Abstract
The Real Estate (Regulation and Development) Act, 2016 ("RERA")1 was introduced to address longstanding contractual disparities in the Indian real estate sector. Prior to RERA, builder-buyer agreements were heavily skewed in favour of developers, leaving buyers vulnerable to arbitrary delays, financial mismanagement, and legal ambiguity. This paper examines the legislative intent behind RERA, its core provisions, and its judicial interpretation, evaluating its impact on standardizing builder-buyer agreements. By relying on statutory provisions and judicial precedents, this paper tends to assess whether RERA has effectively strengthened contractual protections.
Introduction
Before the enactment of RERA, builder-buyer agreements operated under general contract law, primarily governed by the Indian Contract Act, 18722, and consumer protection statutes such as the Consumer Protection Act, 19863. The absence of sector-specific regulation resulted in:
- One-sided agreements drafted by developers without buyer negotiation power.
- Lack of enforceability as homebuyers relied on consumer forums or civil litigation, both of which were slow and inefficient.
- Rampant delays and fund diversion, as developers had no legal obligation to ring-fence buyer funds.
The enactment of RERA aimed to provide sector-specific legal certainty by establishing enforceable statutory obligations on developers, thereby reducing contractual exploitation.
RERA's Legal Overhaul of Builder-Buyer Agreements
RERA introduced a mandatory regulatory framework for builder-buyer agreements, ensuring legal protection through non-excludable statutory obligations.
Standardization and Enforceability of Agreements
- Section 13(1)4: Developers are prohibited from collecting more than 10% of the total sale consideration without executing a registered builder-buyer agreement.
- Section 11(4)(a)5: Developers are legally bound to fulfil contractual obligations under the agreement, making delays actionable.
- Section 19(1)6: Homebuyers now have an explicit right to obtain all contractual information, eliminating information asymmetry.
These provisions ensure that builder-buyer agreements are enforceable and non-negotiable, unlike pre-RERA agreements, which developers could alter unilaterally.
Protection Against Delays and Financial Mismanagement
- Section 4(2)(l)(D)7: Developers must deposit 70% of buyer funds into a separate account, preventing fund diversion.
- Section 188: Buyers are entitled to a full refund with interest if possession is delayed, or compensation if they choose to wait.
- Section 129: If misleading representations induce a buyer to invest, they are entitled to a refund along with statutory interest.
These statutory safeguards replace vague and arbitrary delay clauses in pre-RERA agreements, ensuring legal consequences for non-compliance.
Dispute Resolution and Legal Recourse
- Section 3110: Buyers can directly file complaints before the State RERA Authority, bypassing slow consumer courts.
- Section 29(4)11: RERA mandates that disputes must be resolved within 60 days, ensuring timely enforcement.
- Section 4012: Monetary penalties or compensation awarded under RERA are legally recoverable as arrears of land revenue, preventing developers from ignoring tribunal orders.
These provisions significantly strengthen the buyer's ability to enforce agreements, marking a fundamental shift in contractual power dynamics.
Legal Precedents and Interpretation of RERA
Judicial pronouncements have also played a critical role in reinforcing buyer protections and clarifying ambiguities in RERA.
- Pioneer Urban Land & Infrastructure Ltd. v. Govindan Raghavan (2019)13: The Supreme Court struck down one-sided builder agreements, ruling that "unconscionable clauses that create an imbalance of power are legally unenforceable."
- Ireo Grace Realtech Pvt. Ltd. v. Abhishek Khanna (2021)14: The Court reinforced that delay in possession is a fundamental breach under Section 18, making the builder liable for full refunds.
- M/s Imperia Structures Ltd. v. Anil Patni (2020)15: The Court upheld that buyers could seek relief under both RERA and consumer law, increasing the avenues for legal enforcement.
These judgments solidify RERA's authority, ensuring that builder-buyer agreements cannot override statutory entitlements.
Section 3(2)(a): The 'or' Dilemma Across States
Section 3 of RERA requires mandatory registration of real estate projects unless explicitly exempted under specific conditions listed under Section 3(2). Section 3(2)(a) exempts projects where either the land area does not exceed 500 square meters, or the number of proposed apartments does not exceed eight apartments.
However, the term "or" has become a crossroad in the state-wise implementation process. Some authorities have interpreted it disjunctively, meaning that the conditions are treated as alternatives, while other states have adopted a rather conjunctive reading of the same, requiring both the criteria to be met concurrently for exemption. This divergence has led to a more fragmented regulatory landscape.
State Wise application of Conjunctive reading:
In West Bengal, a notification issued by the Housing Department's RERA Cell lowered these thresholds, making smaller projects eligible for registration. Specifically, projects with six or fewer apartments or land not exceeding 200 square meters were exempt from registration requirements16.
The West Bengal Housing Department ("WBRERA") issued a circular to clarify the interpretation of section 3(2)(a) of RERA and a previous notification17 stating that real estate projects must register with the WBRERA if they involve land exceeding 200 square meters or if they plan to develop more than six flats, plots, or apartments. Additionally, the project must be registered by submitting an online application through the WBRERA website.
In Bihar, during the case of Birendra Kumar Singh v. M/s Arya Building Construction Pvt Ltd18, the Bihar Real Estate Regulatory Authority issued an interim order clarifying that if either of the conditions specified in section 3(2)(a) of RERA is not met, the project falls under the purview of RERA. In essence, if a project exceeds either the land area threshold or the number of apartments threshold, it must be registered under RERA.
In Rajasthan, the Real Estate Regulatory Authority issued an office order stating that a real estate project is exempt from registration under RERA only if it meets both conditions outlined in section 3(2)(a): the land area must not exceed 500 square meters, and the number of apartments must not exceed eight19. This interpretation was later applied in the case of Kundan Lal v. Harish Jasuja & Ors, where the authority clarified that when "or" is used in a restrictive provision, it effectively means "and" requiring both conditions to be met for exemption20.
The Delhi Real Estate Regulatory Authority issued a public notice21 clarifying that for a real estate project in the National Capital Territory ("NCT") of Delhi to be exempt from registration under Section 3(2)(a) of the RERA, both conditions must be met. The authority emphasized that if either condition is not met, registration is required.
State Wise application of Disjunctive reading:
In the "Geetanjali Case22," the Maharashtra Real Estate Appellate Tribunal ("MahaREAT") ruled that if either of the two conditions under Section 3(2)(a) of RERA is met, a real estate project does not require registration. The Tribunal interpreted the word "or" in a way that it meant that if a project's land area is less than or equal to 500 square meters or if it has eight or fewer apartments, it is exempt from registration. However, in a later case of Sanjay Jawaharlal Surana v. Kaushalya Developers23, the MahaREAT delivered a split decision, with one member interpreting "or" conjunctively (requiring both conditions to be met) and the other maintaining the disjunctive interpretation.
The Goa Real Estate Regulatory Authority ("GOARERA") issued an explanatory note on January 18, 202324 clarifying that a project must be registered if it covers an area of more than 500 square meters or includes more than eight units, considering all phases. However, in a later circular, the authority further clarified that meeting just one of the conditions outlined in section 3(2)(a) of RERA is sufficient to exempt a real estate project from registration25. In the case of Deepti Agarwal vs. Isprava Vesta Private Limited26, the Authority ruled that if either of the conditions where the area of land does not exceed 500 square meters or the number of apartments does not exceed eight, is met, the project is exempt from registration.
The Odisha Real Estate Regulatory Authority issued an order27 clarifying that the conditions under Section 3(2)(a) of RERA should be interpreted disjunctively, not conjointly. This means that if a project's land area is less than 500 square meters but includes more than eight apartments across all phases, registration is not required. Similarly, if the land area exceeds 500 square meters but fewer than eight apartments are planned, registration is also not necessary.
In 2020, the Tamil Nadu Real Estate Appellate Tribunal ("TNREAT") interpreted the exemption conditions in Section 3(2)(a) of the RERA to be read conjunctively in the case of M/s. Devinarayan Housing Board and Property Developments Private Limited v. Mr. Manu Karan28. However, the Madras High Court later overturned this decision on September 20, 2023. The High Court ruled that the word "or" in Section 3(2)(a) should be read disjunctively, aligning with the Standing Committee's report on the Real Estate (Regulation and Development) Bill, 201329.
Later, TNRERA issued an office circular on October 12, 202330, clarifying that the registration of real estate projects, specifically buildings, will only be processed if the proposed development exceeds 500 square meters in land area or involves more than eight apartments across all phases.
In the case of Commissioner, Customs Central Excise and Service Tax, Patna vs. M/s Shapoorji Pallonji and Company Private Ltd & Ors31, the Supreme Court interpreted the term "or" in a government authority definition within an exemption notification. The Court ruled that words should be understood in their usual, natural, and grammatical sense, and no alternative meaning should be applied unless it causes ambiguity or renders the clause ineffective. Specifically, the Court treated "or" as indicating an alternative, providing a choice rather than requiring both conditions to be met.
Conclusion
RERA has undeniably transformed builder-buyer agreements, replacing the pre-era of developer-controlled contracts with legally enforceable consumer rights. However, inconsistent implementation, non-compliance, and developer evasion strategies continue to hinder its full potential. While the exemption from registration under Section 3(2) of RERA may not have an impact on the larger real estate projects, since the exemption was meant only for exclusion of smaller real estate projects from the purview of RERA; developers might continue taking advantage of this ambiguity for exemption of smaller real estate projects, including exploitation of pre-existing agreements and evading regulatory oversight for such projects. The loophole compromises the integrity of RERA's mandate, enabling certain developers to bypass compliance while still engaging in transactions that should ideally be covered under RERA's purview. These ambiguities have also led to unwanted litigations before various State RERA authorities, which could have been prevented by a clarification from Government. Through rigorous legal enforcement and structural reforms, RERA can truly become the ultimate safeguard for homebuyers in India.
Footnotes
1. The Real Estate (Regulation and Development) Act, 2016
3. Consumer Protection Act, 1986
5. Section 11(4)(a): Functions and duties of promoter
6. Section 19(1): Rights and duties of allottees
7. Section 4(2)(l)(D): Application for registration of real estate projects.
8. Section 18: Return of amount and compensation
9. Section 12: Obligations of promoter regarding veracity of the advertisement or prospectus
10. Section 31. Filing of complaints with the Authority or the adjudicating officer
11. Section 29(4): Meetings of Authority
12. Section 40. Recovery of interest or penalty or compensation and enforcement of order, etc
13. Pioneer Urban Land & Infrastructure Ltd. v. Govindan Raghavan (2019): [2019] 5 S.C.R. 1169
14. Ireo Grace Realtech Pvt. Ltd. v. Abhishek Khanna (2021) AIR 2021 SUPREME COURT 437, AIRONLINE 2021 SC 9
15. M/s Imperia Structures Ltd. v. Anil Patni [2020] 12 S.C.R. 373
16. Government of West Bengal vide Notification No. 42-H4/2M-01/2023
17. WEST BENGAL REAL ESTATE REGULATORY AUTHORITY vide Circular No: 315/H4/2M-10/24 (pg. 34)
18. Case No.CC/1834/2020: Birendra Kumar Singh v. M/s Arya Building Construction Pvt Ltd
19. Pt 9.2.2: Minutes of the Meeting: No. F.1(31) RJ/RERA2019/550
20. 2(ii) Area of the project land and exemption provided, under section 3(2) of RERA, to projects having an area not exceeding 500 sq. mtrs Complaint No. RAJ-RERA-C-2019-2818 and 13 other complaints, order dated May 9, 2022
22. (2019) ibclaw.in 20 REAT: Geetanjali Aman Constructions Vs. Hrishikesh Ramesh Paranjpe
24. FAQs: Goa Real Estate Regulatory Authority (GOARERA)
25. F. No: 1/RERA/Circulars/2019/811
26. Deepti Agarwal vs. Isprava Vesta Private Limited
27. Odisha Real Estate Regulatory Authority (RERA): No. 2009/RERA Misc (Regd)-25/21
28. M/S.Devinarayan Housing and Property ... vs Manu Karan on 20 September, 2023
29. The Real Estate (Regulation and Development) Bill, 2013
30. Circular No: TNRERA/A4/9869/2023
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