When RERA Takes Extreme Action
One of the most potent weapons the Real Estate Regulatory Authority holds is the power to cancel a builder's project registration.
Under Section 7 of the RERA Act, the Authority can revoke a registration if the promoter defaults on the Act's rules, violates the terms of the project approval, or engages in unfair practices and fraud. But what happens to the hard-earned money of the homebuyers when a project is effectively shut down by the government?
Immediate Consequences of Revocation
When a project's registration is revoked, the Authority takes swift actions to prevent further damage:
- Sales are Frozen: The builder is completely barred from marketing, advertising, or selling any remaining plots, apartments, or buildings in that specific project.
- Bank Accounts are Frozen: RERA immediately directs the bank holding the project's designated escrow account to freeze it. The builder can no longer withdraw any funds.
- Blacklisting: The promoter is officially blacklisted on the RERA portal, and other state RERA authorities are notified.
Section 8: The Project Completion Mechanism
The revocation of registration does not mean the project is dead. The primary goal of RERA is to protect the allottees and ensure they get their homes.
Under Section 8 of RERA, upon revoking the registration, the Authority is legally obligated to consult with the appropriate state government to formulate a plan for completing the remaining development works.
The First Right of Refusal
Crucially, the law gives the Association of Allottees (the homebuyers' group) the "first right of refusal" to carry out the remaining development works.
If the homebuyers form an association, RERA can authorize them to take over the project. The frozen funds in the project's escrow account are released to the Association to fund the remaining construction. If the Association declines to take over the project, the Authority may appoint a third-party competent developer or a government agency to step in and finish the construction.
What Should Homebuyers Do?
If your project's registration gets revoked, individual panic will not solve the issue.
- Unite Immediately: The most critical step is to quickly form and register an Association of Allottees. RERA authorities heavily prioritize collective action over individual refund requests in revoked projects.
- Engage Legal Counsel: The Association should hire a specialized real estate lawyer to represent them before the RERA Authority, ensuring that the transition of project management and the release of frozen funds happen smoothly.