The Fiduciary Duty of Promoters under RERA: Strict Compliance, Enforcement, and Homebuyer Safeguards

In real estate transactions, the promoter plays a central role in planning, development, marketing, and delivery of real estate projects. In India, the conduct of promoters is primarily regulated by the Real Estate (Regulation and Development) Act, 2016 (RERA), enacted to ensure transparency, accountability, and protection of homebuyers.

Under Section 2(zk) of RERA, a promoter includes a person who constructs, develops, sells, or causes to be constructed or developed any real estate project for sale.

Key Functions and Duties of a Promoter under RERA

1. Registration of Real Estate Project

A promoter must register the real estate project with the Real Estate Regulatory Authority before advertising, marketing, or selling any unit (Section 3). As for example, a builder launching a residential apartment project with more than eight flats must obtain RERA registration before issuing brochures or booking flats.

In the case of Newtech Promoters & Developers Pvt. Ltd. v. State of UP (2021) 18 SCC 642, the Supreme Court upheld the mandatory nature of RERA registration and confirmed that RERA authorities have jurisdiction over disputes involving registered projects.

2. Disclosure and Transparency Obligations

Under Section 4 of the RERA Act, 2016, promoters must disclose essential project details such as land title, sanctioned plans, completion timeline, financial information, and status of approvals on the RERA website. These disclosures must be kept updated, and any change in layout or delay in construction must be promptly informed to ensure transparency for homebuyers.

In Pioneer Urban Land & Infrastructure Ltd. v. Govindan Raghavan (2019) 5 SCC 725, the Supreme Court held that non-disclosure or misrepresentation of material facts amounts to unfair trade practice, and that one-sided and oppressive agreements imposed by promoters are unenforceable.

3. Duty Not to Make False or Misleading Advertisements

Section 12 of the RERA Act prohibits promoters from making false statements or misleading advertisements concerning project approvals, amenities, or completion timelines. Any representation made through brochures, advertisements, or promotional material—such as assuring “possession in two years” without obtaining necessary approvals or having a realistic construction plan—constitutes a violation of RERA.

In Experion Developers Pvt. Ltd. v. Sushma Ashok Shiroor (2022) SCC OnLine SC 416, the Supreme Court held that such misleading representations are binding on promoters, and buyers are entitled to rely upon them, thereby strengthening consumer protection in real estate transactions.

4. Financial Discipline and Separate Bank Account

Under Section 4(2)(l)(D) of the RERA Act, a promoter is mandatorily required to deposit 70% of the amounts collected from allottees in a separate bank account, which can be utilized exclusively for land and construction costs of the concerned project. This provision aims to prevent misuse and diversion of funds, ensuring timely completion of projects. Accordingly, funds collected for Project A cannot be diverted to finance Project B.

In Manoj Kumar v. Gaur Grandeur (UP RERA), the promoter was penalised for diverting project funds, reaffirming the principle of strict financial discipline and accountability imposed on promoters under RERA.

5. Adherence to Sanctioned Plans and No Unilateral Changes

Under Section 14 of the RERA Act, a promoter is prohibited from making any alteration to the sanctioned plans, layout, or specifications of a project without obtaining the prior consent of at least two-thirds of the allottees, excluding the promoter himself. Accordingly, a promoter cannot, for instance, convert a promised garden or common open space into commercial shops without buyers’ approval.

In DLF Ltd. v. Manmohan Lowe (NCDRC), such unilateral changes in layout plans were held to constitute deficiency in service, reinforcing the statutory protection granted to homebuyers against arbitrary modifications.

6. Timely Completion and Delivery of Possession

Under Section 18 of the RERA Act, a promoter is legally bound to complete the project and hand over possession within the stipulated timeline agreed with the allottees. Where possession is delayed without valid justification—such as failure to deliver a flat promised by December 2023—the allottee is entitled to seek compensation, interest, or refund of the amount paid.

In Fortune Infrastructure v. Trevor D’Lima (2018) 5 SCC 442, the Supreme Court categorically held that homebuyers cannot be compelled to accept delayed possession and are entitled to a refund along with interest, thereby affirming strong consumer protection under real estate law.

7. Refund, Compensation, and Interest

Under the RERA framework, if a promoter fails to complete the project, breaches the terms of the agreement, or loses legal title to the land, the allottee is entitled to withdraw from the project and claim refund along with interest and compensation. Thus, where a project is stalled due to the promoter’s fault, homebuyers are not bound to wait indefinitely and may lawfully seek restitution.

In Kolkata West International City Pvt. Ltd. v. Devasis Rudra (2019) 8 SCC 613, the Supreme Court held that delay beyond a reasonable period amount to breach of contract, entitling the buyer to a refund with interest.

8. Defect Liability

Under Section 14(3) of the RERA Act, a promoter is liable for any structural defects or defects in workmanship, quality, or services that are reported by the allottee within five years from the date of handing over possession. Such defects—such as wall cracks or faulty plumbing—must be rectified by the promoter free of cost within the prescribed time, failing which the allottee is entitled to compensation.

In Rajeev Kumar v. Experion Developers (Haryana RERA), the authority directed the promoter to rectify the defects and pay compensation for non-compliance, reinforcing the continuing post-possession responsibility of promoters.

9. Formation of Association and Conveyance of Title

Under Section 17 of the RERA Act, promoters are under a statutory obligation to facilitate the formation of an association of allottees and to execute a registered conveyance deed transferring title in favour of the allottees or their association, including rights over common areas. Failure to convey such title, particularly in respect of common facilities, amounts to a breach of statutory duty.

In Nahalchand Laloochand Pvt. Ltd. v. Panchali Co-operative Housing Society Ltd. (2010) 9 SCC 536, the Supreme Court categorically held that promoters have no right to retain common areas and are bound to transfer them to the society, thereby protecting the collective ownership rights of homebuyers.

Recent RERA Judgments & Key Decisions (2023–2025)

• In its decision dated 10 December 2025, the Punjab Real Estate Regulatory Authority held that where a homebuyer chooses to continue in a delayed project, the relief is confined to statutory interest prescribed under RERA for the period of delay, and no additional compensation—such as rent, litigation expenses, or damages for mental agony—is payable. The ruling clarifies that while RERA ensures compensation for delay, interest remains the sole remedy when the allottee does not opt to withdraw from the project.
• In 2025, the Haryana Real Estate Regulatory Authority held Godrej Real View Developers liable for delayed possession and directed payment of interest at 10.8% per annum to the affected allottees. The Authority reaffirmed that promoters are obligated to compensate buyers for delay in handing over possession, and such liability cannot be avoided on the ground of force majeure or alleged non-availability of approvals, in line with the principle laid down in Newtech Promoters & Developers Pvt. Ltd.
• In October 2025, the Karnataka Real Estate Regulatory Authority held that a landowner involved in the development and marketing of a project qualifies as a “promoter” under the RERA Act and is therefore liable for statutory obligations. The Authority directed the landowner to pay compensation of approximately ₹6 lakh per annum to homebuyers for delayed possession. This ruling significantly expands the scope of promoter liability, clarifying that even landowners, and not merely builders or developers, can be held accountable under RERA where they participate in project promotion or sale.
• The Karnataka High Court held that orders passed by RERA authorities are not executable through civil courts, as the RERA Act provides a self-contained statutory mechanism for enforcement. The Court clarified that such orders must be enforced as arrears of land revenue, in accordance with the procedure prescribed under RERA, and not under the Civil Procedure Code. This ruling reinforces the legislative intent that RERA operates as a complete code in itself, ensuring speedy and effective enforcement without recourse to ordinary civil execution proceedings.
• In 2025, the Supreme Court of India upheld the Allahabad High Court’s ruling declaring Larsen & Toubro (L&T) as the sole promoter for the purposes of RERA, thereby resolving disputes concerning promoter identity in the concerned project. The judgment provides crucial clarity in cases involving joint ventures or co-promoted developments, affirming that promoter liability under RERA depends on the entity exercising effective control and responsibility over the project, rather than merely the formal structure of the collaboration.
• In January 2025, the Bombay High Court held that disputes arising under the RERA Act are non-arbitrable, even where the agreement between the promoter and allottee contains an arbitration clause. The Court ruled that RERA is a special welfare legislation providing exclusive jurisdiction to the Regulatory Authority and the Appellate Tribunal, and its statutory remedies cannot be bypassed through private arbitration. This decision safeguards the consumer-centric framework of RERA from being diluted by contractual clauses.
• In August 2025, Haryana RERA held that complaints filed after an inordinate and unexplained delay, generally exceeding three years from the date of default or cause of action, may be dismissed on the ground of unreasonable delay, despite the absence of an express limitation period under RERA. The Authority observed that stale claims undermine certainty and fairness, thereby recognising a de-facto limitation period for RERA proceedings.
• In August 2025, the Maharashtra Real Estate Appellate Tribunal (MREAT), Navi Mumbai, set aside MahaRERA’s unilateral extension of the possession timeline granted to the promoter. The Tribunal held that any material change in the possession date requires the prior consent of homebuyers in terms of Section 14 of RERA, and cannot be imposed administratively. The ruling reinforces the statutory protection against unilateral alteration of project timelines.
• In 2025, Odisha RERA and the Appellate Tribunal held that where a promoter mortgages project land in a collusive or fraudulent manner, the jurisdiction of RERA is not ousted by proceedings under the SARFAESI Act. The authorities ruled that homebuyer interests take precedence, and RERA can continue to grant relief notwithstanding secured creditor actions, thereby preventing misuse of mortgage arrangements to defeat buyer rights.
• During December 2025 and January 2026, the Haryana Real Estate Regulatory Authority passed multiple orders against developers such as TDI Infrastructure, Reheja Developers, and SRS Group for violations including delayed possession, non-compliance with project timelines, and failure to refund amounts. Although fact-specific, these orders collectively reaffirm RERA’s consistent approach in directing refunds, interest, and strict compliance, strengthening accountability in the real estate sector.
• Other Noteworthy RERA Trends (2025): The year 2025 witnessed several significant developments shaping RERA jurisprudence. Allegations of large-scale fund diversion in Jaypee group projects led to the registration of criminal FIRs, highlighting how misuse of homebuyers’ funds can attract not only regulatory penalties under RERA but also criminal liability, with serious implications for the protection of allottees’ rights. The Bombay High Court further strengthened the consumer-protection character of RERA by holding that RERA disputes are non-arbitrable, ensuring that statutory remedies cannot be diluted through private arbitration clauses. Additionally, Punjab RERA clarified that in cases of project delay where the allottee chooses to continue, the relief is generally restricted to statutory interest, thereby limiting claims for additional compensation and bringing clarity on the scope of remedies available under RERA.

Summary: Key Legal Principles Emerging (2023–2025)

 Conclusion:
Under RERA, promoters act as statutory trustees of homebuyers’ interests. The Act imposes strict duties to ensure transparency, financial discipline, timely delivery, and consumer protection. Judicial interpretations consistently reinforce buyers’ rights, making promoter compliance mandatory, enforceable, and fiduciary in nature, transforming their role from a mere developer to one accountable to allottees.