The Builder Has Stopped Paying My Pre-EMI: What a Subvention Scheme Buyer Can Claim at K-RERA

If your builder has stopped paying the pre-EMI under a subvention scheme, that default is by itself a ground to withdraw from the project and recover everything the builder received, with interest, under Section 18(1) of the Real Estate (Regulation and Development) Act, 2016. K-RERA has said so in terms. In complaint 875/2023 (order of 1 July 2024, Bench 6) the Authority held that a promoter who had not handed over the flat and "has not paid pre-EMIs to the financial institution as agreed" was liable to refund the entire amount with interest, and it refused the promoter's offer to return only the buyer's own contribution. The money your bank disbursed to the builder is money the builder received, so the refund covers it, and the Authority's refund orders in these cases direct the promoter to close the loan account in your name "with all pending EMI, Interest, penalties etc." What K-RERA cannot do is give orders to the bank itself unless the bank has moved under Section 13(4) of the SARFAESI Act, a line drawn by the Rajasthan High Court and affirmed by the Supreme Court on 14 February 2022.

Part of the RERA and homebuyer disputes practice at S Jain & Attorneys, Bangalore.

This page is for the buyer who signed a tripartite agreement with a builder and a lender under a "no EMI till possession" or 10:80:10 plan and is now paying an EMI on a flat that does not exist. If there is no lender in your case, start with the pillar on builder delay and homebuyer remedies under RERA. Nothing here describes any buyer, unit or project beyond what the public orders record.

The builder stopped paying my pre-EMI under the subvention scheme: what are my rights?

You hold three rights at once, and all three point at the builder, not the bank. First, the pre-EMI undertaking is a promise in a written contract. Section 37 of the Indian Contract Act, 1872 makes the parties perform "their respective promises", and Section 73 gives you the loss that "naturally arose in the usual course of things" from the breach. Every instalment you have paid in the builder's place is that loss. Second, Section 18(1) of the RERA Act makes the promoter "liable on demand" to return "the amount received by him in respect of that apartment" with interest and compensation if he fails to give possession by the agreed date and you choose to withdraw. Third, Section 18(3) adds compensation where the promoter "fails to discharge any other obligations imposed on him" under the Act or "in accordance with the terms and conditions of the agreement for sale".

The Authority treats the pre-EMI default as part of the refund case. In complaint 875/2023 the promoter had paid the pre-EMI until June 2019 and then stopped. The bench recorded that the promoter had not handed over the flat and "has not paid pre-EMIs to the financial institution as agreed", and concluded that this "certainly entitles the complainant herein for refund of entire amount with interest". The order of 12 September 2022 in complaint CMP/220624/0009677 reasons the same way where the builder had "stopped paying pre-EMIs to the Bank, not closed the loan account and has not handed over possession". You do not have to prove why the builder stopped, only that he undertook to pay, that he did not, and that possession has not come.

Key takeaway. The subvention promise gives you a contract claim and the missed possession date gives you the Section 18 refund. Plead both. The refund order closes the loan, and the contract answers the bank's letters in the meantime.

How does a subvention scheme actually work, and who owes what to whom?

A subvention scheme is three contracts stacked on one flat. The agreement for sale, in Karnataka usually paired with a construction agreement, fixes the price and the possession date between you and the builder. The loan agreement makes you the lender's borrower for the full sanctioned amount. The tripartite agreement joins all three: it lets the lender disburse straight to the builder, often most of the loan up front against "subvention milestones" rather than construction, and records the builder's undertaking to pay the interest on that money, the pre-EMI, until possession or a fixed date. In complaint 875/2023 the split was 10:80:10.

So who owes what. You owe the lender the whole loan from the day it went out. The builder owes you the flat by the agreed date and owes the lender, on your behalf, the pre-EMI for the subvention period. On cancellation the tripartite agreement usually shifts the whole loan onto the builder. Clause 13 of the agreement examined by K-REAT in Appeal 61/2024 provided that on cancellation the amount received by the builder "shall be directly paid to IHFL" and that "the Builder shall be liable to refund the total amount due to IHFL". The Karnataka High Court read the equivalent clauses of a PNB Housing Finance agreement the same way on 14 September 2022 in WP 17696/2021 and connected petitions: on withdrawal "the entire amount advanced by the PNBHFL will be refunded by the Developer", with "the surplus, if any, to the borrower".

The regulators saw the risk in 2013. The National Housing Bank's circular of 18 November 2013, quoted in that judgment, directed that disbursal "should be closely linked to the stages of construction" and that "upfront disbursal should not be made in case of incomplete/under-construction/green field housing project". The Court's conclusion: "reckless release of sanctioned loan even in the absence of any construction on the site cannot put the borrowers to peril".

The three documents in your file, and what each one actually does:

Can the bank make me pay, and what happens to my credit score?

Yes, the bank can, and it will. The loan is in your name, and the tripartite agreement almost always says what the promoter in complaint 875/2023 pleaded from clause 3: that the builder's assumption of liability "in no manner" reduces the borrower's liability, whatever the dispute between borrower and builder. As between you and the bank that clause is good. As between you and the builder it is irrelevant, which is why that promoter lost.

The bank's path is set by the SARFAESI Act, 2002 where the loan is secured. Once the account is classified as non-performing, Section 13(2) lets the lender serve a notice requiring you to discharge the liability "within sixty days from the date of notice". If you do not, Section 13(4) lets it take possession of the secured asset and sell it, and Section 17 gives you forty-five days from that step to apply to the Debts Recovery Tribunal. The judgment in Appeal 61/2024 records exactly this sequence against a subvention buyer: a Section 13(2) notice in September 2021, a notice under Section 138 of the Negotiable Instruments Act in June 2023, criminal recovery proceedings, and finally a High Court writ to stop them. Every missed instalment is reported to the credit bureau under your name, not the builder's.

Write to the bank now: notice of the builder's default with dates and the tripartite clause, a request for the loan statement and the stage-linked disbursement schedule, a request that it pursue the builder under the cancellation clause, and a record that further instalments are paid under protest. The credit record can be repaired, but in the public record so far only by court order after the builder defied a RERA order: in September 2022 the Karnataka High Court directed the Reserve Bank, the National Housing Bank, the lender and TransUnion CIBIL "to process petitioners' claim for reframing the CIBIL scores and for issuing No Due Certificates in accordance with law, within sixty days".

Can K-RERA order the builder to pay the bank and close my loan?

Yes. This is now the standard direction in Karnataka refund orders where a subvention loan exists. The order of 9 February 2026 in complaint 1324/2024 (Bench 5) directed the promoter and its directors to refund with interest within sixty days and, separately, to close the loan account standing in the buyer's name with the lender. The same bench used the words that have since become standard in these orders, for example in complaint 942/2025 on 6 April 2026: "to close the loan account standing in the name of the Complainant with 4th Respondent with all pending EMI, Interest, penalties etc., and payable by the Complainants, if any, subsequent to this order". The order of 29 June 2026 in complaint 247/2024 (Bench 5) carries the same paragraph, with the housing finance company arrayed as the third respondent. The power is Section 18(1), "to return the amount received by him", read with Section 37, under which directions to a promoter "shall be binding on all concerned".

The builder's stock answer is that closing a loan is compensation, which only the adjudicating officer under Section 71 can award, and that a secured loan is outside RERA. K-REAT rejected both in Appeal 61/2024 on 6 March 2026, where the Authority had given refund with interest but no closure direction. Reading paragraph 86 of the Supreme Court's Newtech judgment, which keeps refund and interest with the Authority and compensation with the adjudicating officer, the Tribunal held: "Refund, in our considered view, will encompass both categories, whether it pertains to refund of the amount directly paid by the Allottee, or settling the amount borrowed in the name of the Allottee from the Financial Institutions under Tripartite Agreement". It concluded that "it is the Promoter, who has to close the loan account with the Financial Institution" and ordered foreclosure within sixty days.

What the Authority cannot do is give the bank orders in the ordinary case. Section 31 allows a complaint "against any promoter, allottee or real estate agent", and Sections 36 and 37 reach the same three classes. A bank is none of them. In Union Bank of India v Rajasthan Real Estate Regulatory Authority the Rajasthan High Court held on 14 December 2021 that RERA does not govern the borrower-bank transaction where the security predates the Act, unless the mortgage was fraudulent or collusive, but that the Authority may entertain a complaint "against the bank as a secured creditor if the bank takes recourse to any of the provisions contained in Section 13(4) of the SARFAESI Act", and that in a conflict RERA prevails. The Supreme Court dismissed the bank's special leave petitions on 14 February 2022 "in complete agreement", adding that the Section 13(4) rule applies "in a case where proceedings before the RERA authority are initiated by the home buyers to protect their rights". So you array the lender, so that the closure order is passed in its presence, but you ask for the direction against the builder.

Can I withdraw from the project and get everything back, including the bank's money?

Yes, and the choice is yours alone. Section 18(1) gives the allottee who "wishes to withdraw from the project" the return of the amount received with interest and compensation, and its proviso gives the allottee who stays interest "for every month of delay, till the handing over of the possession". In Newtech Promoters and Developers v State of UP (11 November 2021) the Supreme Court called the refund right "an unconditional absolute right to the allottee", operating "regardless of unforeseen events or stay orders of the Court/Tribunal" not attributable to the buyer.

Everything means everything the builder received. In complaint 875/2023 the principal ran to the buyer's own contribution, the lender's disbursement and the pre-EMI instalments the buyer paid after the builder stopped, and the Authority disagreed with the contention "that the complainant is entitled to refund only on payments made in respect of own contribution". Interest ran on each sum from the date the builder had it, because Section 2(za) Explanation (ii) runs the promoter's interest "from the date the promoter received the amount" until it is refunded. The bench applied 9 percent up to 30 April 2017 and Rule 16 from 1 May 2017: "the State Bank of India highest marginal cost of lending rate plus two percent". On SBI's table effective 15 August 2026 the highest tenor is 8.80 percent, so the rate today is 10.80 percent a year, simple interest, and it moves whenever SBI moves. Rule 17 gives the promoter sixty days from the date the refund becomes due, and every order adds that interest runs "up to the date of final payment".

You can also claim less. In complaint 942/2025 the buyer asked only for his own contribution with interest and closure of the loan, and the order of 6 April 2026 gave exactly that while noting that a full refund was available.

What about the pre-EMI I have already paid from my own pocket?

It goes into the memo of calculation as principal, one row per instalment, with interest from the date you paid it. In complaint 875/2023, after the builder stopped, the buyer's monthly payments of Rs 57,472 to the housing finance company from August 2019 onwards appear as separate rows, each carrying MCLR plus two from its own date to the memo date. The order of 9 February 2026 in complaint 1324/2024 says it in a line: the complainants were entitled to their amount "along with interest together with PEMI paid by the Complainants as per the memo of calculation".

Two things the memo must do. It must net off what the builder did pay: the Authority's format is principal plus interest less "refund from promoter", and in complaint 959/2024 (order of 11 July 2025) the complainants' memo excluded the subvention interest the promoter had paid the bank. And it must be built from the loan account statement, which shows month by month who paid each credit. Losses that are not money paid to anyone, rent while you waited, damage to your credit standing, are compensation, and Newtech keeps compensation with the adjudicating officer under Section 71, on a Form O complaint under Rule 30 with its own fee of Rs 1,000.

Do I have to keep paying the EMI while the case runs?

Nothing in the RERA Act suspends your loan, so stopping is a decision about the bank, not the builder. If you stop, the account slides towards non-performing status, the Section 13(2) notice follows, and the credit entry is made against you. If you pay, every instalment becomes another row in the memo with interest from its date, recoverable from the builder. The buyer in Appeal 61/2024 discarded the Section 13(2) notice on the builder's advice and then had to fight the lender as well as the builder.

K-RERA's interim power will not carry you here. Section 36 is prohibitory and reaches only a promoter, an allottee or an agent, so it cannot stay the bank's debit. The restraints on lenders in the public record have come from the Karnataka High Court under Article 226: the interim orders noted in complaint 875/2023 (WP 14509/2023) and in Appeal 61/2024 (WP 15328/2024), and the mandamus of 14 September 2022 restraining PNB Housing Finance "from taking any coercive measures against the petitioners for recovering any amount comprised in the Loan Agreements and Tripartite Agreements". The one K-RERA restraint on a lender, in complaint 942/2025, records that the Authority acted "as per the observations made by the Hon'ble High Court in W.P.No.36780/2025". A writ is a separate proceeding with its own cost, so budget for it as a second front. And a lender that appeals is not a promoter under Section 2(zk), so it makes no Section 43(5) pre-deposit (Karnataka High Court, WP 30968/2024, 12 November 2025).

Common mistake. Stopping the EMI and ignoring the bank's Section 13(2) notice because the builder said he would sort it out. The sixty days in that notice run against you, not the builder, and the lender's next steps are possession of the flat, a Section 138 notice on the security cheques and an entry on your credit record.

Which clauses of the tripartite agreement will be used against me?

Five clauses come up in almost every one of these cases. The table sets out each one, how it is used, and the answer the orders have given.

One more defence, an exclusive jurisdiction clause in the loan agreement naming another city's courts, was the promoter's main answer in complaint 247/2024, and the Authority ordered refund and closure regardless.

What if the builder is in insolvency?

Then the RERA complaint against the company stops at the moratorium and your claim moves to the resolution professional, while the loan stays yours. Once the NCLT admits the builder company, Section 14 of the Insolvency and Bankruptcy Code freezes proceedings against it, and an allottee files as a financial creditor in Form CA, including the amount the lender disbursed to the builder. The Mantri ruling, covered in the insolvency guide, keeps proceedings alive against the directors and associated entities. The guides on homebuyer rights when the builder is in insolvency and filing Form CA with the resolution professional cover the moratorium, the claim and the committee of creditors.

How do I file the subvention complaint at K-RERA, step by step?

1. Write to the builder invoking Section 18(1): you withdraw, you demand the amount received with interest at the Rule 16 rate, and you call on him to close the loan under the cancellation clause of the tripartite agreement. Copy the lender.
2. Write to the lender as set out above, and record that further instalments are paid under protest.
3. Assemble the file: agreement for sale and construction agreement, tripartite agreement, sanction letter, loan account statement from the first disbursement, every receipt, proof of the pre-EMI the builder did pay, and the correspondence about the delay.
4. File Form N under Rule 29 with the fee of Rs 1,000 by demand draft, arraying the promoter company, its directors and the lender. The order in complaint 1324/2024 records the Karnataka High Court's direction of 27 May 2024 in WP 10211/2023 that directors be made respondents so that execution can run against them.
5. Pray for refund of the entire amount with interest from each date of receipt, a direction to close the loan account with all pending EMI, interest and penalties, and interim restraint under Section 36 against cancellation of the allotment or any dealing with the unit.
6. File the memo of calculation in the Authority's format: one row per payment, yours or the lender's, with the date, the amount, the days to the memo date, the MCLR in force plus two and the interest, less every sum the builder actually paid the lender. Attach the statement pages behind each row.
7. On the order, count sixty days under Rule 17. If nothing comes, apply for recovery: Section 40(1) makes the amount recoverable as arrears of land revenue, Rule 25 routes it through the Karnataka Land Revenue Act, 1964, and Newtech settles that the principal is recoverable that way. The mechanics are in the guide on executing a money decree in India.
8. For losses beyond interest, file Form O under Rule 30 before the adjudicating officer for compensation under Sections 18(3) and 71, with its own Rs 1,000 fee.
9. Watch the appeal clock: sixty days from receipt of the order under Section 44(2). A promoter's appeal is not entertained until he deposits the amount payable to you under the proviso to Section 43(5).

Deadline warning. Four clocks run at sixty days or less. The lender's Section 13(2) notice gives you sixty days before it can act. Section 17 of the SARFAESI Act gives you forty-five days from that action to reach the Debts Recovery Tribunal. Rule 17 gives the builder sixty days from the order to pay. Section 44(2) gives either side sixty days to appeal.

What does it cost and how long does it take?

The official fees are small and fixed: Rs 1,000 for Form N under Rule 29, Rs 1,000 for Form O under Rule 30, Rs 5,000 for an appeal under Rule 33. Professional fees are agreed case by case, usually as a lump sum for the Authority stage with separate figures for a Tribunal appeal and a High Court writ. The real cost is the loan interest you carry while the case runs.

Timelines in the public orders ranged from a few months (complaint 942/2025, heard between January and March 2026 and decided on 6 April 2026) to about two years (complaint 247/2024, preliminary hearings from June 2024, order of 29 June 2026). Then sixty days for payment, then recovery. Where the Authority stops short, the appeal adds years: the closure direction in Appeal 61/2024 came on 6 March 2026 on a K-RERA order of 12 September 2022. Interest at the Rule 16 rate runs through all of it.

The numbers that stay fixed while the rest of the case moves:

What mistakes do subvention buyers make?

What I tell clients in these cases is that the file is won on the loan account statement and lost on the cancellation deed. The statement shows, month by month, who paid what and when the builder stopped. The cancellation deed does the opposite: it hands the builder a document saying you withdrew on his terms, and it is why the buyer in Appeal 61/2024 needed a Tribunal judgment in 2026 to get what the tripartite agreement promised in 2018. Where these cases actually turn is rarely liability, which the orders treat as settled once the pre-EMI stops and the possession date passes. They turn on the memo, and on whether the lender and the directors were before the Authority when the order was passed.

• Signing the builder's cancellation deed or a settlement that refunds your own contribution and leaves the loan to be closed later. In Appeal 61/2024 the promoter's letters of 5 June 2020 promised closure in three instalments and the loan was still open in 2026.
• Discarding the lender's Section 13(2) notice on the builder's assurance, then facing a Section 138 notice and recovery proceedings in your own name.
• Filing against the company alone, or leaving the lender's disbursement and your own pre-EMI payments out of the memo.
• Signing a customisation, supplementary or extension document after the possession date has passed, which hands the builder a new date to argue from.

Frequently Asked Questions

This article is for general informational purposes only and does not constitute legal advice. Consult a qualified advocate for advice on your specific situation.

Related Guides

Subvention disputes are handled by the RERA homebuyer disputes practice, and recovery after the order by the money recovery practice.

• Builder Delay and Fraud: How Homebuyers in India Can Fight Delayed Possession and Recover Compensation
• Builder in Insolvency? Homebuyer Rights After the Supreme Court's Mantri Ruling (2026)
• Form CA: How a Homebuyer Files a Claim When the Builder Is in NCLT