The Mandate of Project Registration
The cornerstone of the Real Estate (Regulation and Development) Act, 2016 is the compulsory registration of projects. Under Section 3 of the Act, it is obligatory for promoters to register their real estate project with the Authority before they can advertise, market, or sell any plots or apartments.
To ensure developers do not bypass this core requirement, RERA contains harsh punitive measures that escalate rapidly from financial fines to actual jail time.
Phase 1: Heavy Financial Penalties (Section 59)
If a builder attempts to launch or sell a project without a valid RERA registration, they are immediately hit with crippling fines.
According to Section 59(1) of the RERA Act, if any promoter contravenes the provisions of Section 3, he shall be liable to a penalty which may extend up to 10% of the estimated cost of the real estate project as determined by the Authority. For multi-crore residential complexes, this 10% penalty alone can run into massive sums, heavily eating into the builder's margins.
Phase 2: Imprisonment for Continued Violation
If the promoter assumes they can simply pay the initial fine and continue to flout the rules, the Act's criminal provisions are triggered.
Under Section 59(2), if a promoter does not comply with the orders or directions issued under sub-section (1), or continues to violate the registration provisions, they shall be punishable with imprisonment for a term which may extend up to three years. Alternatively, they may face an additional fine up to a further 10% of the estimated cost of the project, or both.
Can a Builder Settle the Criminal Charge?
RERA does offer a mechanism called "compounding" to settle criminal offences out of court, preventing actual imprisonment.
An offence punishable with imprisonment under Section 59 can be compounded (settled) by paying a fee equivalent to 10% of the estimated cost of the real estate project. Once this compounding payment is made, any person in custody for that offence should be set at liberty, and no further proceedings continue against them in court.