-RERA, UP-RERA, Telangana RERA, etc.).
(2) Builder's track record — check completed projects, possession dates vs commitments, any RERA complaints filed.
(3) Land title — independent legal opinion on the underlying land. (4) Approvals — building plan sanction, environmental clearance, fire NOC, IOD/Commencement Certificate.
(5) Financial health of the builder — stock market disclosures (if listed), credit rating, news search for litigation/insolvency.
(6) Site visit — through a trusted local representative if the NRI cannot visit personally.
Q: How does the payment structure work for under-construction property?
Under RERA, payments must be linked to construction milestones (Construction-Linked Plan or CLP), not arbitrary time intervals. Typical milestones: booking (10%), agreement (15-20%), foundation/plinth (10%), each floor casting (varies), brickwork/plastering (10-15%), flooring/internal work (5-10%), possession (10-15%). Some builders offer Subvention Schemes where the builder pays the home loan EMIs until possession — these usually cost more in total and have hidden risks. Down Payment Plan (where you pay 80-95% upfront for a discount) is high risk for NRIs and not advisable.
Q: How should an NRI fund under-construction property purchase?
Funding options for NRIs:
(1) Inward remittance from foreign bank account directly to the builder's RERA escrow account — preferred and clean from FEMA standpoint.
(2) From NRE account — funds are clean (originally from abroad) and freely repatriable later.
(3) From NRO account — uses Indian-source funds; future repatriation of sale proceeds is subject to USD 1 million cap.
(4) Home loan from Indian bank or NBFC — many banks offer NRI home loans at competitive rates with EMI repayment from NRO/NRE account.
Avoid:
cash payments to the builder (FEMA violation, no proof of payment), payments through resident Indian relatives' accounts (creates audit trail issues).
What are the most common risks NRIs face with under-construction property?
Top risks NRIs report:
(1) Possession delays — projects originally promised in 36 months take 60-84 months.
(2) Builder bankruptcy — buyers become unsecured creditors in IBC proceedings.
(3) Specification dilution — promised marble becomes vitrified tiles, modular kitchen becomes basic, branded fittings become generic. (4) Hidden charges at possession — preferential location charges, club membership, maintenance corpus, infrastructure charges added on top of agreed price.
(5) Carpet area vs super built-up area disputes — RERA mandates carpet area disclosure but builders often disclose super built-up only in marketing.
(6) Lack of approvals at possession — Occupancy Certificate (OC) not received but possession given.
How can an NRI file a RERA complaint from abroad?
NRIs can file RERA complaints entirely online from abroad:
(1) Visit the relevant state RERA website (e.g., maharera.maharashtra.gov.in, rera.karnataka.gov.in).
(2) Register as a complainant with passport and email.
(3) File complaint specifying nature of grievance — possession delay, deviation from agreement, refusal to refund, etc.
(4) Pay the prescribed complaint fee online (typically Rs 1,000-5,000).
(5) Upload supporting documents — buyer-builder agreement, payment receipts, communication trail, RERA registration of project. (6) Attend hearings via video conferencing — most RERA authorities now allow virtual appearance for NRI complainants.
RERA must dispose of complaints within 60 days; orders are binding and enforceable.
NRIs can also engage a RERA-empaneled lawyer to represent them.
What should an NRI do if the builder delays possession beyond the agreed date?
RERA gives the buyer two clear options if the builder fails to deliver possession by the date in the registered agreement:
(1) WAIT WITH INTEREST — continue with the project but claim interest from the builder for the delay period (typically MCLR/repo rate + 2%, currently 9-11% per year), payable monthly until actual possession.
(2) EXIT WITH FULL REFUND — withdraw from the project and demand refund of the entire amount paid plus interest at the same rate. The buyer's choice is binding on the builder under RERA. The NRI should send a formal demand notice in writing first; if the builder does not comply within 30 days, file a RERA complaint. Most NRIs choose refund with interest as it provides cleaner exit.
For complete details on selling property in India as an NRI and understanding the complete legal, tax, and repatriation process, visit our Selling Property in India page.