Daily News Analysis

Real Estate (Regulation and Development) Act, 2016 (RERA)

20th November, 2021 GOVERNANCE

Figure 2: No Copyright Infringement Intended


  • The Supreme Court affirmed that the provisions of the Real Estate (Regulation and Development) Act, 2016 (RERA) are applicable to projects that were ongoing and for whom completion certificates were not obtained at the time of the enactment of the law.
  • Supreme Court has interpreted that the law is retroactive.


Objectives of RERA:

  • Enhance transparency and accountability in real estate and housing transactions
  • Boost domestic and foreign investment in the real estate sector
  • Provide uniform regulatory environment to ensure speedy adjudication of disputes
  • Promote orderly growth through efficient project execution and standardization;
  • Offer single window system of clearance for real estate projects
  • Empower and protect the right of home buyers


Important Provisions of RERA:

  • The Act stipulates that no project can be sold without project plans being approved by the competent authority and the project is registered with the regulatory authority.
  • This provision ended the practice of selling on the basis of deceitful advertisements.
  • Promoters are required to maintain “project-based separate bank accounts” to prevent fund diversion.
  • The mandatory disclosure of unit sizes based on “carpet area” strikes at the root of unfair trade practices.
  • The provision for payment of “equal rate of interest” by the promoter or the buyer in case of default reinforces equity.
  • These and many other provisions have empowered consumers, rectifying the power asymmetry prevalent in the sector.


RERA : an effort in Cooperative Federalism:

  • RERA is a seminal effort in cooperative federalism. 
  • Though the Act has been piloted by the Central government, the rules are to be notified by state governments, and the regulatory authorities and the appellate tribunals are also to be appointed by them.


Challenges with RERA:

  • Who will ensure how much is 70% of the total project cost? Also, the state government can alter this amount to less than 70%.
  • The Bill mandates that 70% of the amount collected from buyers of a project be used only for construction of that project. In certain cases, the cost of construction could be less than 70% and the cost of land more than 30% of the total amount collected.  This implies that part of the funds collected could remain unutilized, necessitating some financing from other sources. This could raise the project cost.
  • Builders argue that it will be difficult to sell units on the basis of carpet area in an under-construction property in which many units have been already sold on the basis of super built-up area.
  • Developers say that the main cause of delay is slow approvals from government agencies.
  • Under the Act, if the registration is revoked by the regulatory authority, who will complete the construction?
  • A few consumer activists believe that the real estate regulator may not be effective in the matter of handling complaints. The complaints are already being handled by consumer courts. So they say that there is nothing new. Also, the consumer courts were not effective in the redressal of complaints. They express the same reservations about the regulatory authority also.
  • Does not address important issues like the lengthy process for project approvals, lack of clear land titles, the prevalence of black money etc
  • Since state-level governance is very uneven, this will work patchily. Some states will set up efficient Tribunals and Regulatory Boards; others will not.
  • Many politicians have interests in real estate. That could work both for, and against the concepts of the new Act. Some smart and not-so-crooked politicians will back the new act and use it to accelerate activity. Others will try to hold up the new legislation or subvert it.


Way Forward:

  • Centre and state must collectively resolve any conflict arising out of RERA implementation
  • Potential conflict between RERA and IBC to be checked
  • Government agencies should be made accountable for the delay in granting approvals
  • States should not dilute the RERA provisions. Provisions for punishment of violations, should be kept intact in all state laws
  • A robust IT infrastructure should be established for monitoring projects and quick redressal of grievances
  • The government has already set up Central Advisory Council (CAC) for effective implementation of RERA. The scope of functions of CAC should be broadened to include advisory to state bodies on issues related to RERA compliance