All You Need to Know About the Real Estate Regulation Act (RERA)

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An insight

On 26th March 2016, the Government of India passed an iconic act that would redefine the real estate rules of the country: The Real Estate (Regulation and Development) Act, 2016.

Before the Act came into force, real estate development in India was highly unorganized, with each State and Union Territory having its own law on the subject.

The Act became fully applicable throughout India from May 1, 2017 as a welcome relief to real estate purchasers in India and as a stringent law needed to regulate the Indian real estate market to curb illegalities and promote the healthy development of the sector.

The Act is aimed to protect the interests of consumers in the real estate sector, to ensure the transparent and efficient sale of plots, apartments and buildings, and to provide for speedy dispute redressal by establishing an adjudicating mechanism.

Read on to understand how RERA Act helps the modern home buyer.

What is it about?

The Act establishes a regulatory authority for the real estate market in our country. As per the RERA Act, each state and Union territory will have its own regulatory authorities which will frame all the regulations and rules according to the RERA Act. These set of rules are drafted by the Centre and aim to bring order to the sector. The Regulatory Authorities are given the responsibility to register real estate projects and agents operating in their respective states.

In a bid to boost transparency and accountability, the act mandates that Developers should not only give information on the website of the authority about themselves and their projects but also about the real estate agents, contractors, architect and structural engineer whose services they will utilize for their projects. The Act applies to the transaction of sale (whether as freehold or leasehold) of apartments, buildings or plots only in residential and commercial projects, but does not include a transaction wherein a person is given an apartment, building or plot on rent.

Aim of the act

The aims of the Act are to –

  • To regulate the real estate sector of the country;

  • To promote good governance in the sector which in turn would create investor confidence and boost investments in the real estate sector;

  • Provide a unified legal regime for purchase of properties;

  • Standardise practices across the country;

  • Establish regulatory oversight mechanism to enforce contracts and fast track dispute resolution mechanism;

  • Levy penalties on errant builders and developers;

  • Bring transparency and accountability in the real estate industry.

  • Stabilise erratic housing prices to improve activity in the market.

How will it impact home buyers?

Below are some key compliances of the act that greatly benefit home buyers:

  • The developer or builder will have to register with the regulator all commercial and residential real estate projects where the land is over 500 sq. meters. or eight apartments before launching a project.

  • The developer or builder needs to give accurate details on websites relating to profile and track record of his/her company, details of litigations, advertisement and prospectus issued about the project, details of apartments, plots and garages, registered agents and consultants, development plan, financial details of the promoters, status of approvals and projects etc., to enable informed decisions by buyers,

  • The developer or builder will have to put 70% of the money collected from a buyer in a separate account to meet the construction cost of the project.

  • RERA also seeks to impose strict regulations on the developer or builder to make sure construction is completed on time.

  • The buyer will pay only for the carpet area (area within walls) and developer or builder can’t charge for the super built-up area, as is the practice at present.

  • The Act provides a period of five years to the buyers to bring to notice of the Promoter any defects observed in development, which makes it Promoters responsibility to rectify such defects without further charge within 30 days and in the event of promoter’s failure to rectify such defect within such time, the buyer shall be entitled to receive appropriate compensation in the manner as provided under the Act.

  • Under RERA, each state will have to setup regulatory bodies as appellate tribunals to solve the disputes between buyer and builder within specified timeline.

Below are some key compliances of the act that greatly benefit home buyers:

Registration under RERA

Every real estate project (commercial and residential) where the total area to be developed exceeds 500 sq. meters or more than 8 apartments is proposed to be developed in any phase, must be registered with its respective state’s RERA.

The existing projects where the completion certificate (CC) or occupancy certificate (OC) has not been issued, are also required to comply with the registration requirements under the Act.

The Promoters are required to provide detailed information on the project e.g. land status, details of the promoter, approvals, schedule of completion, etc. only when registration is completed and other approvals (construction related) are in place, can the project be marketed.

This will help bring greater transparency and reduce the number of properties used for illegal purposes, if the spirit of the central act is followed without dilution. An important function of this regulatory body is to amass data in designated depositories and create a responsive system that addresses the grievances of the stakeholders.

After the implementation of this act, developers cannot advertise, sell, offer, market or book any property without first registering it with the regulatory authority. This makes for an influential reason for every builder to register their project. For timely RERA registrations, the regulatory authority has been mandated to either grant or refuse applications within a maximum period of 30 days. For any extensions, the applicant must provide an appropriate reason for the delay.

Continual disclosures of the project

Promoters are required to make extensive disclosures about their projects, of information ranging from project plans and completion timelines to project approvals and permissions, the estimated cost of the construction, details of litigations and encumbrances on the land etc. The Promoters are also required to make disclosures on quarterly basis to ensure transparency as all the critical information relating to projects viz. timeline of completion of project, construction materials used, revenue collected, etc. will be available in the public domain.

No more delays with possession

It has been a standing issue with buyers everywhere, wherein the developers fail to deliver possession of the houses on the agreed time. Under RERA act, the agreed upon date of possession will be sacrosanct. If the Promoter fails to deliver the project within the specified date and if the buyer intends to withdraw from the project, then the Promoter would return all the money that the buyer has paid with regards to purchase along with the applicable interest as prescribed under the rules and compensation as may be adjudicated by the authority which is in addition to any other remedy available to the buyer.  However, if the Buyer does not want to withdraw from the project, then the Promoter will compensate him by paying interest for every month of delay.

Reserve account

It was a common practice of Builders/Developers to divert funds collected from one project into some other investment that largely contributed to delays in the real estate sector to resolve this issue, Builders/Developers are now required to deposit 70% of all project receivables in an escrow account maintained with a scheduled bank, which will be used to cover the land cost and construction cost of the project. The Act further mandates that 70% of the amount deposited in the separate account shall be withdrawn by the Promoter in proportion to the percentage of completion of the project together with a certificate from an architect, engineer and chartered accountant in practice.

The Act creates enabling factors that will ensure that there are no hindrances in the implementation of a real estate project apart from ensuring that only serious players remain in the sector which will help the sector grow in long run.


If any promoter fails to register the real estate project as provided under the Act, he shall be liable to a penalty which may extend up to ten per cent of the estimated cost of the real estate project.

On continued violation, he shall be punishable with imprisonment for a term which may extend up to three years or with fine which may up to a further ten per cent of the estimated cost of the real estate project, or with both.

Also, if the Promoter provides any false information while making application for registration of the real estate projects, he shall be liable to a penalty which may extend up to five percent of the estimated cost of the real estate project as determined by the Authority.

The Act also provides that any violation of an order of the RERA authority or the Appellate Tribunal will attract imprisonment as well as fine, as prescribed.

Real estate industry in India is often treated in isolation from other issues that plague the society. With the RERA Act in place, there is hope for some semblance of control and an authority to adhere to.