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RERA Act: Everything you need to know about

Last Updated on May 17, 2022 by Admin

An Act to establish the Real Estate Regulatory Authority for the regulation and promotion of the real estate sector, as well as to ensure the efficient and transparent sale of a plot, apartment, or building, as the case may be, or the sale of a real estate project, and to protect the interests of consumers in the real estate sector, and to establish an adjudicating mechanism for speedy dispute redress, as well as to establish the Appellate Tribunal to hear appeals from the decisions.

The Real Estate (Regulation and Development) Act, 2016, (RERA) is a law passed by India’s parliament. The RERA aims to protect home buyers’ interests while also encouraging investment in the real estate sector. While the Rajya Sabha passed the RERA bill on March 10, 2016, the Lok Sabha approved it on March 15, 2016. The act went into effect on May 1, 2016. While 59 of its 92 sections became effective on May 1, 2016, the remaining provisions took effect on May 1, 2017.

What is RERA Act?

The Real Estate Regulatory Authority, or RERA, was established under the Real Estate (Regulation and Development) Act of 2016, with the goal of regulating the real estate sector and addressing issues that homebuyers face. Its objectives are as follows:

  • To safeguard allottees’ interests and ensure their accountability
  • To maintain transparency and reduce the possibility of fraud;
  • To implement Pan-India standardization and professionalism;
  • To improve the flow of correct information between home buyers and sellers;
  • To impose greater responsibilities on both builders and investors; and
  • To increase investor confidence in the sector.

Homebuyers have long complained that real estate transactions are lopsided and heavily skewed in favor of developers. In India, RERA and the government’s model code seek to create more equitable and fair transactions between property sellers and buyers, particularly in the primary market.

It is hoped that RERA will simplify real estate purchases by introducing greater accountability and transparency, provided that states do not dilute the provisions and spirit of the central act. The RERA will be the first regulator for the Indian real estate industry. The Real Estate Act requires each state and union territory to establish their own regulator and set the rules that govern how the regulator operates.

Key highlights of the RERA act

The best component of this Act is that it establishes a single legal framework for the purchase of flats, apartments, and other real estates across the country. The following are some of the Act’s important features:

  • The regulating authority is established: The real estate sector has long been without a proper regulator (similar to the Securities Exchange Board of India for capital markets). In each state and union territory, the Act established a Real Estate Regulatory Authority. Its responsibilities include safeguarding stakeholders’ interests, collecting data in a specified repository, and establishing an effective grievance redressal procedure. To avoid delays, the authority has been instructed to process applications within 60 days, with the possibility of an extension only if a justification for the delay is recorded. Furthermore, appeals will be heard by the Real Estate Appellate Authority (REAT).
  • Mandatory registration: According to the central legislation, any real estate project (where the total area to be developed exceeds 500 square meters or more than 8 units are intended to be created in any phase) must be registered with the RERA of the state in which it is located. Existing projects that have not received a completion certificate (CC) or occupancy certificate (OC) must also comply with the Act’s registration criteria. Promoters must give specific information on the project when filing for registration, such as land status, promoter data, approvals, completion timetable, and so on. The project can only be marketed after registration and other construction-related clearances have been completed.
  • Reserve account: One of the major causes of project delays was that monies raised for one project were invariably moved to fund new, unrelated projects. Promoters are now required to store 70% of all project receivables in a separate reserve account to prevent such a diversion. The money in such an account can only be used for land and construction costs, and it must be certified by a professional.

  • Promoters’ ongoing disclosures: Following the Act’s adoption, house buyers will be able to track the development of a project on the RERA website, since promoters will be required to make periodic submissions to the regulator about the project’s progress.
  • Title representation: Promoters must now provide a positive warranty on their right title and interest in the land, which can be used against them later by the home buyer if a title problem is detected. They must also get insurance on the projects’ title and construction, the proceeds of which will be paid to the allottee upon execution of the sale agreement.
  • Selling agreement standardization: The Act establishes a standard model sale agreement between promoters and homebuyers. Typically, promoters use punitive clauses against property purchasers that penalize them for any default, while the promoter faces little or no penalty for similar failures. Such penalty clauses may soon be obsolete, and house purchasers should expect more balanced agreements in the future.
  • Penalty: To guarantee that violations of the Act are not treated lightly, violators face a substantial monetary penalty (up to 10% of the project cost) as well as imprisonment.

RERA Act benefits

The buyer, the developer, and the industry as a whole benefit from the Real Estate Regulation Authority. The RERA statute seeks to protect the interests of buyers and developers; consumers and sellers alike because the requirements apply to both residential and commercial properties. Let’s look at what they are in more detail—

Real Estate Regulation Authority (RERA) Benefits for the homebuyers

  • Builders are required to disclose every element of their project on RERA’s official website under RERA. They must also keep the information on the website up to date on a regular basis. This also gives purchasers more information about project timelines.
  • Under RERA standards, buyers pay for the property depending on the carpet area or the space contained by walls. Builders are thus prohibited from charging homeowners for the super built-up area, which includes balconies, elevators, stairwells, and lobbies.
  • Builders must transfer 70% of the money from homebuyers into a separate bank account that is exclusively used for development. As a result, buyers may be assured that their funds are secure and that their use is transparent.
  • Builders are prohibited from taking more than 10% of the project cost as an advance or application fee under RERA, and RERA ensures that projects are completed on schedule.
    In the event of project delays, developers must pay homebuyers a 2% interest rate over SBI’s MCLR for the duration of the delay.
  • Homebuyers have up to five years after receiving a handover to notice building faults and ask developers to fix them. Developers must settle filed disputes within 120 days under RERA.
    A builder or developer cannot make changes to the building design without alerting two-thirds of the owners unless a majority of homebuyers agree.
  • If homebuyers discover a problem in the title deed after taking possession, they are entitled to reimbursement from the developer under the Act, which forbids developers from receiving more than 10% as an advance from homebuyers.

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Real Estate Regulation Authority (RERA) Benefits for the developer

  • RERA has consolidated the sector as a result of mandatory state registration.
  • It has increased real estate developers’ trust in projects, resulting in increased investment.
    Developers have benefited from the sector’s organized funding.
  • RERA has made corporate branding possible, and developers have benefited greatly from it.
  • RERA’s model code, which attempts to foster more equal and fair transactions between the seller and the buyer, limits the scope of lawsuits.
  • All builders and homebuyers will sign a single model sale agreement, providing greater standardization.

Real Estate Regulation Authority (RERA) Benefits for the industry

  • RERA promotes effective governance and transparency in real estate transactions.
  • RERA’s requirement that builders and developers register before starting a project has significantly decreased project delays and misspellings, while also ensuring reliable project delivery and efficiency.
  • India’s real estate industry now has more accountability, uniformity, quality, and standardization according to the RERA Act.
  • The RERA Act has aided the real estate sector in attracting more investments and private equity money.
  • RERA has aided in maintaining a regulated environment since its start.
  • Every state’s RERA is divided into numerous smaller regulatory organizations that are responsible for the growth of the real estate business in that state or union territory; this guarantees better openness and facilitates commercial transactions.

Penalties under RERA

A penalty is imposed on the developer or promoter based on the offense. If the developer is found guilty, the following are the penalties:

  • If developers do not register under RERA, they must pay 10% of the project’s estimated cost. Furthermore, if they provide inaccurate information about the project, they will be charged 5% of the anticipated cost.
    Breaking the law can result in a three-year prison sentence or a fine of up to 10% of the project’s anticipated cost.
  • If agents are caught performing construction and sales on their project without a RERA registration, they would be fined Rs.10,000 per day or up to 5% of the project’s cost.
  • In the event of serious non-compliance with RERA, developers may be subject to a daily penalty of up to 5% of the project’s estimated value.
  • In the event of non-compliance with the Appellate Tribunal, the punishment is up to one year in prison or 10% of the project’s likely cost, whichever is greater.
  • In the event of non-compliance with RERA, buyers must pay a daily penalty of up to 5% of the project’s estimated cost. Noncompliance with the Appellate Tribunal, on the other hand, carries a penalty of up to one year in prison or ten percent of the project’s likely cost, whichever is greater.


Drawbacks and Apprehensions

There are a few drawbacks of this RERA act:

  • Who will ensure that 70% of the entire project cost is covered? Furthermore, the state government has the authority to reduce this percentage to less than 70%.
  • The bill requires that 70% of the money obtained from project buyers be used solely for the project’s construction. In other circumstances, the cost of construction could be less than 70% of the total sum received, while the cost of land could be more than 30%. This means that some of the monies raised may go unused, needing further funding from other sources. This could result in a higher project cost.
  • Builders say that selling apartments based on carpet area will be problematic in an under-construction property when many units have already been sold based on super built-up area.
    According to developers, the main cause of the delay is sluggish government clearances.
  • Who will complete the building if the regulatory authority revokes the registration under the Act?
  • Some consumer advocates claim that the real estate regulator is ineffective in dealing with complaints. Consumer courts are already dealing with the concerns. As a result, they claim there is nothing new. In addition, consumer courts were ineffective in resolving concerns. They have similar worries about the regulatory authority.
  • Ignores crucial issues such as the lengthy approval process for projects, the lack of clear land titles, the presence of black money, and so on.
  • Because state-level governance is so disparate, this will only work in spots. Some states will establish effective Tribunals and Regulatory Boards, while others will not.
  • Many politicians have real estate holdings. That could operate in favor of and against the new Act’s concepts. Some shrewd and not-so-shrewd politicians will support the new law and utilize it to boost activity. Others will try to stall or undermine the new legislation.

Impact on the Real Estate Sector

RERA impacts real estate projects

The Real Estate Act has painted a very hopeful and bright image, and it is working in various ways to promote long-term growth; the impact will vary depending on the scenario, and it will be contingent on proper implementation by the authorities.

In the real estate market, we may claim that since developers are now compelled to work inside the regulatory body’s stringent framework, frivolous supply will also decrease (fewer projects by builders) because there are various hazards associated with doing multiple projects at once.

Naturally, developers (builders) will focus on initiating projects that are likely to be finished within the stipulated time limit as per the consumer agreement, failing which severe repercussions would be imposed.
The Real Estate Act expressly states that the developer (builder) must specify the time and duration of the project’s completion during the registration process and that if the developer (builder) fails to do so, strict action will be taken against them, including hefty interest and penalties, as seen in one of the cases.

In this case, the authorities ordered the builder to hand over possession of the disputed apartment to the complainant (buyers) within a certain time frame, and if the builder failed to comply with the order, the builder would be liable to pay interest to the purchaser on the full amount paid by the purchaser until the real-time of custody.

In another case, the plaintiff claimed that the builder had failed to give ownership of the flat and had also breached the builder-buyer agreement’s possession clause. The concerned authorities have ordered that the complainant be given control of the unit before the time limit expires.

The responder (builder) was also required to give an occupancy certificate, and if this was not done, the buyers were entitled to compensation/interest from a defined date until the due date of custody on the entire sum paid by the builder/developer.

RERA impacts real estate agents

Real estate agents will be required to register under the Real Estate (Regulation and Development) Act (RERA) in order to effectuate a transaction. With an estimated 5,00,000 to 9,00,000 brokers, the broker business in India is considered to be a USD 4 billion industry. It has, however, always been disorganized and unregulated.

Brokers cannot guarantee any amenities or services that are not listed in the documents under RERA. Furthermore, at the time of booking, they must supply all information and paperwork to the property buyers. As a result, RERA is likely to weed out unskilled, unprofessional, fly-by-night businesses, as brokers who do not follow the rules face substantial fines, jail time, or both

Registration process under RERA act

RERA applies to all builders and developers, with the exception of the following: –

  • Where the area of land to be developed is less than 500 square meters or the number of flats to be created is less than 8.
  • If the Promoter got a completion certificate prior to the implementation of RERA.
  • For the purpose of renovation, repair, or redevelopment that does not include marketing, advertising, selling, or new allotment of any unit, plot, or building.
  • Commercial and residential projects, including plotted development.
  • Each phase is to be treated as a standalone real estate project requiring fresh registration.

The RERA project registration process

  • An authenticated copy of all approvals, a commencement certificate, a sanctioned plan, a layout plan, a specification, a plan of development work, proposed facilities, a Proforma allotment letter, a sale agreement, and a conveyance document to be supplied when the project is completed.
  • Submitting a project registration application to RERA.
  • New and existing projects must be registered with RERA prior to being launched.
  • RERA registration for agents and brokers.
  • RERA and RERA appellate tribunals must resolve disputes within six months.
  • Registration of different phases of the same project separately.
  • Developers must submit with RERA details of projects launched in the last five years, including their status and reasons for delays.
  • Regular updates to the RERA website.
  • Maximum one-year extension in the event of a developer-caused delay.
  • A CA audits the project accounts every year.
  • RWA has a conveyance deed for the common space.
  • Land title and construction insurance.
  • The duration of the project.

The procedure for becoming RERA-approved brokers

  • Section 3: Without RERA registration, a promoter cannot advertise, book, sell, or offer for sale.
  • Section 9: No agent can sell a project without first registering with RERA.
  • Every sale handled by an agent must include the agent’s RERA number.
  • Your registration must be renewed.
  • If a condition of registration is broken, registration might be canceled or blocked for a period of time.
  • Section 10: No agent may sell an unregistered project.
  • Keep accurate books and records.
  • Avoid engaging in unfair trade practices.
  • Make a false assertion – verbally, in writing, or visually.
  • Represent that the services are of a certain quality.
  • Misrepresent that the promoter or himself has approval or affiliation that he or she does not have.
    Permit the publication of advertisements for services that are not intended to be supplied in the newspaper or elsewhere.
  • At the time of booking, the agent must ensure that the allottee has access to all documentation.


One of the key issues for a developing country like India is providing appropriate housing for its citizens. In India, purchasing a property is both a financial and an emotional decision. The purchase of a primary residence is, for most people, one of the most significant financial transactions they will ever make.

Unfortunately, the clearance of any project by the related authorities necessitates approval from several departments and authorities, resulting in frequent project delays and unjustified increases in the overall cost of every project.

In most cases, the focus should be on identifying the core cause of project delays and adopting required and preventative actions to minimize further delays. Furthermore, various building companies are currently looking for RERA experts. So, if you learn and comprehend everything thoroughly, this could be a new employment possibility for you.

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