India: Power To Buyer - The New Real Estate (Regulation And Development) Act, 2016


  • Applicable to residential as well commercial projects.
  • Prior registration with the regulator mandatory for projects with land in excess of 500 square meters and projects comprising of more than 8 apartments.
  • On-going projects where completion certificate is yet to be obtained are covered.
  • Projects not to be constructed/ marketed/ sold prior to registration.
  • Builders to disclose, inter alia, stagewise completion schedule at the time of registration.
  • Agreement for sale to be entered with allottees and registered prior to receiving any advance.
  • 70% of the amount realised from allottees to be maintained in a separate account and to be utilised towards cost of construction and cost of land.
  • Regulatory Authority and Appellate Tribunal to be constituted by each State and Union Territory for resolution of disputes.
  • Proceedings of Regulatory Authority and Appellate Tribunal to completed within 60 days from the date of receipt of complaint/appeal.

The real estate sector in India, in the recent times, has been plagued with lack of transparency, unregulated and unscrupulous activities of developers, oppressed and highly dissatisfied consumers and lack of timely and cost effective remedies. The arm twisting tactics and unethical business practices followed by many real estate developers have led to skyrocketing prices of real estate and a pool of consumers which is repelled by such high pricing and absence of proper check on developers. As a result, a large section of our population still dreams of owning a home.

In order to address the aforesaid issues affecting the real estate sector in the country, the Real Estate (Regulation And Development) Act, 2016 ("RERA") has been brought into force. RERA received Presidential assent on March 26, 2016 and the Ministry of Housing and Urban Poverty Alleviation ("MHUPA"), vide its notification dated April 26, 2016, appointed May 1, 2016 as the date for coming into effect of 69 out of total 92 sections of RERA.

The rules for giving effect to the provisions of RERA are to be formulated and notified within a period of 6 (six) months from the date of commencement of the Act by respective State Governments (for each Sate), MHUPA (for Union Territories except Delhi and Puducherry), Ministry of Urban Development (for Delhi) and Union Territory Government (for Puducherry).

RERA aims at putting institutional infrastructure in place in the country for the purpose of ensuring uniform regulatory environment, protection of consumer interest, quick adjudication/ resolution of disputes and overall development of the real estate sector.

The salient features of RERA are discussed hereunder:

1. Uniform Applicability: The provisions of RERA extend to whole of India (except Jammu and Kashmir) and are applicable to commercial as well as residential real estate projects. The said feature of RERA will be crucial in ensuring its uniform applicability and preventing any real estate project from escaping the provisions of RERA, unless expressly exempted, by the reason of said project being commercial or residential.

2. Constitution of Regulatory Authority: RERA provides for constitution of Real Estate Regulatory Authority ("Regulatory Authority") for all States and Union Territories, as regulator for real estate projects, within a period of one year from the date of coming into effect of the Act. The said Regulatory Authority will perform such duties and exercise such powers as are assigned to it under RERA, including but not limited to granting registration to real estate projects/real estate agents, maintaining database of projects/ promoters/ real estate agents, issuing orders/directions to ensure compliance of RERA, imposing penalty for offences, etc.

3. Registration of Real Estate Projects: All real estate projects shall be required to be registered with the concerned Regulatory Authority if the area of land proposed to be developed therein exceeds 500 square meters, or the number of apartments proposed to be developed therein exceeds 8 (inclusive of all phases), or if the completion certificate with respect to such project has not been obtained on the date of commencement of the Act,. The said application shall be filed within a period of 3 (three) months from the date of commencement of this Act with respect to ongoing projects.

Undertaking marketing/sale with respect to a real estate project will not be permissible for promoters till necessary registration has been obtained under RERA.

4. Disclosures by Promoters: While filing an application for registration of a real estate project, promoters are required to provide disclosures with respect to all the details of the project and give declaration with respect to completion schedule and title of the land for the project. The period within which a promoter undertakes to complete the project under its application of registration is the period for which the registration for the said project shall be valid under RERA.

5. Agreement with Buyers: RERA mandates the promoters to first enter into a written agreement for sale with the buyers and register the said agreement before accepting any advance payment or application fee (not exceeding 10% percent of the cost). Further, the said agreement for sale shall be in the prescribed form in order to prevent promoters from drafting one-sided agreements in their favour.

6. Maintenance of Project Receivables in a Separate Account: RERA directs promoters to deposit and maintain at least 70% (seventy percent) of the amounts realised for the real estate project from the allottees, from time to time, in a separate account to be maintained in a scheduled bank, to be withdrawn in proportion to percentage of completion of project for covering the cost of construction and the land cost. The said requirement has been incorporated in RERA in order to prevent diversion/misappropriation of funds so obtained by promoters from allottees of a real estate project.

7. Check on Promoters' Powers: RERA imposes several checks on powers/activities of promoters, including but not limited to the requirements of seeking prior consent of at least two third allottees before altering sanctioned plans/common areas of a project and/or transferring the project to a third party, rectifying structural/ workmanship/ quality defects within a period of 30 days of being notified, maintaining insurance with respect to land and building of the project, refunding the money or paying monthly interest, as the allottee may desire, in the event of delay in completion, etc.

8. Registration of Real Estate Agents: RERA has mandated all real estate agents to get themselves registered with the Regulatory Authority before facilitating any real estate transaction. Further, RERA incorporates a provision that requires real estate agents to facilitate possession of all necessary documents that an allottee is entitled to and perform all such other function as may be prescribed under the rules.

9. Buyers' Rights: RERA grants several rights to the buyers, including but not limited to right to have access to database of promoters/projects/real estate agents, right to claim refund/monthly interest in the event of delay, right to claim compensation for any loss caused due to defect in title of project land, etc.

10. Time Bound Dispute Resolution Mechanism: In addition to constitution of Regulatory Authorities, RERA also provides that appropriate Government shall constitute an Appellate Tribunal ("Appellate Tribunal") within a period of 1 (one) year from the date of commencement of the Act for hearing appeals against the orders of Regulatory Authority that are preferred within a period of 60 (sixty) days from the date of receipt of copy of concerned order.

RERA also provides that the proceedings of Regulatory Authority and Appellate Tribunal shall be completed within a period of 60 (sixty) days from the date of receipt of complaint or appeal, as the case may be.

11. Offences and Penalties: Failure of any promoter to get its real estate project registered in compliance with section 3 of RERA may result in levy of penalty up to 10% of the estimated cost of the project along with imprisonment for a term up to 3 (three) years in the event of continued default. Further, in the event of any promoter failing to provide correct information for registration or failing to adhere to any other provision of RERA, apart from section 3, such promoter shall be liable to a penalty up to 5% of the estimated cost of the project.

The Central Government has, as of now, notified 69 out of the total 92 sections under RERA. However, the 22 sections that are yet to be notified, such as prior registration of real estate projects; registration of real estate agents; duties/ obligations of promoters, are essential for regulating the activities of promoters and achieving the key objective of bringing transparency in the real estate sector.

Until the said remaining sections are notified, constitution of Regulatory Authority and framing of necessary rules under RERA will not result in achievement of desired results of transparency, accountability and timely handovers. Therefore, it will have to be seen as to how much time the Government takes before notifying the remaining sections and, accordingly, makes it obligatory for the promoters to ensure full compliances of their duties under the Act.

© 2016, Vaish Associates Advocates,
All rights reserved
Advocates, 1st & 11th Floors, Mohan Dev Building 13, Tolstoy Marg New Delhi-110001 (India).

The content of this article is intended to provide a general guide to the subject matter. Specialist professional advice should be sought about your specific circumstances. The views expressed in this article are solely of the authors of this article.

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Vinay Vaish, Partner, Vaish Associates Advocates
Amit Bhandari
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