Introduction to RERA and Real Estate Laws
For decades, the Indian real estate market was highly unorganized, tilting heavily in favor of developers and promoters. Homebuyers frequently faced project delays, hidden charges, structural defects, and arbitrary changes to layout plans without any effective legal recourse. To bridge this regulatory gap, the Parliament of India enacted the Real Estate (Regulation and Development) Act, 2016 (RERA). RERA establishes a specialized regulatory authority in every state to monitor real estate transactions, settle disputes efficiently, and bring institutional transparency to the sector.
Mandatory Registration Under Section 3
One of the foundational pillars of RERA is mandatory project registration. Under Section 3 of the Act, no promoter or developer can advertise, market, book, sell, or invite investments into any real estate project without registering it with their respective State Real Estate Regulatory Authority.
Exemptions to Registration:
- Where the area of land proposed to be developed does not exceed 500 square meters.
- Where the total number of apartments proposed to be developed does not exceed 8 units.
- Where the promoter has received a completion certificate for the project prior to the commencement of the Act.
- Projects aimed purely at renovation or repair which do not involve re-allotment or marketing of new spaces.
If a project falls outside these exemptions and remains unregistered, developers face strict penalties under Section 59, which includes fines up to 10% of the estimated cost of the real estate project, or imprisonment up to three years.
The 70% Escrow Account Mandate
Historically, builders routinely diverted funds collected from one project to buy land for another, causing massive systemic delays. RERA strictly eliminates this malpractice through Section 4(2)(l)(D).
Developers are legally mandated to deposit 70% of the money collected from allottees into a separate, dedicated escrow bank account maintained in a scheduled bank. These funds can only be withdrawn to cover the direct costs of construction and land acquisition. Furthermore, withdrawals must be proportionally certified by an engineer, an architect, and a chartered accountant in practice, ensuring that the progress of the bank withdrawals matches the physical development on the ground.
Statutory Rights of Homebuyers
RERA shifts the legal equilibrium by granting homebuyers robust statutory rights that override traditional, heavily biased builder-buyer agreements.
1. Right to Information (Section 11)
Buyers have the absolute right to view sanctioned plans, layout designs, specifications approved by competent authorities, and the phase-wise time schedule for completion, including the status of civic infrastructure like water, electricity, and sanitation.
2. Remedy for Possession Delay (Section 18)
If a builder fails to give possession of an apartment or plot in accordance with the terms of the agreement for sale, the buyer has two choices under Section 18:
- Withdraw from the project: The builder is legally bound to return the full amount paid by the buyer, along with interest calculated at the prescribed rate from the date of payment until repayment.
- Stay in the project: If the buyer chooses not to withdraw, the developer must pay regular monthly interest for every single month of delay until possession is handed over.
3. Protection Against Structural Defects (Section 14)
Developers are strictly liable for any structural defects or quality issues discovered in the property. If any defect is brought to the builder's notice within five years from the date of handing over possession, the builder must rectify the defect within 30 days entirely free of charge. If they fail to do so, the buyer is entitled to receive appropriate financial compensation under the Act.
Dispute Redressal and Enforcement Mechanisms
To ensure quick resolution, RERA bypasses slow, traditional civil courts. Homebuyers can file formal complaints directly before the Real Estate Regulatory Authority or the Adjudicating Officer under Section 31 of the Act.
Decisions made by the Authority can be challenged before the Real Estate Appellate Tribunal (REAT) within 60 days. If a developer refuses to comply with an execution order passed by RERA or REAT, the authority can enforce the order as arrears of land revenue, allowing for the attachment and auction of the builder’s properties to recover the homebuyer's dues.