MODULE 5
1. Real Estate (Regulation and Development) Act, 2016 (RERA)
The Real Estate (Regulation and Development) Act, 2016 was enacted as a comprehensive
regulatory framework to reform India’s real estate sector, which had long been characterised by
opacity, project delays, information asymmetry, and weak consumer protection. The Act seeks to
promote transparency, accountability, and financial discipline, curb diversion of funds by
promoters, ensure time-bound project completion, and strengthen the legal position of
homebuyers, who were traditionally the weaker party in real estate transactions.
1.1 Objectives and Architecture
RERA applies to both residential and commercial real estate projects, including plotted
developments, where the land area exceeds 500 square metres or the project consists of more than
eight apartments. Importantly, the Act also covers ongoing projects that had not received a
completion certificate at the time RERA came into force, thereby bringing legacy developments
within the regulatory net. This retrospective application was intended to protect buyers already
affected by delays and non-compliance.
The Act adopts a decentralised institutional structure, mandating each State and Union Territory
to establish a Real Estate Regulatory Authority, a Real Estate Appellate Tribunal, and to frame
state-specific rules for implementation. While RERA is a central legislation, its operationalisation
depends heavily on state machinery, resulting in some variation in procedures and timelines across
jurisdictions.
1.2 Mandatory Registration
A cornerstone of RERA is mandatory registration. Section 3 expressly prohibits promoters from
advertising, marketing, booking, selling, or offering any apartment, plot, or building in a real estate
project without prior registration with the concerned State RERA. This provision directly targets
pre-launch sales and speculative marketing practices that were common prior to the Act.
Registration is not a mere formality; it requires extensive disclosures by the promoter. These
include details of land title and encumbrances, sanctioned plans and layout approvals, the stage
and status of statutory permissions, the proposed timeline for completion, and the number, type,
and size of units. Draft agreements for sale and allotment letters must also be uploaded, ensuring
that buyers have access to uniform and standardised contractual terms.
The Act also regulates intermediaries. Section 9 mandates compulsory registration of real estate
agents dealing in registered projects. Agents are required to quote their registration number in
every advertisement and transaction, thereby increasing traceability and accountability. This
brings brokers within the regulatory framework and reduces misinformation and misrepresentation
at the marketing stage.
1.3 Safeguards for Buyers
RERA introduces several substantive safeguards to protect allottees. One of the most significant
is the 70% escrow requirement, under which at least seventy percent of the amounts collected from
buyers must be deposited in a separate bank account. These funds can be used only for the land
and construction costs of that specific project, and withdrawals are permitted strictly in proportion
to the project’s progress, certified by engineers, architects, and chartered accountants. This
mechanism directly addresses fund diversion, a major cause of project delays.
Section 14 restricts promoters from making arbitrary alterations to sanctioned plans, layouts, and
specifications. Any change affecting common areas or key structural elements requires the consent
of at least two-thirds of the allottees, thereby limiting unilateral decision-making by developers.
Timely completion is central to RERA’s consumer protection regime. If a promoter fails to
complete the project or hand over possession within the declared timeline, or if the project
registration is revoked, Section 18 entitles the allottee to refund with interest and compensation,
or alternatively, to continue with the project and receive interest for the period of delay.
Additionally, RERA introduces a five-year defect liability period, during which the promoter must
rectify structural or quality defects at no cost to the buyer, failing which compensation becomes
payable.
2. Environmental and Safety Clearances
Real estate development is also subject to environmental, safety, and building regulations, which
operate alongside RERA. Compliance with these regimes is mandatory and non-compliance can
halt projects, invalidate approvals, or lead to demolition and penalties.
2.1 Environmental Clearance (EC)
Environmental clearance is governed primarily by the EIA Notification, 2006, issued under the
Environment (Protection) Act, 1986. EC is mandatory for building and construction projects with
a built-up area of 20,000 square metres or more, as well as for township and area development
projects exceeding prescribed thresholds.
Projects are categorised based on size and environmental impact. Large or high-impact projects
fall under Category A and are appraised at the central level, while Category B projects are
evaluated by State Environmental Impact Assessment Authorities. The clearance process requires
submission of detailed project information, conceptual plans, land-use data, environmental impact
assessments and management plans, and no-objection certificates from pollution control and utility
authorities. In many cases, a public hearing is also mandatory.
Crucially, no on-site work, including land development, can legally commence before
environmental clearance is granted. Any violation may result in stop-work orders, penalties, or
even rejection of post-facto approval.
2.2 Safety Clearances and Building-Level Compliance
Before construction begins, developers must obtain sanctioned building plans and commencement
certificates from the local planning authority. Upon completion, a completion certificate and an
occupancy certificate are required to confirm compliance with approved plans, structural safety
norms, and habitability standards. Without an occupancy certificate, lawful possession and utility
connections are often barred.
Fire safety compliance is mandatory for specified building heights and occupancies. A Fire Safety
No-Objection Certificate is issued by the State Fire Department based on compliance with the
National Building Code, 2016, covering exits, fire-fighting systems, access roads, and emergency
infrastructure. Depending on location, additional approvals may be required from authorities such
as the Airport Authority, Railways, Defence establishments, or coastal zone regulators.
3. Penal Provisions and Dispute Resolution
3.1 RERA Penalties
RERA contains stringent penal provisions to ensure compliance. Promoters who fail to register
projects may be penalised up to ten percent of the estimated project cost, and continued default
can attract imprisonment. Non-compliance with orders of the Authority can lead to daily penalties
accumulating up to five percent of the project cost.
Real estate agents operating without registration or violating statutory duties face daily fines and
potential suspension or revocation of registration. Even allottees are not immune; failure to comply
with orders of the Authority or Tribunal can result in monetary penalties.
In serious cases, RERA authorities have the power to revoke project registration, freeze project
bank accounts, and de-bar promoters or agents from future projects, making compliance
economically and reputationally critical.
3.2 Dispute Resolution Structure
RERA establishes a specialised and time-bound dispute resolution framework. Complaints relating
to violations of the Act—such as delay, non-disclosure, or deviation from sanctioned plans—are
adjudicated by the Real Estate Regulatory Authority at the first instance. The Authority has wide
investigative and adjudicatory powers, including ordering refunds, interest, compensation, and
penalties.
Claims specifically relating to compensation for loss or damage are decided by an Adjudicating
Officer appointed under Section 71, usually of District Judge rank. Appeals from decisions of the
Authority or Adjudicating Officer lie before the Real Estate Appellate Tribunal, with a further
appeal to the High Court on questions of law. While the Act envisages expeditious disposal, actual
timelines vary across states.
4. Contractual Obligations in Real Estate Transactions
Statutory regulation under RERA operates alongside contract law, and parties’ rights and
obligations are largely shaped by the covenants contained in their agreements, subject to
mandatory statutory protections.
4.1 Promoter/Developer Obligations
Under builder-buyer agreements and agreements for sale, promoters are obligated to make full and
truthful disclosures regarding land title, encumbrances, approvals, layouts, and amenities. They
must construct strictly in accordance with sanctioned plans and RERA disclosures, obtain all
statutory approvals, and adhere to declared timelines for completion and possession.
Developers are required to maintain separate project accounts, refrain from unauthorised
alterations, execute conveyance deeds in favour of buyers or associations, and honour defect
liability obligations for a minimum of five years. Breach of these duties exposes promoters to
RERA proceedings, civil liability, and in certain cases criminal consequences.
4.2 Buyer/Allottee Obligations
Buyers are contractually bound to pay instalments on time, furnish documentation, comply with
lawful use restrictions, and take possession when validly offered. Failure to pay may permit the
promoter to levy interest or cancel the allotment, subject to notice requirements and RERA’s
standards of fairness and proportionality.
4.3 Other Transactional Contracts
Depending on project structure, additional contractual arrangements may exist, such as joint
development agreements between landowners and developers, development management
agreements, commercial lease deeds, and mortgage or loan agreements with lenders. These
contracts operate subject to overriding statutory protections and are enforced through a mix of
RERA proceedings, civil litigation, arbitration, and consumer remedies.
Taken together, RERA, environmental and safety regulations, penal enforcement mechanisms, and
contractual governance form an interlocking compliance framework that now defines real estate
development and transactions in India, marking a decisive shift from promoter-centric practices to
a more regulated, buyer-protective legal regime.