In a strict enforcement move under the Real Estate (Regulation and Development) Act, 2016, the Karnataka Real Estate Regulatory Authority (K-RERA) has decided to impose monetary penalties on builders and promoters who have failed to submit mandatory annual audit reports for their registered housing projects.
Despite multiple extensions and reminders, a large number of promoters have not complied with the statutory requirement for the financial year 2024–25. Left with no alternative, K-RERA has now ordered that penalty proceedings be initiated with immediate effect, calculated on the basis of the estimated cost of the housing project.
Statutory Requirement Under RERA
The RERA Act, enacted by the Centre in 2016 and implemented in Karnataka in 2017, mandates strict financial disclosure by promoters to ensure transparency and safeguard homebuyers’ interests.
Under Section 4(2)(l)(D) of the RERA Act, every promoter is required to submit a Chartered Accountant-certified annual audit report for each registered project after the close of every financial year. The report must disclose:
Funds collected from allottees
Expenditure incurred on the project
Percentage of project completion
For this purpose, K-RERA has prescribed Form No. 7, which must be submitted online through the K-RERA portal.
Repeated Deadlines Ignored by Builders
The financial year 2024–25 ended on March 31, 2025, and promoters were required to submit their audit reports by September 30, 2025. However, compliance remained poor even after repeated extensions.
K-RERA extended the deadline successively to:
September 12, 2025
November 15, 2025
December 12, 2025
Despite these relaxations, most builders failed to submit the required reports. Some promoters reportedly filed audit reports at their convenience, undermining the regulator’s ability to monitor project finances effectively.
While K-RERA has not disclosed the exact number of defaulting promoters, it has acknowledged that non-compliance is widespread, forcing the authority to take coercive action.
Penalties Invoked Under Section 38(1)
Invoking its powers under Section 38(1) of the RERA Act, K-RERA has now ordered the levy of annual penalties on non-compliant builders. The authority has clarified that the penalty order will be effective immediately, and recovery proceedings will follow if promoters fail to comply.
This move reinforces K-RERA’s regulatory stance that statutory disclosures are not optional, and failure to adhere will attract financial consequences.
Penalty Structure Based on Project Cost
K-RERA has prescribed a graded penalty structure, calculated per year, based on the estimated cost of the housing project:
Projects up to Rs 25 crore: Rs 20,000
Projects between Rs 25 crore and Rs 50 crore: Rs 25,000
Projects between Rs 50 crore and Rs 100 crore: Rs 50,000
Projects above Rs 100 crore: Rs 1,00,000
These penalties will apply annually for continued non-submission of audit reports.
Relief for FY 2023–24: Deadline Extended
In a partial relief measure, K-RERA has extended the deadline for submission of audit reports for the financial year 2023–24 without penalty until January 20, 2026.
However, the authority has issued a clear warning that if promoters fail to submit the audit reports along with applicable penalties between January 20 and March 31, 2026, strict action will be initiated from April 1, 2026.
Recovery Proceedings and Enforcement
K-RERA has reiterated that recovery proceedings will be carried out in accordance with the provisions of the RERA Act and applicable rules. The authority has emphasized that persistent non-compliance will not be tolerated and that enforcement action is necessary to maintain financial transparency and accountability in the real estate sector.
Impact on Homebuyers and the Real Estate Sector
Annual audit reports play a critical role in ensuring that homebuyers’ funds are used solely for the project for which they are collected. By tightening enforcement, K-RERA aims to prevent fund diversion, enhance regulatory oversight, and restore buyer confidence.
This move sends a strong signal to promoters that compliance under RERA is mandatory, and failure to meet statutory obligations will have financial and legal consequences.
