Escalation clause in a flat agreement: what a builder may add after you sign, and what it may not

The letter is two paragraphs long and polite. Steel and cement have risen sharply, it says, and to keep the project on schedule the company is "constrained to revise" the rate by Rs 150 a square foot of carpet area, payable with your next instalment. A second, smaller line passes on an increase in a government charge. Most buyers read a letter like this as a bill. It is really a question about the escalation clause in a flat agreement, a paragraph most buyers never read until a letter like this arrives. In Maharashtra that paragraph says something many of them do not expect. The price is escalation-free, and the exceptions are narrow and have to be proved.

Meera's letter#

Meera (illustrative, as our stories always are) is 41 and lives in Thane, and the 3BHK she bought on the twelfth floor of a KDMC tower near Dombivli is hers now. This letter came long before the keys, midway through construction. It revised her rate by Rs 150 a square foot, Rs 1.44 lakh on her 960 square feet of carpet area, citing steel and cement, and added Rs 19,500 as her share of an increase in a charge the planning authority levies. Both were to be paid with her next instalment. Nothing was enclosed for either. Names and numbers in this story are illustrative.

Her instinct, as with most paperwork, was to let someone else decide, and the sales manager she rang said most buyers in the tower had already paid. What slowed her was an afternoon before she signed, spent setting her draft beside MahaRERA's model form. The price clause had carried no highlighting, and she went back to it before paying anything.

What the law actually says#

The agreement follows the state's form. Section 13(1) of the RERA Act bars a promoter from taking more than 10 percent of a flat's cost as an advance or application fee before a written agreement for sale is signed and registered. Section 13(2) leaves its form to the rules, and Maharashtra's rule 10(1) requires it to conform to the Act and the rules and to be in accordance with the model form of agreement at Annexure A, which MahaRERA publishes. A promoter may adapt the model, but under a MahaRERA order of 3 June 2022 every deviation must be highlighted in a different colour, and the proforma agreement is uploaded with a deviation sheet when the promoter applies to register the project. Order 38/2022 goes further for some clauses, among them area difference, termination and parking, which must appear exactly as the model has them.

The price clause. The model's total price "is escalation-free, save and except" increases "on account of development charges payable to the competent authority and/or any other increase in charges which may be levied or imposed by the competent authority Local Bodies/Government from time to time". When the promoter raises such a demand, it "shall enclose the said notification/order/rule/regulation published/issued in that behalf to that effect along with the demand letter", and the increase "shall only be applicable on subsequent payments".

That is one exception with three conditions. The increase must be one an authority imposed. It must be proved by the instrument that imposed it, enclosed with the letter rather than described in it. And it can ride only on payments still to come. The demand sentence does use the word "cost", but inside the phrase "development charges, cost, or levies imposed by the competent authorities": a cost the authorities impose, not the dealer's price of steel.

What the clause leaves out. Steel, cement, sand, labour and fuel appear nowhere in it, and neither does a revised rate per square foot or a "development" or "infrastructure" charge with no notification behind it. Lines your agreement already lists, with their figures, are not escalation either: they are the agreement doing what it said, and the possession demand letter tests most of them. A floor rise or location premium belongs inside the agreed total for the same reason.

What the Act asks of you. Section 19(6) makes the buyer responsible for "necessary payments in the manner and within the time as specified" in the agreement, and section 19(7) charges interest "at such rate as may be prescribed" for any delay. So the scheduled instalment is due on its date, and a proven authority increase with the payments that follow it. A line the agreement does not provide for is not a payment it specifies: until the promoter shows its basis, it is a request.

Older agreements. Agreements signed before RERA's model form are a different document, and demands under them still reach the Maharashtra Real Estate Appellate Tribunal, which hears appeals from MahaRERA's orders. In a ruling reported by LiveLaw in November 2024, buyers in the sale component of a slum rehabilitation scheme had been promised possession between January and July 2011. The occupancy certificate came in November 2019, and after it the developer demanded more for escalation in construction cost, the extra cost of lifts and an increased flat area, plus interest because those demands were unpaid. The Tribunal held the demand for escalation in the cost of building materials unlawful. It observed that escalation could reasonably be allowed from the agreement to the due date of possession, and only where the developer proved it with documents; this demand came more than eight years after the promised dates, without that proof. If an older agreement of yours does allow escalation, those are the ruling's two limits.

Taxes move by law, not by letter. An under-construction flat carries GST at 5 percent, or 1 percent where it meets the affordable housing tests, without input tax credit, and a completed flat carries none; the GST rate changes of September 2025 left all three where they were. GST is charged on the price, so a change in its rate is notified for every buyer at once and moves your tax, not your price. Stamp duty and registration charges were paid when your agreement was executed and registered, on the higher of the agreement value and the ready reckoner value, so there is nothing in them for a mid-construction letter to revise. GST on flats and stamp duty and registration charges have the rates.

Lawful additions against disguised escalation#

The table reads the model form; if your own price clause is highlighted as a deviation, read that clause instead.

Your routes, compared#

Sending a legal notice to your builder covers what the notice must say, and filing a MahaRERA complaint and appeals to the Tribunal cover the last two routes.

An analogy: the fixed-fare cab#

Book a cab at a fixed fare and the fare is the driver's problem from then on. If diesel goes up halfway across the city, the fare does not, because fuel was always the driver's cost. Tolls are different: the booking says they are extra, at actuals, and the driver shows you the receipt. A toll that goes up after you have passed the booth is not your toll. The model agreement works the same way. Steel and cement are the diesel, an authority's increased charge is the toll, the notification is the receipt, and "subsequent payments" is the road still ahead.

The cost pressure behind these letters, and where disputes go#

Letters like Meera's are written when costs really have moved. In 2022, CREDAI-MCHI, the developers' association for the Mumbai region, warned that rising construction costs could push housing prices up 10 to 15 percent, The Tribune reported. That is a reason for a new launch's price list to go up. It is not a term of an agreement signed before it. Costs fall as well as rise: GST on cement was cut from 28 percent to 18 percent from 22 September 2025.

When a builder presses a demand instead of dropping it, the forum is MahaRERA, which disposed of 6,945 complaints in 2025, 81 percent more than the 3,824 it disposed of in 2024, according to its figures as reported by Outlook Money.

What to do this week#

1. Find your price clause. Read the price paragraph of your registered agreement beside MahaRERA's model form, and note whether it is highlighted as a deviation. If it is, the highlighted words are what you signed.
2. Sort the letter's lines. Mark each one as an authority charge, a tax, or something else, using the table above.
3. Ask for the instrument behind every authority charge: the notification or order itself and how your share was worked out, not a summary of it.
4. Reply in writing before the due date. Quote the clause, accept what it supports and decline the rest. Before you write, look the project up on ReraGenie: its free page lists every document the promoter filed with its upload date, which can include the proforma agreement and deviation sheet uploaded at registration, and the complaints already filed against the project with case numbers, so you can see whether other buyers have taken a demand to MahaRERA.
5. Pay what is due on time. The scheduled instalment on its date, plus any proven authority increase, under a covering letter naming what you decline and why. Check the instalment itself the usual way, against the stage on site, as checking a demand letter explains.
6. If the demand is pressed, with interest or termination threatened over it, send a legal notice, then complain to MahaRERA.

What Meera did#

The clause was the model's, word for word. She wrote to the builder that evening, quoting it: she asked for the notification behind the Rs 19,500 and declined the Rs 1.44 lakh, because steel and cement are not charges any authority levies. The notification came four days later, an order of the planning authority raising the charge, dated after her agreement. She checked her share against it and paid her scheduled instalment on its due date with the Rs 19,500 added, under a covering letter repeating what she declined and why.

The builder did not press it. Her next demand letter carried the stage instalment and nothing else, and steel and cement were not mentioned again. She had needed no lawyer and no complaint, only the paragraph, the notification and two letters with dates on them.

What the filings add#

For any covered Maharashtra project, the Rs 499 ReraGenie buyer report brings three things to a letter like this. The project's filed documents come as a ZIP, among them, where filed, the proforma agreement and deviation sheet uploaded at registration, so the price clause you signed can be read beside the one the promoter filed. Complaints and cases are set out in plain words, showing whether other buyers in the project have already taken a dispute to MahaRERA. And the possession story, the first promised date against the current one, comes with construction pace against the district, which matters for the reason the Tribunal gave: escalation, where an agreement allows it, could reasonably run only to the due date of possession. It includes a free 90-day project watch, which emails you when the filing changes. See what the buyer report contains.

This article is educational and not legal advice. For a dispute, consult a lawyer who practices before your state's RERA.