RERA: A boon for homebuyers

The real estate sector got its own regulator from May 1, 2017 the date when the Real Estate (Regulation and Development) Act, 2016 (RERA) became effective in the entire country. Each state and Union territories will have its own Regulatory Authority which will frame regulation and rules according to the Act. RERA is expected to bring clarity and fair practices that would protect the interest of buyers and also impose penalties on errant builders.

What is RERA?

The Real Estate (Regulation and Development) Act, 2016 is an Act of the Parliament of India which seeks to protect home-buyers as well as help boost investment in the real estate industry. The bill was passed by RajyaSabha on 10 March 2016 and by the LokSabha on 15 March 2016. The Act came into force from 1 May 2016 with 59 out of 92 sections notified. Remaining provisions came into effect from May 2017.

According to RERA, each state and Union territory has its own regulator and set of rules to govern the functioning of the regulator. Centre has drafted the rules for Union Territories including the national capital.

What was the need for a regulatory law for the real estate?

The real estate sector has grown in the recent years but has largely been unregulated from the perspective of consumer protection. Though, consumer protection laws are available, the recourse available therein is only curative, but not preventive. This has affected the overall potential growth of the sector due to absence of transparency and standardization.

Provisions under RERA

RERA is expected to bring the much-needed relief to homebuyers as builders will be accountable for the promise they made to the home buyers. To safeguard the interest of home buyers the following provisions are made in RERA

  • Registration:The Real Estate Act makes it mandatory for all commercial and residential real estate projects where the land is over 500 square meters, or eight apartments, to register with the Real Estate Regulatory Authority (RERA) for launching a project, in order to provide greater transparency in project-marketing and execution. For on-going projects which have not received completion certificate on the date of commencement of the Act, will have to seek registration within 3 months. Application for registration must be either approved or rejected within a period of 30 days from the date of application by the RERA. On successful registration, the promoter of the project will be provided with a registration number, a login ID and password for the applicants to fill up essential details on the website of the RERA. For Failure to register, apenalty of up to 10 percent of the project cost or three years’ imprisonment may be imposed.Real estate agents who facilitate selling or purchase of properties must take prior registration from RERA. Such agents will be issued a single registration number for each State or Union Territory, which must be quoted by the agent in every sale facilitated by him.
  • Protection to buyers: The Act prohibits unaccounted money from being pumped into the sector as of now 70 percent of the money has to be deposited in bank account through cheques. A major benefit for consumers included in the Act is that builders will have to quote prices based on carpet area and not super built-up area, while carpet area has been clearly defined in the Act to include usable space like kitchen and toilets.
  • Real estate Regulatory Authority and Appellate Tribunal: It will establish state–level Real Estate Regulatory Authorities (RERAs) to regulate transactions related to both residential and commercial projects and ensure their timely completion and handover. Appellate tribunals will now be required to adjudicate cases in 60 days as against the earlier provision of 90 days and Regulatory Authority to dispose of complaints in 60 days while no time frame was indicated in earlier bill.
  • Offences, penalties and adjudication: As per section 59, where under the Act it is obligatory for the promoter to register a project with the Authority, and if the promoter fails to do the same, he shall be liable to penalties upto ten percent of the estimated cost of the real estate project.


However, in case the promoter consistently defaults or does not comply with the directions/ orders of the Authority as regards registration of the project with the authority, he shall be liable to additional fine of ten percent of the estimated cost of the real estate project or imprisonment upto 3 years or both.

As per section 61 if the prompter defaults any other provision of the Act or the Rules and Regulation made thereunder, he shall be liable to a penalty upto five percent of the estimated cost of the real estate project.


Implementation of the new law is expected to boost the demand in the real estate where unsold inventories have been piling up since demonetization of the high value currency notes.


Here are the ways in which RERA could help homebuyers.

Completion of project on time: Delays in projects are the biggest issue faced by the buyers. The reasons are many and impact is huge. Scores of homebuyers in real estate such as Noida have not been able to get the possession of their apartments even after paying the full amount to builders. Under the new law the promoter of a real estate development firm has to maintain a separate escrow accounts for each of their projects. A minimum 70 per cent of the money from investors and buyers will have to be deposited. This money can only be used for the construction of the project and the cost borne towards the land. In case of delay of project the developers need to pay an interest rate of 2 percentage points above State Bank Of India’s lending rate to home buyers. RERA also prescribe imprisonment of upto three years for errant developers.


Builders can’t charge for area outside the wall: Till now, the industry has been selling real estate based on super built up area. Now RERA stipulates projects to be sold on carper area. As per the market trend, carpet area of a project is generally 30% to 35% lesser than the super built area of the project.  Now the builder can’t charge for the super built-up area.


Improvement in quality of construction: RERA talks about the quality of construction in projects. Over the last few years, buyers have protested about poor quality of construction. The regulator will ensure protection to buyers in this matter for five years from the date of possession. If any issue highlighted by buyers in front of the regulator in this period including in quality of construction and the provision of services, the developer will have to rectify the same in a matter of 30 days. This provision of the act will improve the quality of the construction.


Transparency in deals:Developers can’t invite, advertise, sell, offer, market or book any plot, apartment, house, building, investment in projects, without first registering it with the regulatory authority. Furthermore, after registration, all the advertisement inviting investment will have to bear the unique RERA registration number. The registration number will be provided project wise. After registering the project, developers will have to furnish details of their financial statement, legal title deed and supporting documents.

To add further security to buyers, RERA mandates, that developers can’t ask more than 10 per cent of the property’s cost as an advanced payment booking amount before actually singing a registered sale deed.


Quick redressal of grievances: Under RERA, regulatory bodies and appellate tribunals have to be set up in each state to solve builder-buyer disputes within 120 days. Besides, promoters will not be able to change a project’s design without buyer’s consent. Promoters must have the consent of two-thirds of the buyers in a project before making any change in the number of units or other structural changes.



There is no denying fact that RERA is a blessing for the homebuyers. Focusing on the grey areas, which were persistent in the sector and were responsible for property buyers getting duped, the Act contains key reformative measures to safeguard the interest of homebuyers. However, implementing this on ground level is challenging. Foremost challenge faced by RERA is its acceptance among the developer community. They have, time and again, expressed fear that RERA can over-regulate the sector, thus resulting in its eventual strangulation. Also, apparently RERA wants them to follow strict timelines but their time gets lost in following up with government agencies for the various approvals.

Other challenge for RERA is its notification by the respective state government and implementing the same in true spirit. Developers may influence the state government and get the provisions of RERA modified in their favor.The Maharashtra government notified the draft RERA rules in December 2016 and since then, it has been criticized by the activists for being too developer friendly.


RERA is a full-proof scheme to re-build trust, bring in transparency and safeguard the consumers’ interest.The intent of RERA is loud and clear-satisfaction of home buyers and providing them the value for their money. RERA Act will ensure that the homebuyers are adequately protected and the promoters and developers abide by the rules and regulation. It will also try to protect the interest of the homebuyers ensuring speedy redressal of dispute which will help gain confidence amongst the buyers. So in true sense RERA is boon for the homebuyers.

About the Author

Vishvajeet Kumar
Chief Manager (Faculty)
Union Bank of India

Staff Training College, Bangalore
Kalkere Post, Bannerghatta Road
Bengaluru, Karnataka – 560083
Ph: 080-22639055

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