Real Estate Regulation and Development Act (RERA): Impact on Buyers

Introduction

The real estate sector in India has historically been marred by a lack of transparency, delayed project deliveries, and disputes between developers and buyers. Homebuyers often faced the brunt of these issues, suffering financial losses and prolonged uncertainty. To address these challenges, the Government of India enacted the Real Estate (Regulation and Development) Act, 2016, commonly known as RERA.

The primary objective of RERA is to safeguard the interests of homebuyers and ensure greater transparency, accountability, and efficiency in the real estate sector. This blog provides a comprehensive analysis of the Act’s provisions, its implementation, and most importantly, its impact on buyers.

1. Historical Context and Need for RERA

Before RERA, India’s real estate sector was largely unregulated at the national level, with varying state-level regulations that were often ineffective. Common grievances included:

Delayed possession of properties.

Misleading advertisements and false promises by builders.

Lack of clarity on project plans and approvals.

Diversion of funds by developers.

Absence of fast-track dispute resolution.

These issues eroded buyer confidence and hampered growth in the sector. RERA was introduced as a comprehensive legislation to address these long-standing problems.

2. Scope and Applicability of RERA

RERA applies to:

All residential and commercial real estate projects where land is over 500 square meters or more than eight apartments.

Developers must register ongoing and new projects before marketing or selling.

Certain categories like projects under the jurisdiction of the Defense Ministry or projects where the buyer is the government are exempt.

States have the power to frame rules and establish regulatory authorities under RERA.

3. Key Provisions of RERA Beneficial to Buyers

a. Mandatory Project Registration

No project can be marketed or sold without registration under RERA.

Developers must submit detailed project information: land title, approvals, layout plans, carpet area, completion schedule, etc.

The registration certificate is publicly available online for buyers to verify.

This transparency enables buyers to verify project authenticity before investing.

b. Standardized Sale Agreements and Restrictions on Advance Payment

Sale agreements must follow a standard format prescribed by the authority.

Builders cannot demand more than 10% of the property cost as an advance before signing the agreement.

This prevents excessive upfront payments without legal commitment.

c. Project Timelines and Possession

Builders are legally bound to deliver possession within the agreed timeline.

In case of delays, buyers are entitled to compensation, including interest on delayed payments.

The Act protects buyers from arbitrary delays and financial strain.

d. Escrow Account for Project Funds

Developers must deposit at least 70% of the money collected for a project in a separate escrow account.

Funds from this account can only be used for the construction of that specific project.

This prevents diversion of funds to other projects or unrelated expenses.

This financial discipline protects buyers’ investments and ensures the project progresses as promised.

e. Carpet Area Declaration

Builders are mandated to sell property based on carpet area (actual usable floor area) rather than super built-up area, which often inflated prices.

Buyers gain clarity on what they are actually paying for.

f. Protection Against Unfair Practices

Misleading advertisements, false representations, or sale without registration invite penalties.

Builders are barred from changing project plans or amenities without buyer consent.

Buyers can hold builders accountable for deviations.

4. Grievance Redressal Mechanism

One of the most significant buyer-friendly features of RERA is the establishment of:

State Real Estate Regulatory Authorities (RERAs): They regulate the sector and monitor compliance.

Real Estate Appellate Tribunals: Hear appeals against RERA decisions.

Buyers can file complaints directly with RERA authorities for issues such as:

Delay in possession.

Structural defects.

Non-compliance with RERA provisions.

These bodies aim to provide fast-track dispute resolution, reducing dependence on courts and lengthy litigation.

5. Impact of RERA on Buyers

a. Improved Transparency

Before RERA, information asymmetry favored developers. Now, all crucial project details must be disclosed publicly. This helps buyers make informed decisions, reducing fraud and mis-selling.

b. Increased Buyer Confidence

With legal safeguards and a robust complaint mechanism, buyer trust has grown, encouraging more investments in the housing market.

c. Reduction in Delayed Projects

The threat of penalties and interest on delayed possession has incentivized developers to adhere to timelines.

d. Financial Protection

The escrow account provision and capping of advance payments ensure buyers are not forced to pay large sums upfront and that funds are used appropriately.

e. Standardization of Practices

Uniformity in sale agreements and carpet area definitions reduces disputes over pricing and terms.

6. Challenges in Implementation

Despite RERA’s promising framework, certain challenges remain:

Varied Enforcement Across States: Different states have implemented RERA rules with varying degrees of rigor, creating inconsistency.

Awareness Levels: Many buyers, especially in tier-2 and tier-3 cities, remain unaware of their RERA rights.

Compliance by Developers: Some developers continue to evade registration or circumvent rules.

Infrastructure Constraints: Overburdened RERA authorities sometimes delay complaint resolution.

Complexity for Buyers: Legal jargon and processes can be daunting without expert guidance.

7. Case Studies Illustrating RERA’s Impact

Case Study 1: Timely Delivery and Compensation

A group of buyers from Mumbai filed a complaint against a developer for delaying possession by two years. The Maharashtra RERA awarded compensation and interest on delayed payments, and the builder was directed to complete the project within a stipulated period.

Case Study 2: Refund for Non-Registered Project

In Bengaluru, a builder sold apartments in a project that was not registered under RERA. The Karnataka RERA penalized the developer and ordered full refunds to buyers with compensation.

8. How Buyers Can Leverage RERA

Verify Project Registration: Always check RERA registration numbers and project details on the official state RERA website.

Read Sale Agreements Carefully: Ensure they comply with RERA’s standard formats and contain clear timelines.

Keep Records: Maintain receipts, agreements, and communication for any legal reference.

File Complaints Promptly: Use the RERA complaint mechanism for grievances rather than lengthy court procedures.

Stay Informed: Follow updates and rulings related to your project.

9. The Future of RERA and Real Estate in India

Increasing Digitalization: Online dashboards and mobile apps are improving transparency and ease of access.

Stricter Penalties: Amendments are proposed to enhance penalties and enforcement.

Consumer Education: Government and NGOs are increasingly promoting buyer awareness campaigns.

Integration with Other Laws: Efforts are underway to harmonize RERA with environmental and land laws.

Conclusion

RERA has been a transformative legislation for the Indian real estate sector, especially for buyers. By enforcing transparency, financial discipline, and timely delivery, it has empowered homebuyers like never before. While challenges persist, RERA’s framework continues to evolve, promising a safer and more trustworthy real estate market.

For buyers, understanding and exercising their rights under RERA is crucial to protecting their investments and ensuring a hassle-free home buying experience.