Builder demanding cost escalation? What RERA and the model agreement for sale allow

Rules and rates as of 19 October 2026.

Two years into an under-construction purchase, a letter arrives: steel, cement and labour have become dearer, so please pay ₹400 a square foot more. Sometimes the demand comes with the offer of possession, when you have the least room to argue. This explainer sets out what the RERA Act says about the price you agreed, what the model agreements framed under it allow a builder to add, and how to answer a demand.

What the RERA Act fixes

The Real Estate (Regulation and Development) Act, 2016 does not use the word "escalation". It does three things that matter here.

• The price and payment plan go in writing. Section 13(1) bars a promoter from taking more than 10% of the cost as an advance or application fee without first signing and registering an agreement for sale. Section 13(2) says that agreement "shall be in such form as may be prescribed" and must specify "the dates and the manner by which payments towards the cost of the apartment" are to be made.
• The building is fixed too. Section 14(1) requires the project to be built to the sanctioned plans and specifications. Under section 14(2), changes need your prior consent unless they are minor, and an addition to area is not minor. A price rise tied to "more area" is therefore tied to a change you can refuse.
• You pay what the agreement says, on time. Section 19(6) makes the buyer responsible for payments "in the manner and within the time as specified in the said agreement for sale". Section 19(7) charges interest at the prescribed rate on late payment. Section 2(za) says the rate a builder charges you for default must equal the rate it pays you for its own default.

Put together: the agreement is the ceiling. If a charge is not in the agreement, the Act gives the builder no separate right to it.

What the model agreements allow

States prescribe the form of agreement in their RERA rules. We read two versions.

Goa. Annexure A to Goa's 2017 RERA rules (Official Gazette, Series I No. 34, Extraordinary No. 2, 24 November 2017) is the model agreement. Its clause 1(e) says: "The Total Price is escalation-free, save and except escalations/increases, due to increase on account of development charges/taxes payable to the competent authority" and other levies imposed by the competent authority, local bodies or government. When demanding such an increase, the promoter "shall enclose the said notification/order/rule/regulation" with the demand letter, and the increase applies "only ... on subsequent payments".

The "Annexure A [See rule 9]" form. Agreements filed on Uttar Pradesh RERA's portal under this heading carry the same rule in clause 1.3, with one addition. A proviso says that if a development charge is newly imposed or increased "after the expiry" of the scheduled completion date, "the same shall not be charged from the allottee". We read this in an agreement a project filed on the portal, not in the gazetted rules, so check the version prescribed in your state.

Neither form allows an increase for the builder's own costs of materials or labour. The only door they leave open is a government levy, proved by the notification itself.

Which demands the model forms allow

Demand	Under the model forms we read	What to ask for
Steel, cement or labour cost rise	Not among the permitted increases; the price is "escalation-free"	The clause in your signed agreement that allows it
New or higher development charge, tax or levy notified before the scheduled completion date	Allowed, on subsequent payments, with the notification enclosed	The notification, and the arithmetic for your unit
New or higher development charge notified after the scheduled completion date	Not chargeable under the clause 1.3 proviso; the Goa form is silent	The date of the notification against your agreed completion date
"Increased area"	A change to your unit; section 14(2) needs your consent for an addition to area	Revised sanctioned plan and the carpet area before and after

Worked example: a ₹80 lakh flat

Assumptions (illustrative): agreement value ₹80,00,000 for an 800 sq ft carpet-area flat; 70% paid; scheduled completion date in the agreement still in the future. Interest for late payment assumed at 11% a year; your state's rules set the actual rate.

Demand A: material cost escalation of ₹400 per sq ft.
₹400 × 800 = ₹3,20,000, which is ₹3,20,000 ÷ ₹80,00,000 = 4% of the price. Under the model forms this is not a permitted increase. Unless your signed agreement has a clause that allows it, you can contest it.

Demand B: a development charge raised by the local authority by ₹150 per sq ft, notified before the completion date.
₹150 × 800 = ₹1,20,000. This is the kind of increase the forms allow, if the builder encloses the notification, and if the notification applies to your project in that amount. It is added to the payments still due: here 30% of ₹80,00,000, or ₹24,00,000, is still to be paid.

The cost of guessing wrong. If you hold back Demand A and an authority later rules it payable, interest runs on it. At the assumed 11%: ₹3,20,000 × 11% × 6 ÷ 12 = ₹17,600 for six months, about ₹2,933 a month. One option is to pay "under protest", in writing, and dispute the demand. Discuss the choice with your lawyer.

What RERA benches have done recently

The Haryana Real Estate Appellate Tribunal shows how these disputes run.

• In Pankaj Aggarwal v. Shree Vardhman Infrahome (Appeal 1601 of 2025, 14 August 2026), escalation charges came with an offer of possession. The tribunal found that the Gurugram authority had not ruled on whether the escalation, EDC/IDC and increased-area demands were lawful. It called them "independent issues requiring adjudication" and sent the case back. The lesson for buyers: ask for a specific ruling on each demand, not just delay interest.
• In Vijay Mittal v. ROF Infratech and Housing (Appeal 1400 of 2025, 27 March 2026), about fitment and administrative charges on plots, the tribunal treated charges expressly written into a signed agreement as binding unless shown to conflict with the law. What you sign before paying 10% is what you will be held to.
• In extending one Gurugram project's registration in March 2025, the authority made it a condition that any increase in taxes, charges or levies after the scheduled date "shall not be charged from the allottees".

These are Haryana decisions on their own facts. Other states' authorities may read their own model agreement differently.

How to respond to a demand

1. Ask in writing for the clause in your registered agreement that allows the charge, and for the notification if it is a levy.
2. Check the notification's date against the scheduled completion date in your agreement and on the project's RERA page.
3. Check the arithmetic for your carpet area, and whether a "Total Price includes" clause already covers the charge.
4. If the builder cannot point to a clause, a complaint lies with your state RERA authority under section 31. A lawyer can advise on paying under protest meanwhile.