What is demand letter?
Also called: payment demand letter, demand notice, instalment demand, call letter from builder
A demand letter is the builder's formal request for the next instalment, sent when a milestone in your payment plan is reached. It states the stage completed, the amount and tax due, and the due date, and your bank needs it to release a loan disbursement.
Under a construction-linked plan you'll get one every few months. A proper demand letter names the milestone ('casting of 14th floor slab, Tower B'), the percentage of the agreement value now due, the GST on it, credit for amounts already paid, and a due date, usually 15 to 30 days away. Builders often attach an architect's certificate confirming the stage. If you have a loan, you forward the letter to the bank along with proof of your own share, and the bank pays its part straight into the builder's collection account.
Late payment interest is where these letters get expensive. State RERA rules generally fix it at the SBI's highest marginal cost of lending rate plus 2%, and Section 2(za) of the Act says the rate a builder charges a buyer for default must equal the rate the builder pays the buyer for its own default. Older pre-RERA agreements sometimes carried 18% or 24% a year on overdue instalments, and a few builders still try to apply those figures.
Don't pay blind. Compare the milestone with the progress the builder has uploaded on the state RERA portal, and go to the site if you can. Check the arithmetic, especially whether GST has been charged on items that shouldn't carry it, such as a refundable deposit. If a demand is premature, dispute it by email before the due date so there is a record against the interest clock.
Keep every demand letter and receipt in sequence. When you later claim interest for delayed possession or file a RERA complaint, the dates on those demands are often the clearest evidence of when construction actually slowed.
A buyer of a ₹95 lakh flat in Kharadi, Pune receives a demand for 10% on completion of the 8th floor slab: ₹9.5 lakh plus ₹47,500 GST, due in 21 days. The buyer pays the GST and a 20% own share from savings, and the bank releases the remaining ₹7.6 lakh directly to the builder.
Paying before checking the stage on site. Money disbursed for a slab that wasn't cast is very hard to claw back.
Questions people ask about demand letter
What happens if I pay a demand letter late?
The builder can charge interest at the rate set in the agreement and your state's RERA rules, usually SBI MCLR plus 2%. Repeated default can lead to cancellation after notice.
Does the bank need the demand letter to disburse?
Yes. Lenders release each tranche against the builder's demand letter, and many also ask for the architect's stage certificate and your own contribution receipt.