Get interest for delayed flats as land revenue arrears
On December 10, 2025, the Punjab RERA authority ordered a builder to compensate a homebuyer with interest due to delayed possession.They also said that this interest compensation would be classified as "Land Revenue" according to Section 40(1) of the RERD Act, 2016.
Additionally, Punjab RERA stated that the amounts should be collected as land revenue by the Competent Authorities as provided in the Punjab Land Revenue Act, 1887, read with Section 40(1) of the Real Estate (Regulation and Development) Act, 2016.
So, what does it mean when the builder is required to pay interest compensation and this amount is deemed as arrears of land revenue.
What does it mean when interest compensation awarded to homeowners is regarded as arrears of land revenue?
Avnish Sharma, Partner at Khaitan & Co, says that by invoking Section 40 (1) of RERA Act, 2016, the authority can ensure that a compensation awarded by it to a homebuyer is treated as a sovereign due owed to the government and not just as a civil liability.
Sharma says: “Section 40(1) of the Real Estate (Regulation and Development) Act, 2016 creates a statutory fiction by deeming any interest, penalty or compensation payable under a RERA order to be recoverable as ‘arrears of land revenue’. By invoking this provision, Punjab RERA has ensured that the compensation awarded is not treated as a mere civil liability, but as a sovereign due owed to the state.”
Also read: Waited long for a delayed project? Punjab RERA says no extra compensation for homebuyer other than interest for delay period
How does this help homeowners?
As Sharma points out, this basically means that the compensation given to homeowners can be recovered through the state’s revenue recovery machinery—just like unpaid land revenue or government dues—without the homebuyer starting separate legal processes in a civil court.
Sana Khan, Associate Partner, SNG & Partners said the RERA authority has determined that interest and/or compensation owed by the builder will be treated as ‘arrears of land revenue’.
Khan mentions that since land revenue is basically a tax paid to the state government, considering interest, penalties or compensation owed by the promoter as arrears of land revenue creates a strong , quick and efficient recovery system . This system is outlined in the collection process of the owed amounts and is the responsibility of District Collectors, or Tahsildars, which allows for fast relief to the homebuyers.
What could happen to the builders if they fail to pay the interest compensation as ordered?
According to Sharma, once the recovery certificate is issued, the district administration can attach bank accounts, seize movable assets, attach or auction off immovable property, and even start arrest and detention procedures in under the land revenue law.
Sharma emphasizes that crucially, the builder loses the procedural safeguards typically available in civil execution.
Sharma says: “Non-compliance can also expose the promoter to additional penalties and prosecution under RERA, making continued default both financially and reputationally damaging.”
What is a debt recovery certificate?
According to Khan, Section 40(1) of the Real Estate (Regulation and Development) Act, 2016 serves towards recovery of interest or penalty or compensation and enforcement of an order from Promoter or an Allottee or a Real Estate Agent; as the case may be.
Khan says: “In doing so, the adjudicating authority may issue a “Debt Recovery Certificate” which would be sent to the Deputy Commissioner or any other competent authority, as a means to facilitate the recovery of the dues as per the RERA Order.”
According to Sharma, the ‘Debt Recovery Certificate’ is a statutory recovery instrument under Section 40 of the RERA Act. It is a formal certification issued by the Authority quantifying the amount due and authorising the District Collector or Deputy Commissioner to recover it as arrears of land revenue.
Sharma says that once it is issued, the recovery process shifts from the regulatory forum to the district administration, which then proceeds under the respective state’s Land Revenue Act like the Punjab Land Revenue Act, 1887 for the state of Punjab.
Supreme Court precedent exists
Khan says that as per the Supreme Court’s judgement in Newtech Promoters and Developers Pvt. Ltd. Vs. State of UP and Ors, the court established and ratified that the refund along with interest and/or penalty and/or compensation from the Promoter under section 18 read with Section 40(1) under the RERA Act, has to be recovered as “Arrears of Land Revenue”.
What does the Punjab Land Revenue Act say?
Khan points out that under Section 3(6) of the Punjab Land Revenue Act, 1887; “Land Revenue includes assigned land-revenue and any sum payable in respect of land, by way of quit-rent or of commutation for service, to the Government or to a person to whom the Government has assigned the right to receive the payment.” Section 3(7) defines “Arrear of land-revenue” as land-revenue which remains unpaid after the date on which it becomes payable.
Additionally, Punjab RERA stated that the amounts should be collected as land revenue by the Competent Authorities as provided in the Punjab Land Revenue Act, 1887, read with Section 40(1) of the Real Estate (Regulation and Development) Act, 2016.
So, what does it mean when the builder is required to pay interest compensation and this amount is deemed as arrears of land revenue.
What does it mean when interest compensation awarded to homeowners is regarded as arrears of land revenue?
Avnish Sharma, Partner at Khaitan & Co, says that by invoking Section 40 (1) of RERA Act, 2016, the authority can ensure that a compensation awarded by it to a homebuyer is treated as a sovereign due owed to the government and not just as a civil liability.
Sharma says: “Section 40(1) of the Real Estate (Regulation and Development) Act, 2016 creates a statutory fiction by deeming any interest, penalty or compensation payable under a RERA order to be recoverable as ‘arrears of land revenue’. By invoking this provision, Punjab RERA has ensured that the compensation awarded is not treated as a mere civil liability, but as a sovereign due owed to the state.”
Also read: Waited long for a delayed project? Punjab RERA says no extra compensation for homebuyer other than interest for delay period
How does this help homeowners?
As Sharma points out, this basically means that the compensation given to homeowners can be recovered through the state’s revenue recovery machinery—just like unpaid land revenue or government dues—without the homebuyer starting separate legal processes in a civil court.
Sana Khan, Associate Partner, SNG & Partners said the RERA authority has determined that interest and/or compensation owed by the builder will be treated as ‘arrears of land revenue’.
Khan mentions that since land revenue is basically a tax paid to the state government, considering interest, penalties or compensation owed by the promoter as arrears of land revenue creates a strong , quick and efficient recovery system . This system is outlined in the collection process of the owed amounts and is the responsibility of District Collectors, or Tahsildars, which allows for fast relief to the homebuyers.
What could happen to the builders if they fail to pay the interest compensation as ordered?
According to Sharma, once the recovery certificate is issued, the district administration can attach bank accounts, seize movable assets, attach or auction off immovable property, and even start arrest and detention procedures in under the land revenue law.
Sharma emphasizes that crucially, the builder loses the procedural safeguards typically available in civil execution.
Sharma says: “Non-compliance can also expose the promoter to additional penalties and prosecution under RERA, making continued default both financially and reputationally damaging.”
What is a debt recovery certificate?
According to Khan, Section 40(1) of the Real Estate (Regulation and Development) Act, 2016 serves towards recovery of interest or penalty or compensation and enforcement of an order from Promoter or an Allottee or a Real Estate Agent; as the case may be.
Khan says: “In doing so, the adjudicating authority may issue a “Debt Recovery Certificate” which would be sent to the Deputy Commissioner or any other competent authority, as a means to facilitate the recovery of the dues as per the RERA Order.”
According to Sharma, the ‘Debt Recovery Certificate’ is a statutory recovery instrument under Section 40 of the RERA Act. It is a formal certification issued by the Authority quantifying the amount due and authorising the District Collector or Deputy Commissioner to recover it as arrears of land revenue.
Sharma says that once it is issued, the recovery process shifts from the regulatory forum to the district administration, which then proceeds under the respective state’s Land Revenue Act like the Punjab Land Revenue Act, 1887 for the state of Punjab.
Supreme Court precedent exists
Khan says that as per the Supreme Court’s judgement in Newtech Promoters and Developers Pvt. Ltd. Vs. State of UP and Ors, the court established and ratified that the refund along with interest and/or penalty and/or compensation from the Promoter under section 18 read with Section 40(1) under the RERA Act, has to be recovered as “Arrears of Land Revenue”.
What does the Punjab Land Revenue Act say?
Khan points out that under Section 3(6) of the Punjab Land Revenue Act, 1887; “Land Revenue includes assigned land-revenue and any sum payable in respect of land, by way of quit-rent or of commutation for service, to the Government or to a person to whom the Government has assigned the right to receive the payment.” Section 3(7) defines “Arrear of land-revenue” as land-revenue which remains unpaid after the date on which it becomes payable.
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