It is a well-known fact that housing is one of the basic needs of humans.
Access to adequate housing can be a precondition for the enjoyment of several
human rights, including the rights to work, health, social security, vote,
privacy, or education. Safe, secure, and adequate housing is a fundamental need
of human beings. Realizing the gravity of the problem of the housing, the right
to housing has been recognized under international as well as regional human
rights law as it is the basic right of the individual. In the line with the
international human rights law, various States have also carved their legal
system to encompass the right to housing as the fundamental right of the
The Indian judiciary has demonstrated commendable interest in the
right to housing and interpreted this right under the context of the right to
life provided under article 21 of the Constitution. Over some time, it was seen
that the demand for housing has been significantly increased. To give its
importance and to bring transparency, The Real Estate Regulation Act (RERA) was
introduced on 1 May 2016 and implemented on 1 May 2017.
The prime objective of
this act is to bring accountability and transparency to make real estate
transactions simple as housing is a key input in economic, social, and civic
development. Many buyers know that RERA has been implemented to protect the
. RERA act mainly focuses on the consumer's major issues
related to incorrect information of projects by the promoters, maltreatment of
funds, and delays in completing real estate projects.
The Real estate Regulation and Development Act, (RERA), 2016 is a revolutionary
act of the parliament of India in the history of the Indian real estate sector.
On 10th March 2016, Rajya Sabha passed the real estate bill, and on 15th March
2016 by the Lok Sabha. And on 25th March 2016, the bill was passed by the
Honorable President. Including that for publishing information our honorable
President published the act and was published in the Official Gazette on 26th
For regulation and promotion of the real estate sector, an act to
establish the real estate regulatory authority to ensure the sale of plot,
apartment or building, sale of real estate project, or to protect the interest
of the consumer in the real estate sector and to establish an adjudicating
mechanism for speedy dispute release in an efficient and translucent manner.
According to RERA, to govern the functioning of regulators, each state and union
territory will have its own set of rules and regulators. Including the national
capital, the center has drafted the rules for Union territories. Many of the
states have notified rules and a regulatory will start functioning, while many
states are still behind on schedule for notification of RERA rules.
states till 31st July 2017 are Madhya Pradesh, Maharashtra, Rajasthan, Gujarat,
Andhra Pradesh, Bihar, Chattisgarh, Haryana, Karnataka, Kerala, Uttarakhand,
Odisha, Punjab, Tamilnadu, and Uttar Pradesh. Land acquisition has become an
issue in numerous places. Without the approval of plans, delinquent builders
often sell projects to investors with bad quality of construction, and project
stuck in litigation, etc. RERA seeks to address issues like delays, price,
quality of construction, and other changes. The act aims to improve
translucently and motivate fair practices in the sector.
What Is The RERA (Real Estate Regulatory Act)?
The Real Estate (Regulation and Development) Act, 2016 (RERA) is an Act passed
by the Indian Parliament. In the real estate sector, the RERA seeks to safeguard
the interests of home buyers and also amplify investments. On March 10, 2016,
the Rajya Sabha passed the RERA bill, followed by the Lok Sabha on March 15,
2016, and it came into force from May 1, 2016, where 59 of its 92 sections were
notified, and from May 1, 2017, the remaining provisions came into force. The
central and state governments are necessitating notifying their own rules under
the Act, based on the model rules drafted under the central Act.
The key objectives of the Act are:
- Ensuring Translucency in the real estate sector concerning the sale of
flats, apartments, plots, buildings, or any kind of real estate project.
- Establishing an adjudicating mechanism for speedy dispute redressal.
- Protecting the interest of buyers/allottees in the real estate sector.
- Establishing a bridge of trust between buyers and the promoters, using
authority as a medium.
With the rise in disputes between buyers and the promoters, the Real Estate
Regulatory Act notification by the Government of India has led to some
guidelines which the promoters have to fulfill as to legally build a project or
RERA has brought some milestone changes in the real estate sector of India. The
unflinching promise of the government into a private sector like real estate
maintaining fair play in the property business has come as a big solace for the
buyers. Apart from the buyers, the promoters and the real estate agents who go
by the government norms, but suffer from some loss because of some ill practices
by some promoters, real estate agents also will feel happy and pleased.
present only four states have established their permanent regulator they are:
Madhya Pradesh, Maharashtra, Punjab, and Gujarat. The remaining states are
working with interim regulators. Only 23 States/UTs have notified the rules
under the Act, while six states have drafted the rules but have not yet
The home buyers have grumbled for so long that real estate transactions were
skewed and laboriously in the esteem of the developers. RERA and the
government's model code, focus to design a more rightful and fair transaction
between the seller and the buyer of properties, substantially in the primary
market. RERA will make real estate purchase effortless, by bringing in superior
accountability and translucency, provided that states do not weaken the
provisions and the soul of the central act.
The RERA will bestow the Indian real estate industry its first regulator. For
each state and union territory, the Real Estate Act makes it obligatory, to form
its regulator and draft the rules that will govern the functioning of the
Which Projects Come Under RERA?
The projects which shall come under the RERA are likely to be:
- Commercial and residential projects including plotted development.
- Projects measuring more than 500 sq. meters or 8 units.
- Projects without Completion Certificate, before the commencement of the
The project is only for renovation/repair / re-development which does not
involve re-allotment and marketing, advertising, selling, or new allotment of
any apartments, plot, or building in the real estate project, will not come
Reasons For Introducing RERA
Since 2012 Indian real estate sector has been facing collapse due to factors
- Low rental yield,
- Inventory pile-up,
- Unclear taxes and arbitration.
Nevertheless, the property prices have not stabilized accordingly The Indian
Express, 2017. As a consequence, the demand for property has reduced further.
This reduced demand in the recovery of investment for builders.
For a homebuyer investing his life savings in the property, indeterminate
delays, or hinder is a cause for worry. By misleading those about the quality of
construction and completion, brokers or property agents took advantage of
approaching homebuyers. They mislead homebuyers about concerning resources of
the property. They would commit orally about concerning property documents that
were often missing or incomplete. Moreover, the agents would conceal the status
of properties under litigation from prospective buyers.
Jurisdiction Of RERA
From July 1, 2017, the Real Estate Regulation and Development Act (RERA) came
into force in various States. The ambits of the RERA act are not restricted to
new projects to be started after the implementation of the RERA Act but also
covered projects that were ongoing on the date of commencement of the Act and
had not received a completion certificate from the concerned Authority.
A question of law recently arose before the Maharashtra RERA Authority that
whether in cases of termination of the agreement before the implementation of
RERA Authority, the jurisdiction of the RERA authority is ousted or not?
In the case of Chauthiprasad S. Gupta vs. M/S Nahalchand Laloochand Pvt. Ltd
the buyer had made a substantial payment to the builder, and thereto the builder
executed and registered a sale agreement for a unit in NL Aryavarta
(East), Mumbai. As per the buyers' version, the builder terminated the agreement
of sale unilaterally by way of a termination letter without giving any
opportunity of being heard to the buyer. The builder, therefore, prayed before
the Authority for directions to the builder to withdraw the termination letter
and for awarding of interest and compensation.
The builder disputed the claim of the buyer on the pretext that the termination
of the agreement was done before the implementation of RERA therefore the RERA
authority lacked the jurisdiction to entertain the present complaint. Further,
the builder contended that the termination of the agreement was as per the
clauses of the agreement hence needs no interference from the Authority.
Concerning the jurisdiction issue raised by the builder, the Authority took the
view that the project in question falls within the definition of an ongoing
project and that the project is registered under Section 3 of the RERA Act. The
jurisdiction of RERA Authority over such projects continues until the projected
is completed and the obligations of the promoter regarding the project get fully
discharged. The authority, therefore, decided that the RERA Authority has
jurisdiction to entertain such cases.
To conclude, the builders today cannot escape their liability by taking shelter
under the non-maintainability of the complaint if the project is registered
under the RERA and has not received an Occupational/ Completion certificate yet.
Impact Of RERA On Real Estate Industry
- Initial backlog.
- Increased project cost.
- Tight liquidity.
- The risein the cost of capital.
- Increase in project launch time.
Initially, a lot of work is to be done to get the existing and new project
registered. Details such as the status of each project executed in the last 5
years, promoter details, detailed execution plans, etc., need to be prepared.
With the advent of RERA, specialized forums such as the State Real Estate
Regulatory Authority and the Real Estate Appellate Tribunal will be established
for the resolution of disputes about home buying and the aggrieved party will
have no recourse to other consumer forums and civil courts, on such matters.
While the RERA sets the groundwork for fast-tracking dispute resolution, the
litmus test for its success will depend on the time setting up of these new
dispute resolution bodies and how these disputes are resolved expeditiously with
a degree of finality.
- Impact of RERA on the buyer
RERA has been introduced to protect the rights and interests of property buyers.
To increase translucency in project completion status, the developers must
disclose the construction status on the official website of the Authority. This
has to be done every quarter i.e. in every 3 months after getting the
registration number from the authority. In case of any malefaction by the
promoter/ builders, the buyer/allottee can file a complaint to the Authority
online. The complaints of the buyers/allottees are mandated to be resolved
within 120 days. Builders/promoters cannot change anything in the structure of
the building without prior assent from all the buyers. All these measures, in
addition to those mentioned in the sections of the Real Estate (Regulation and
Development) Act 2016, is expected to boost the confidence of the investors.
- Impact of RERA on promoter/ builders
Under RERA the builders must register critical statistics regarding the project.
- Details of the promoter,
- Status of the land a title should be undisputed,
- Status of statutory approval from the concerning authorities,
- Agreements followed by all the schedules mentioned in the RERA act,
- Details of the brokers,
- Architects and contractors,
- Certificates from Engineer and C.A.
In case of failure to register this information, it will lead the promoter/
builders to heavy penalties. The builders are bound by a five-year agreement
with the buyer for quality affirmation of the building and these 5 years are
calculated from the date of possession. This means that within five years of
selling a property if construction quality or any other structural issues arise
they (builder/promoter) will have to repair it or compensate for it. They also
have to ensure the formation of the Resident's Welfare Association within three
months of the project completion. According to section 18 of the RERA act, 2016
buyers can affirm a refund in case of delay or dissatisfaction with property
puts developers in a fix.
Apart from disclosing critical information mentioned above to buyers, they also
have to state the exact size (carpet area) of the property. They can no longer
state super-built up area (i.e. common area, verandah, etc.) as the size of the
property. Because of this they can no longer charge buyer the amount for a super
built-up area. Developers can start selling only after getting approval from
RERA also reduced the liquidity of the builders due to the clause of 70% of the
project cost received by the builder should be submitted in an escrow account
and this 70% amount should be used in the same project. Certificates of CA,
Engineer is necessary before sanctioning of money from the escrow account.
3. Impact of RERA on new projects
Any project with over 8 apartments or a size of over 500 sq. Mts. is required to
be registered under RERA. The developers have to register each stage of
construction independently with the State Authority. Since builders have to
register their new projects, they cannot pre-launch a project. Pre-launches used
to be the major source for raising capital. There is a cap on the number of
deposit builders that can accept from buyers.
Under RERA a builder cannot take
more than 10% as an initial deposit. Advertising a project without registering
it first is also banned in case of advertising without registering with RERA;
RERA can send notice to the builder and can take action against the project
under section 59 of the RERA act, 2016.
The Act also addresses two major issues faced by buyers:
- Delay in construction and
- Quality of construction.
In both cases, if a builder disdain on the norms of RERA, the builder will be
liable to compensate the buyer for the loss. The compensation is decided in the
initial agreement signed between the parties. It also specifies the amount of
interest payable by the builder in case of construction delays.
- Impact of RERA on ongoing projects
The developers who still have under construction projects may face difficulty
due to RERA. As per the Act, all the ongoing projects have to now register first
with the regulatory authority before moving further in completing the project.
They are also prohibited from advertising or promoting the property before
registration. These steps are likely to delay the construction and sale of the
existing property greatly. RERA also mandates builders to issue occupation or
completion certificate before handing over possession to the buyer. As of today,
there are lakhs of flats in all major cities of India like Mumbai and Bangalore
who have failed to do so.
Another concern for these developers is whether they
will get the certificates on time or not as this depends on the Municipal
Corporation for the projects under the planning area and the non-planning area,
it depends on the Gram panchayat. In cases where developers seek an extension,
the amount of time granted for project completion would depend upon the
authority plus there will be a fine charged by the authority for the delay in
- Impact of RERA on Agents and brokers
Traditionally, the Indian real estate agents have been an unorganized segment of
the sector. However, the new legislation makes it mandatory for the brokers to
register themselves to facilitate a transaction. According to an estimate, there
are 5, 00,000-9, 00,000 agents in India which has an unorganized and unregulated
affair in the real estate sector. With RERA in force, brokers cannot promise any
amenities or services that are not mentioned in the documents. Moreover, they
will have to provide all information and documents to the home buyers, at the
time of booking.
Consequently, RERA is likely to filter out the inexperienced,
unprofessional, fly-by-night operators, as brokers not following the guidelines
will face hefty penalty or jail or both. Under RERA, brokers will no longer be
able to sell properties without registering with the Authority. They can also be
penalized in case of wrong information shared with buyers regarding the
property. However, the fear among industry players is that many unorganized
brokers will find themselves out of work. Agents need to pay a fee to register
them. Citing issues of lack of faith in builders and lack of benefits for agents
under RERA, many agents will choose to shut their shops.
Advantages Of RERA
- RERA has brought uniformity in the real estate sector related to carpet
area, common areas which will prevent malpractices like changes in layout, area,
agreement, specifications, details about the broker, architect, and contractor,
- Developers need to make timely delivery of the booked office spaces or
homes. If not strict compensation and imprisonment can be taken against the
- The same features promised at the time of registration need to be
delivered at the time of handover. If not then the builder can be penalized.
- Specifying the carpet area and not the built-in area which is more than
the former by at least 20 to 30% is mandatory.
- Completion of clearance from the government departments is compulsory
before selling any house or office space.
- A separate bank account should be opened for each of the projects
promoted by a developer.
- The buyer can approach the developer for any defect in the building
within a year of the handover and get it rectified free of charge.
Disadvantages Of RERA
- The rules and regulations passed in the new bill do not apply to the
ongoing projects or projects that are held up due to some clearance issues.
- Government agency delay in approval and clearance may hinder the timely
delivery of products.
- Small developers with projects less than 1000 sq. m. do not come under
the purview of this act and registration with the regulator is not mandatory
- Without clearance, projects cannot be launched and so the launching of
new projects may get delayed.
The advantages are heavier than the disadvantages and this is a good step to
help the commoners get the delivery of his dream home on time and be able to buy
them at reasonable prices.
Market Situation After One Year Of RERA
- There have been fewer project launches and the focus has been on
- Developers have tried to adhere to compliances, to avoid litigation.
- Relaxed delivery timelines for existing projects has granted developers
an escape window.
- The market is yet to witness any landmark judgment that could set a
The developers, nevertheless, feel that the RERA has changed the market
dynamics, in a short period. Anita Arjundas, managing director, Mahindra Life
space, asserts that the RERA is India's first serious attempt, to regulate an
industry that has been perceived as less than transparent. A year into the
implementation of the Act, we can sum it up as a year of transformation and
volatility and at the same time, as one that holds the promise of new
- States should refrain from introducing exceptions to the definition of
The concoctionof the definition of "ongoing projects" creates a conflict
with one of the main objectives of RERA, which is to provide translucency and
better conveyance to the home buyers. Central RERA is thoroughly clear on this
issue. States should refrain from proposing exceptions and endorse the simple
yet very clear definition of "ongoing
- Make government agencies accountable for the delay in granting approvals
If there is any kind of delay in granting required government approvals for a
real estate project (like ownership certificate, land-use conversion,
environmental and pollution no-objection certificates, non-encumbrance, road
access, and other related infrastructure-related approvals) can lead to delay
projects. For preventing the probability of delay in delivery, every approval
process should legally be made time-bound.
- RERA provisions for punishment of violations, in the form of imprisonment
and fine, should be kept intact in all state
For different violations, the states should do away with the compounding options
of imprisonment/ penalties in state laws.
In case of non- compliance for developers, real estate agents and buyers the
Central RERA 2016 recommends imprisonment for a term, extendable up to 3 years,
or fine which may go up to 10% of the estimated cost of the real estate project,
or both. But, except for Kerala all other states and union territories have
added a clause of compounding of offense to avoid imprisonment and Goa the draft
is silent on this.
RERA is a quasi-judicial body, and to trusting its judgment to redress the RERA
instilling faith in its redressal mechanism will require, to a large extent. So,
instead of constituting a replacement of any specific punishment the Central
RERA provisions for punishment of violations, in the form of imprisonment and
fine should be kept intact in all state Laws – leaving the actual judgment to
the regulator itself.
- Clearly define home buyers in the class of creditors to avoid conflict
between IBC and RERA
In ongoing projects, the recent developments highlight the problem of builders
declaring bankruptcy.Being the "unsecured creditors", the rights of home buyers
may get violated in such cases. Thoughthe new Bankruptcy Act applies to these
projects, an organized approach is required to protecthome buyers' rights.
- Set up IT infrastructure
A booming IT infrastructure for RERA – along with effective and efficient
monitoring structure andrapid redressal of complaints in case of violations –
is mandatory for the long-run success of thislandmark legislation.
The act is a positive change in terms of increasing transparency in the
real-estate sector, increasing accountability of the promoters and developers,
and establishing efficient forums for grievance redress. This will consequently
lead to lower litigation due to stringent rules and regulations in the highly
The past few decades have seen increasing attention given towards the
constructive urbanization process in the context of the rapid transformative
process of the country as the nation strives to enhance the capacity to cope up
with developmental needs through urbanization. In-country like India, a
standardized Real Estate Regulation Act is necessary to have uniform standards
throughout the country and to bring transparency in transactions.
implementation of an act like RERA is a firm step in the right direction to
bring awareness in terms of customers, promoters, builders, etc. In the future,
in the lines of RERA, modernization of land records, land acquisition, and GST
can also be put on priority for the growth of the real estate sector. It is made
compulsory for the various stakeholders like builders, promoters, agents, and
allottees are to comply with the specification of the projects, project
agreements, and regulatory frameworks.
It is also to be noted that the real
estate entities must ensure that the properties of allottees are well maintained
and that residents are satisfied with the conditions of the properties. The RERA
is a significant move in this regard to ensure greater accountability of the
real estate builders and agents towards customers as well as the government.
The RERA is committed to the successful and effective implementation of the real
estate law of the country and has taken relevant and consistent measures for the
progressive development of the sector in the country. To encourage sustainable
development of the RERA, along with a customer-friendly environment, various
policy measures incorporated under the RERA would certainly bring remarkable
changes in the economic and social transformation.Written By:
- Muskan Joshi - Renaissance law college
Ph no: 7223813170
- Sakshee Jaiswal - Renaissance law college
Ph no: 7693048368