6 Things You Need to Know About Real Estate Regulatory Authority (RERA)

Last Updated at: Nov 23, 2020
On 4th September 2020, the Uttar Pradesh RERA (Real Estate Regulatory Authority) stated that almost 75% complaints lodged with it in the last 2 years were from the NCR region. The authority said it had implemented e-courts since February 2020. All complaints filed under e-courts and old complaints are being heard via virtual conferences during the COVID-19 pandemic. 


‘Real Estate cannot be lost or stolen, nor can it be carried away. Purchased with common sense, paid for in full, and managed with reasonable care, it’s about the safest investment in the world’  

                                                                                                   – Franklin D Roosevelt

With an aim to bolster this sector and revive investments, the Government passed The Real Estate (Regulation and Development) Act, 2016 (The Act) which establishes a Real Estate Regulatory Authority (RERA) in each state for regulation of the real estate sector. The Act fully came into force on 1st May 2017, and most states in India have set up their own RERAs since then along-with notifying rules for the same.

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Whether you’re a real-estate investor, a real estate agent or a buyer looking for a house, here are six things about RERA that will help you understand its impact on your interests better:

  1. Purpose: Converging builder’s promises with buyer’s fair expectations: Until about three years ago, the real estate sector in India recorded an unparalleled growth in sales, investments, and prices. However, since time immemorial, there has been a growing lack of confidence between property-builders and buyers. An independent survey reported that more than 80 per cent of building projects fail to meet initially committed deadlines.
  2. Moreover, almost 66 per cent of civil litigation relates to property-disputes. In the recent past, several factors such as demonetization, stagnation in prices, coupled with several government reforms reducing the disposable income contributed to creating a lacklustre outlook towards the real estate sector. The Act looks promising in alleviating the usual troubles like delayed possession and advancing an overall regime of transparency, disclosure, and trust in the real-estate sector. A unique feature aimed at protecting buyers is the aspect of control and quality management under RERA.
  3. Builder’s obligation to register under RERAAll new developers of commercial as well as residential projects will have to register their project with RERA. While the word ‘industrial’ was also used in the initial draft, the final draft excludes it. Therefore, projects with a pre-specified purpose for industrial use have been excluded. However, small builders – making an apartment with 8 or fewer units, or covering an area less than 500 square meters are exempted from the registration requirements.
  4. Restrictions on the utilization of funds: Every builder commencing projects after the RERA has been set-up in the State is under an obligation to deposit 70 per cent of the amount paid by buyers of the property in a separate account. This account is especially ear-marked, for its funds can only be utilized for meeting developmental costs. What it ensures is that developers will no longer be able to cross-utilize funds received for one project towards meeting the expenses of another project. The proceeds of this account also need to be certified by a professional, such as a Chartered Accountant. The Act also covers ongoing projects, bringing those existing projects where possession has not been handed over yet under its ambit. Projects for which completion certificates have been obtained are outside the purview of the Act.
  5. Additional disclosure requirements for builders: There are other additional disclosure requirements at the onset of the project such as the types of homes being sold, blueprints and maps with detailed layouts, payment schedules, and details of every promoter of the project coupled with a mandatory quarterly report on the project completion status. Although amends to the layout and project are allowed after taking consent of 2/3rd buyers, a pre-disclosure of the promises made would aid the RERA in taking prompt action and resolving disputes.
  6. Post-possession warranty: Now, for the first time an act in India provides an implied warranty to buyers of property for five years in the following words- In case of any structural defect or any other defect in workmanship, quality or provision of services or any other obligations of the promoter as per the agreement for sale relating to such development is brought to the notice of the promoter within a period of five years by the allottee from the date of handing over possession, it shall be the duty of the promoter to rectify such defects without further charge, within thirty days, and in the event of promoter’s failure to rectify such defects with. The language employed by the legislature is fairly strict:  “any structural defect”, “any other defect”, leaving little scope for ambiguities for builder’s to exploit. This has also necessitated greater oversight by builders on their workmanship and design. It would also be prudent to take insurance for indemnifying against future claims, in the case of projects with heavy outlay.
  7. Penalties under RERA – Promoters, Real-Estate Agents & Companies covered: The Act enshrines heavy penalties for all promoters entrusted with the task of development and promotion. Non-registration of the project with RERA can attract a penalty of 10% of the project cost. Failure to comply with rules framed by RERA in this regard may also attract imprisonment of up to 3 years and an increased penalty of up to 20% of the estimated project value. Under the Act, Real-estate agents and companies may also be charged 10,000 rupees a day, up to 5% of the cost of plot.
  8. The Real Estate Regulation Act – Confronting & Addressing Realties of the Property-sector in India: Although the dynamics of the success that the Act claims remain to be seen in the crucial months ahead, it is noteworthy that this Act exclusively maintains oversight over real-estate projects from its pre-offer registration stage to post-possession warranties and defects. It is also expected that the improvised real-estate regulatory mechanism will generate better returns for the sector through increased investor confidence, reducing the multitude of permits/clearances required, improving financial discipline for promoters while also providing quick-resolution of disputes.


Avani Mishra is a graduate in law from the National Law Institute University, Bhopal. She qualified the Company Secretary course with an All India Rank 1 and is a recipient of the President’s Gold Medal for her academic distinctions. She also holds a B.Com degree with a specialization in Corporate Affairs and Administration.