Real Estate Regulatory Act 2016



  • Real Estate (Regulation and Development) Act (RERA) is an act passed by the Parliament in 2016 that came into effect from 1st May 2017.
  • It aims to protect home-buyers as well as help boost investments in the real estate sector by bringing efficiency and transparency in the sale/purchase of the real estate.
  • The Act establishes the Real Estate Regulatory Authority (RERA) in each state for regulation of the real estate sector and also acts as an adjudicating body for speedy dispute resolution.

Need for the RERA

  • The real estate sector in India had been largely unregulated, with no standardization of business practices and transactions.
  • Prevalence of issues like delays, price, quality of construction. Delay in projects has been a major issue plaguing the real estate sector- huge cost overrun due to delays.
  • Numerous instances where developers cheated property buyers.
  • No grievance redressal mechanism.
  • The huge generation of black money in the sector.

Objectives of RERA Act, 2016

  • Ensure transparency and accountability in real estate and housing transactions.
  • Boost domestic and foreign direct investment in the real estate sector.
  • Provide a unified regulatory environment to ensure speedy adjudication of disputes.
  • Promote orderly growth through effective project execution and standardization.
  • Seek a single-window system of clearance for real estate projects.
  • Empower and protect the rights of home buyers.


Key Provisions of RERA Act, 2016


  • Establishment of state-level regulatory authorities- Real Estate Regulatory Authority (RERA): The Act provides for State governments to establish more than one regulatory authority with the following mandate:
    • Register and maintain a database of real estate projects; publish it on its website for public viewing
    • Protection of interest of promoters, buyers and real estate agents
    • Development of sustainable and affordable housing,
    • Render advice to the government and ensure compliance with its Regulations and the Act.
  • Establishment of Real Estate Appellate Tribunal- Decisions of RERAs can be appealed in these tribunals.
  • Mandatory Registration: All projects with a plot size of a minimum of 500 or eight apartments need to be registered with Regulatory Authorities.
  • Deposits: Depositing 70% of the funds collected from buyers in a separate escrow bank account for the construction of that project only.
  • Liability: Developer’s liability to repair and maintain structural defects for five years.
  • Penal interest in lieu of default: Both promoters and buyers are liable to pay an equal rate of interest in case of any default.
  • Cap on Advance Payments: A promoter cannot accept more than 10% of the cost of the plot, apartment or building as an advance payment or an application fee from a person without first entering into an agreement for sale.
  • Defines Carpet Area as the net usable floor area of flat. Buyers will be charged for the carpet area and not a super built-up area.
  • Punishment: Imprisonment of up to three years for developers and up to one year in case of agents and buyers for violation of orders of Appellate Tribunals and Regulatory Authorities.

Benefits for Buyers

  • Timely delivery of flats
    • Developers often make false promises about the completion date of the project, but hardly ever deliver.
    • Strict regulations will be enforced on builders to ensure that construction runs on time and flats are delivered on schedule to the buyer.
    • If the builder is not able to deliver the flats on time, he/she will have to refund the purchaser with interest.
  • Furnishing of accurate project details:
    • In the construction stage, builders promote their projects defining the various amenities and features that will be part of the project. But not everything goes according to the plan, with several features missing.
    • As per the Act, there can't be any changes to a plan.
    • And if a builder is found guilty of this, he/she will be penalized 10% of the project’s costs or face jail time of up to three years.
  • Specifying carpet area:
    • Generally, builders sell flats on the basis of a built-up area, which includes a common passage area, stairs and other spaces which is approximately 20-30% more than the actual flat area.
    • But, not all buyers are aware of the concept of carpet area.
    • With this Act, it will become mandatory to declare the actual carpet area.
  • All clearances are mandatory before the start of a project:
    • Builders often attract buyers with huge discounts and pre-launch offers. And, the buyer, overwhelmed by the offers, does not bother about the clearance.
    • But, due to delays in getting clearance, the buyer does not get the flat on time.
    • This Act ensures that developers get all the clearances before selling flats.


  • Each project should have a separate bank account:
    • Developers raise funds through pre-launch offers and use them to purchase some other land or invest it in other projects.
    • This Act will make it compulsory that a separate bank account is maintained for each project.
    • Each transaction will have to be recorded, and diversion to another project will not be entertained.
  • After-sales service:

As per an interesting clause in the REAL ESTATE (REGULATION AND DEVELOPMENT) ACT, 2016

    • if the buyer finds any structural deficiency in the development of the building, the buyer can contact the builder for after-sales service.
    • But, the buyer should approach the builder within 5 years of purchase to rectify such defects without further charges.



  • Past real estate projects not included
    • Only new projects are covered by the Act.
    • Projects that are ongoing, completed or stuck due to clearance or financial issues, don’t come under the act.
    • Hence, not many benefits for buyers are provided.
  • Delay from government agencies
    • There can be delays caused by the government, which sometimes takes a lot of time to clear a project.
    • It is up to government bodies to timely approve projects so that developers can launch, complete and deliver them on time.
  • No compulsory regulation for projects less than 500sqm area:
    • Registration with the regulator will not be mandatory for projects less than 500 square meters.
    • So, small developers will not be bound to register.
  • New project launches expected to be delayed:
    • A project will not be allowed to launch without the requisite clearances from the government, so they will automatically get delayed.
  • It does not deal with the concerns of developers regarding force majeure (acts of god outside their control) which result in a shortage of labor or issues on account that there is no central repository of land titles/deeds.
  • State governments regulated the real estate as land and land improvement are State subjects in the Seventh Schedule of the Constitution before RERA has been enacted under Concurrent List. This has increased the tussle between various states and Centre over the implementation of RERA Act, 2016.


Way Forward

  • Avoiding any conflict between the Centre and the States in case of regulation of the real estate sector.
  • States should not dilute the RERA Act 2016 provisions. Provisions of punishment for violations should be kept intact in all State laws.
  • States should fully implement REAL ESTATE (REGULATION AND DEVELOPMENT) ACT, 2016 to fight black money.
  • Government agencies should be made accountable for the delay in granting approvals.
  • A robust IT infrastructure should be established for monitoring projects and quick redressal of grievances.
  • All the concerns of developers should be addressed in a time-bound manner to avoid unnecessary litigations in courts.