1. Why RERA Was Needed? (Background)
For many years, real estate in India suffered from:
- No uniform laws
- Delayed projects (sometimes 5–10 years)
- Hidden charges & unclear area measurement
- Poor construction quality
- Misleading advertisements
- Misuse of buyers’ money
- Difficult and slow dispute resolution
To solve these issues, the government introduced the RERA Act in 2016, which became fully operational on 1 May 2017.
RERA is considered one of India's biggest reforms in the real estate sector.
2. What is RERA? (Definition)
RERA is a central law created to regulate the real estate market.
It aims to:
- Protect home buyers
- Make builders accountable
- Promote transparency
- Encourage fair practices
- Speed up dispute resolution
Each state must set up its own Real Estate Regulatory Authority to implement the Act.
3. Introduction and Background
Before 2016, India’s real estate sector was largely unregulated. Common issues included:
- Delays in project completion
- Misleading advertisements
- Diversion of buyers’ money to other projects
- Changes in project plans without consent
- Lack of accountability and transparency
- Difficulty in resolving disputes
To protect homebuyers and bring discipline to the real estate sector, the Government of India introduced The Real Estate (Regulation and Development) Act (RERA), 2016.
The Act came into full force on 1 May 2017.
4. Objectives of RERA
The primary aims of the Act are:
4.1 Protect the interests of homebuyers
Prevent unfair practices, fraud, and exploitation.
4.2 Promote transparency
Mandatory disclosure of all project details such as:
- Project plans
- Approvals
- Land status
- Financial statements
- Delivery timelines
4.3 Establish Real Estate Regulatory Authorities (RERAs)
State-level regulatory bodies that monitor and regulate real estate projects.
4.4 Ensure accountability
Builders and promoters are made responsible for timely delivery and quality.
4.5 Create a fast-track dispute resolution mechanism
Establishment of the Real Estate Appellate Tribunal (REAT).
4.6 Standardize real estate practices
Reduce irregularities and introduce uniform rules across India.
5. Scope of the RERA Act
RERA applies to:
- Residential and commercial real estate projects
- Projects with more than 500 sq. m. land or more than 8 apartments
- Ongoing projects without completion certificate at the time RERA came into effect
It covers:
- Promoters (builders/developers)
- Real estate agents
- Allottees (homebuyers)
6. Key Features and Provisions of RERA
6.1 Mandatory registration of projects
Promoters cannot advertise, sell, or offer any project without registering with the state RERA authority.
To register, the promoter must submit:
- Project plan & layout
- Land ownership documents
- Status of approvals
- Promoter details
- Timeline for completion
- Past project history
After verification, the authority provides a unique RERA registration number, which must appear in all advertisements.
6.2 Mandatory registration of real estate agents
Real estate brokers/agents must register with RERA to operate legally.
This ensures:
- Professional standards
- Accountability
- Transparency in transactions
6.3 70% of funds must be kept in an escrow account
To stop diversion of funds:
- Developers must deposit 70% of the money collected from buyers into a separate bank account (escrow).
- This money can only be used for that specific project.
- Withdrawals must be based on the progress of construction, certified by engineers, architects, and chartered accountants.
This prevents misuse of funds and project delays.
6.4 Clearly defined carpet area
RERA standardizes the definition of carpet area, preventing builders from manipulating “super built-up area”.
Carpet area = net usable floor area + area of internal partition walls.
This ensures buyers know exactly what they are paying for.
6.5 Timely delivery of projects
Developers must complete the project by the declared deadline.
If delayed:
- Buyer can withdraw and get a full refund + interest, or
- Continue and get compensation + interest for delay
6.6 Restriction on changing plans
Builders cannot change:
- Layout plan
- Specifications
- Number of units
without written consent of two-thirds of allottees.
6.7 Obligations regarding defect liability
If a buyer discovers structural defects, poor workmanship, or service issues within 5 years of possession, the promoter must:
- Repair free of cost
- Within 30 days
If not repaired, buyer is entitled to compensation.
6.8 Rights and duties of homebuyers
Rights:
- Receive information about project status
- Access all approved plans
- Receive possession on time
- Get refund for delays
- Seek compensation for defects
Duties:
- Make timely payments
- Participate in forming the Resident Welfare Association (RWA)
- Comply with agreement terms
6.9 Real Estate Regulatory Authority (State RERA)
Each state establishes a regulatory body responsible for:
- Registering projects and agents
- Monitoring project progress
- Ensuring compliance
- Addressing complaints
- Protecting consumer interests
- Imposing penalties
6.10 Real Estate Appellate Tribunal (REAT)
If a party is not satisfied with RERA’s decision, they can appeal to the Appellate Tribunal.
The Tribunal ensures fast-track resolution.
7. Penalties Under RERA
RERA imposes strict penalties:
7.1 For Promoters
- Non-registration of project: up to 10% of project cost
- Providing false information: up to 5% of project cost
- Continued violation: imprisonment up to 3 years or fine
7.2 For Real Estate Agents
- Non-registration: ?10,000 per day up to 5% of property value
- Violation of orders: imprisonment up to 1 year
7.3 For Buyers
- Non-compliance with Tribunal orders: fine up to 5% of property value
8. Benefits of RERA
8.1 For Homebuyers
- Transparent information
- Protection from fraud
- Standardized carpet area
- Timely project completion
- Easy refund and compensation
- Grievance redressal mechanism
- Quality assurance for 5 years
8.2 For Developers
- Increased credibility
- Access to organized funding
- Better project management
- Streamlined processes
- Increase in buyer confidence
- Level playing field
8.3 For Real Estate Sector
- Improved governance
- Reduction in disputes
- Professionalization of real estate business
- Boost to investment and growth
- Increased accountability
9. Impact of RERA on the Indian Real Estate Market
Positive impacts:
- Increased transparency and trust
- Improved discipline among builders
- Higher investor confidence
- Better completion rate of projects
- Reduction in pre-launch sales and unrealistic promises
- Market consolidation—weak players exiting, strong players growing
Challenges and criticisms:
- Varying implementation across states
- Exemptions to small projects in some states
- Limited awareness among consumers
- Delays in setting up Tribunals in some regions
10. Differences Before and After RERA
| Aspect | Before RERA | After RERA |
| Regulation | Mostly unregulated | Regulated with state RERA |
| Project | Very Common | Heavy penalties; strict timelines |
| Use of Buyers money | Often diverted | 70% escrow rules |
| Area calculation | Super built up manipulation | Standard carpet area |
| Consumer rights | Weak | Strong, legally enforceable |
| Advertisment | Misleading ads common | Only after RERA registration |
| Dispute Resolution | Long and Legal process | Fast Track tribule |
11. Conclusion
The RERA Act, 2016 is one of the most important reforms in India’s real estate sector. It:
- Empowers homebuyers
- Increases accountability of builders
- Brings transparency
- Regulates the real estate market
- Enhances long-term growth of the industry
Despite some challenges, RERA has significantly improved buyer confidence and instilled discipline in the real estate ecosystem.
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