RERA ACT – What It Means For The Real Estate Builders?

  • The Real Estate (Regulation and Development) Act, also known as the RERA act was enacted by the Government of India on 26th March 2016, with its provisions coming to effect on 1st May 2016. This act was passed as a guard to protect of home buyers and also as a boost to the real estate sector. All developers have been given until the end of the July to register their projects under the RERA act. As passed by the Parliament of India, the central and state governments have to notify their own rules based on the frames made by the Central Government.

Why did RERA act happen?

RERA act was established as a balancing step for the home buyers. For long it was said that the real estate transactions leaning heavily in favor of the developers. Thus, RERA act and the government claim to create a more leveled and equal market for the consumers and sellers, especially in the primary market. It is expected that RERA act will make real estate business more lucid and transparent, bringing in more accountability and simplicity gave that state does not dilute the provisions given by the Central Government.

RERA act will act as a regulator, and it will be made compulsory for all states and union territories to form their own rules according to the act policies and function according to that.

Establishment of regulatory authority

The RERA act came as a regulator and policymaker in the real estate market, one whose presence was long needed. It has been established in each of the states and union territories and some of its functions include creating a robust grievance system, protecting interests of buyers and stakeholders as well as accumulating data at a repository. For the quick application of the act, the authority has been mandated to execute it in maximum 60 days and will only be extended if a reason is recorded.

Compulsory registration

Compulsory registration has been made mandatory for all real estate projects (where total area exceeds 500 sq meters or more than 8 apartments have to be constructed) in their respective state’s RERA. Existing projects that fall into this category, and whose completion or occupancy certificate has not been issued are also to be registered in this. While applying all the detail of the project, i.e. Land details, promoter details, approvals, and the schedule has to be given. The project can only be marketed when the registrations and approvals are verified.

Reserve account

One of the major problems was the delay of the competition of the project as the fund of one project was directed in a new project. Hence to prevent such diversions the promoter was required to save 70% of the funds of one project in a separate bank account and the fund of that is to be used only for that project construction. This was also required to be certified by someone authorized to do that.

Regular updates by promoters

The RERA act takes the project online where the buyers will be regularly able to monitor the status of the completion of the project. The promoters were not only required to register it but also have to regularly make submissions regarding the progress of the project.

Standardization of sale agreement

The RERA act took the role of the unbiased middleman by prescribing standard model agreement to be entered between promoters and home buyers. Typically any clause entered by the promoter against the home buyers could attract a penalty but that same clause caused minimal or no penalty on the side of the promoter. The introduction of RERA clauses will give more balanced agreements for the home buyers in future.


To make sure that the Act is enforced and not taken lightly, fine up to 10% of the project cost and imprisonment has been prescribed against the violators.


Impact of RERA on real estate industry

With the introduction of RERA act, specialized forums and bodies like State Real Estate Regulatory Authority and Real Estate Appellate Tribunal was established to settle the dispute between home buyers and promoters. There will be no need to turn heads to civil courts or consumer forums on such matters. With RERA setting the ground fast dispute resolution steps, it’s only a matter of time till the success of the project becomes transparent.

Authored by a Building Expert from Wienerberger India

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