The Real Estate (Regulation and Development) Act, 2016.
The Real Estate (Regulation and Development) Act, 2016
1. Background
The real estate sector in India has long been plagued by issues such as:
Lack of transparency,
Delayed projects,
Fraudulent practices,
Mismanagement of funds,
Non-registration of projects,
Buyer exploitation.
Prior to RERA, buyers had little legal protection, and real estate was largely an unregulated sector. Various state-level laws were inconsistent and often ineffective.
2. Purpose of the Act
The Real Estate (Regulation and Development) Act, 2016 was enacted to:
Regulate the real estate sector,
Promote transparency and accountability,
Protect consumer interests,
Establish a mechanism for speedy dispute resolution,
Encourage fair play and professionalism in real estate,
Facilitate growth of the sector in a sustainable and organized manner.
3. Scope and Applicability
Applies to all real estate projects where the land is over 500 square meters or has more than 8 apartments (varies slightly based on states).
Applicable to both residential and commercial projects, including sub-sale (resale) of properties.
The Act applies across India except for Jammu and Kashmir (prior to 2019 abrogation of Article 370).
Requires mandatory registration of real estate projects and real estate agents.
4. Key Provisions
a) Real Estate Regulatory Authority
Each state must establish a Real Estate Regulatory Authority (RERA) to regulate and promote the real estate sector.
The Authority has powers to hear disputes, register projects, and ensure compliance.
b) Real Estate Appellate Tribunal
Each state must set up an Appellate Tribunal to hear appeals against decisions of RERA.
c) Registration of Projects and Agents
Mandatory registration of all projects before advertising or selling.
Developers must provide project details: approvals, layout plans, timelines, and status.
Real estate agents must also register.
d) Disclosures by Promoters
Must disclose project details, status, completion date, approvals, etc.
Cannot make false or misleading statements.
e) Escrow Account
70% of the money collected from buyers must be kept in a separate escrow account.
Funds can only be used for construction of that project.
Ensures money is not diverted to other projects.
f) Timely Delivery
Promoters are obligated to deliver possession on or before the date declared.
Failure leads to penalty and compensation to buyers.
g) Defect Liability Period
Promoters are responsible for fixing defects in the property for 5 years post-possession.
h) Penalty Provisions
Penalties for non-compliance: up to 10% of project cost or imprisonment up to 3 years or both.
Agents and promoters found guilty of violations can be fined.
i) Adjudication of Complaints
Consumers can file complaints with RERA for issues like delays, defects, unfair practices.
Fast-track dispute resolution.
5. Impact of the Act
Promoted transparency and accountability in real estate.
Increased consumer confidence.
Reduced fraudulent practices.
Improved timely delivery of projects.
Professionalized real estate developers and agents.
Provided a dedicated forum for dispute resolution.
6. Important Case Law
a) RERA and Consumer Protection Act Overlap:
Laxmi Pat Surana v. Union of India (2020)
The Supreme Court emphasized that RERA provides a specialized and exclusive forum for real estate disputes, overriding consumer fora for matters covered under RERA.
b) Promoter Liability for Delay
M/s Pyramid Infratech Pvt. Ltd. vs Union of India (NCLT, 2018)
Promoters held liable under RERA for delay in project completion and ordered to compensate buyers, even when under insolvency proceedings.
c) Applicability to Ongoing Projects
Courts have clarified that even ongoing projects (started before RERA but still unsold) must register and comply with RERA provisions once the Act came into force.
d) Penalty and Enforcement
K. Raheja Development Corporation vs. Real Estate Regulatory Authority (2019)
The Tribunal upheld RERA’s power to impose penalties for non-registration and non-compliance, stressing strict adherence.
7. Relationship with Other Laws
RERA supersedes state-level real estate laws to the extent of conflict.
Co-exists with Consumer Protection Act, but RERA is the primary law for real estate disputes.
Works alongside Land Laws, Building Codes, and Environmental Laws.
8. Limitations and Challenges
Implementation varies across states; some delays in establishing authorities.
Smaller projects and rural areas often remain outside the purview.
Complexity in handling ongoing projects and legacy cases.
Awareness among buyers and smaller developers still needs improvement.
9. Conclusion
The Real Estate (Regulation and Development) Act, 2016 is a landmark legislation transforming the Indian real estate sector by:
Making it more transparent, accountable, and buyer-friendly.
Providing a dedicated regulatory mechanism for oversight and dispute resolution.
Encouraging professionalism and ethical practices.
Protecting millions of homebuyers from exploitation and unfair practices.
Its strong regulatory framework, backed by strict penalties and fast-track dispute resolution, has been widely seen as a positive step toward formalizing the real estate industry in India.
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