Examining The Distinction Between Liability Of Landowners And Project Developers Under RERA

The Real Estate (Regulation and Development) Act, 2016 (RERA Act) has ushered in greater accountability and discipline across India's real estate sector, addressing long-standing issues such as project delays, lack of transparency, and developer fraud and malpractice.

The Act seeks to regulate all major stakeholders in the country's real estate ecosystem (builders, promoters, real estate agents, and brokers) through specified disclosures and other requirements, as well as imposition of sanctions in the event of default, etc. One of the persistent issues under the RERA framework is the uncertainty around liability of landowners arising from failure of project developers in honoring their commitments and claims. This note seeks to analyse the legal basis and practical consequences of such liability, with a focus on whether and when landowners may be treated as 'promoters', as defined under Section 2(zk) of the RERA Act.

Typically, the landowner's primary obligations are confined to handing over an encumbrance-free parcel of land to enable the developer to construct, market, and sell units to prospective buyers; and executing agreements and deeds of conveyance to transfer undivided land shares to such buyers. The question of whether such landowners, who neither exercise material control over development activities nor participate in marketing or sales, can nonetheless be categorised as 'promoters' has generated significant ambiguity. This equivocality can be analysed by examining the following aspects:

• State RERA circulars: It is first necessary to consider the regulatory framework and administrative guidance issued by various State Real Estate Regulatory Authorities, including those of Maharashtra¹, Karnataka,² Rajasthan,³ Gujarat,⁴ and Goa.⁵ These authorities, through circulars and clarifications, have generally recognised a distinction between a landowner and a developer within the meaning of 'promoter', based on the developer retaining complete operational control over project activities – from obtaining building plan sanctions and undertaking construction to delivering possession of units to allottees.

• Form B of RERA Rules, 2016: The aforementioned State circulars must be read in conjunction with Form B of the RERA Rules, 2016, as independently adopted by each State. Form B mandates the promoter to submit a declaration regarding the authenticity of the title of the land. Either the promoter holding the legal title to the must land be named in the affidavit, or, where the land is owned by another person, the owner's consent must be furnished along with copies of the development agreement and title documents. It is therefore evident that where the landowner and the developer are distinct persons, the landowner need not join the developer in applying for project registration; in such cases, the developer is treated as the promoter. Form B thus categorically distinguishes between a developer and a landowner in terms of the disclosures and submissions required.

• Case laws: The contours of this issue have been further clarified through a series of judicial pronouncements interpreting the scope of the term 'promoter' under the RERA Act:

• In Larsen & Toubro Ltd v State of Uttar Pradesh,⁶ the Allahabad High Court held that the definition of 'promoter' does not automatically include landowners owing to the usage of the word 'or' instead of 'and' in the phrase 'who constructs or causes to be constructed'. This means that a promoter need not necessarily be an owner of the land, but can be a person who develops the land even through a power of attorney. The precise selection of words by the Legislature leaves no room for ambiguity, and the definition cannot be expanded. The landowner is not required to be listed as a co-promoter unless the landowner is also actively involved in construction or sale activities. Mere ownership of land does not make the landowner a promoter under RERA; co-promotership arises only when both developer and owner are distinctly involved in the project's development and sales. The decision was also upheld by the Supreme Court.⁷
• In Pooja Constructions v. Kerala Uranma Devaswom Board,⁸ the Kerala High Court came to the same conclusion after examining the Explanation to Section 2(zk) of the RERA Act. Sub-clause (vi) of the Explanation states that for the purpose of the definition of 'promoter', where the person who constructs or converts a building into apartments or develops a plot for sale and the person who sells apartments or plots are different persons, both of them shall be deemed to be the promoters and shall be jointly liable. However, landowners that are otherwise not involved with the development or sale of the project are not considered promoters, except to the limited extent to which the RERA Act prescribes their liabilities – such as the execution of conveyance deeds.
• In Vaidehi Akash Housing Pvt Ltd. v New DN Nagar Co-op Housing Society Union Ltd,⁹ the society, as landowner, granted Vaidehi redevelopment rights over its property, including rehabilitation for members and a free-sale component for the developer. After terminating Vaidehi's agreement and appointing a new developer, purchasers sought possession and enforcement against both parties. However, the Court held that the society, being a mere landowner, was not a promoter. As there was no privity of contract with the new flat purchasers, they could not seek specific performance against the society. Their rights were subject to the rights of Vaidehi.
• While Vaidehi was a case under the Maharashtra Ownership Flats (Regulation of the promotion of construction, sale, management and transfer) Act, 1963 (MOFA), in the Goregaon Pearl CHSL v. Seema Mahadev Paryekar,¹⁰ the Bombay High Court compared the definitions of promoters under MOFA and RERA. It held that the definitions are similar, and the case law of Vaidehi would apply to projects under RERA as well. A landowner society that has no control over the development would not be liable to third-party purchasers in case of breach by the developers. Further, there is no provision under the RERA framework that mandates that an owner of land has to be a promoter. Landowners are included in the definition of 'promoter' under Clause (vi) to the Explanation when they are developing a plot for sale themselves. The non-inclusion in the earlier subclauses indicates the legislative intent that landowners are not promoters in the normal course.

In view of the above, the determination of whether a landowner qualifies as a promoter under the RERA framework hinges on the degree of control and participation the landowner exercises in the project. A landowner cannot automatically be classified as a promoter unless they have a demonstrable role in development, construction, marketing, or sales. This assessment must be guided by the terms of the development agreement and the disclosures in Form B. As reaffirmed by regulatory circulars and rulings such as Pooja Constructions, where the developer retains full operational control, extending promoter liability to the landowner is neither warranted nor intended.

Footnotes

1 Maharashtra Real Estate Regulatory Authority circular no: 12/2017 bearing no. MahaRERA/Secy./FileNo.27/538/2017 dated December 4, 2017

2 Karnataka Real Estate Regulatory Authority (RERA), Circular No: KRERA/circular/03/2019 dated October 31, 2019

3 Rajasthan Real Estate Regulatory Authority, No. F.1(152) RJ/RERA/LAND/2020/1202, dated June 30, 2020

4 Gujarat Real Estate Regulatory Authority (RERA), GujRERA/Circular/23/2020 dated July 20, 2020

5 Goa Real Estate Regulatory Authority, No. 11/35/2017-DMA/3390(A), dated February 13, 2018

6 Writ Petition No. 16616 of 2024

7 2025 SCC OnLine SC 1750

8 2024 SCC OnLine Ker 4894

9 2014 SCC OnLine Bom 5068

10 2019 SCC OnLine Bom 3274

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.