Critical Analysis of RERA, Future Of RERA, Proposed Amendments and Reforms

1. Introduction

The real estate industry is a globally recognized and regulated domain that has experienced
substantial growth in India over recent decades, solidifying the nation's position as the
world's second-largest player in the sector. Prior to 2016, the industry was primarily governed
by general consumer and property laws, lacking a dedicated regulatory framework. 1 In
response to this gap, the Real Estate (Regulation and Development) Act (RERA) was enacted
in 20162, with the objectives of streamlining property purchase processes, safeguarding buyer
interests, fostering investment, and enhancing transparency within the sector. This paper will
examine the genesis, significance, and provisions of RERA, assess its impact, and critically
analyze its shortcomings and implementation challenges.

2. RERA and its Impact

I. Impact of RERA on Home Buyers’ Rights

RERA primarily regulates a broad spectrum of industry participants, encompassing owners,

builders, developers, and developmental authorities, collectively termed as promoters. To
establish a robust regulatory framework, the Act mandates the registration of residential and
commercial projects exceeding prescribed thresholds with the Real Estate Regulatory
Authority (RERA).3 This necessitates comprehensive disclosure of critical project
information by promoters, including past project details, property ownership, encumbrances,
approvals, and project timelines. RERA subsequently determines the registration validity
period. To ensure transparency, disclosed information is publicly accessible on the RERA
website.4

1
“E.T. Realty (October 13, 2016) Homebuyers Can Now Move NCDRC Directly Against a Builder, available at
[Link]
a-builder/54823235 (Accessed: 9 August 2024).
2
The Real Estate (Regulation and Development) Act, 2016
3
Lalit Wadhwani (March 29, 2016) Passage of Real Estate Bill: Blessing for Both, Home Buyers & Developers,
available at [Link]
developers/813487 (Accessed: 9 August 2024).
4
Dave, S. (2022) Real estate (regulation and development) act, 2016, India Corporate Law. Available at:
[Link] (Accessed: 09
August 2024).”
RERA confers upon buyers a spectrum of rights, including the timely transfer of possession,
accurate property-related information, financial reimbursement in case of project
abandonment, compensation for incurred losses or damages, and access to a transparent
grievance redressal mechanism. Section 19(1) establishes a purchaser's fundamental right to
access comprehensive information pertaining to a property acquisition. This encompasses
details of the authorized and design plans, as well as any relevant rules or guidelines
stipulated within the agreement.5

“A pivotal provision requires promoters to deposit 70% of sales proceeds in a dedicated

escrow account for construction and land acquisition purposes. The Act imposes restrictions
on advance payments exceeding 10% of the sale price without a registered sale agreement.
Prior to RERA, frequent plan alterations posed significant challenges for unit buyers. To
address this, the Act prohibits plan modifications without the consent of two-thirds of unit
buyers.6 Furthermore, promoters are held accountable for rectifying structural defects within
five years of possession handover. The Act also incorporates regulations for real estate agents,
mandating their registration and prohibiting transactions involving unregistered projects.”

II. RERA and Real Estate Market Transparency

“RERA mandates the registration of all real estate projects, encompassing both residential
and commercial developments, with the regulatory authority. This requirement necessitates
transparent disclosure of project details, including approvals, timelines, and financial
information, to potential buyers. Developers are bound by stringent adherence to project
completion timelines as stipulated in registered plans. Any project delays or alterations must
be substantiated and accompanied by appropriate compensation to homebuyers, thereby
enforcing accountability in project execution.7”

III. Role of RERA in Promoting Affordable Housing

“The confluence of the Pradhan Mantri Awas Yojana (PMAY) and the Real Estate
(Regulation and Development) Act (RERA) has catalyzed significant growth within the

5
Id.
6
“Godge, A., Gandal, J., & Kumar, A. (2023). Impact of Real Estate Regulatory Authority (RERA) Act 2016.
Zenodo (CERN European Organization for Nuclear Research). [Link]
7
Id.
affordable housing sector, driven by escalating consumer demand. Empirical studies
conducted in India's leading metropolitan cities, including Mumbai, Hyderabad, and Pune,
have documented a notable enhancement in housing affordability.8”

“While RERA and PMAY collectively contribute to the transformation of India's real estate
landscape, the successful implementation of affordable housing projects hinges on the
industry's adherence to RERA regulations.9 Prior to RERA's enactment, the sector was
marred by consumer complaints related to delayed possession and fraudulent brokerage
practices. To mitigate these issues, RERA has instituted a regulatory framework that
mandates transparency and accountability among developers and brokers. Consequently, the
incidence of consumer grievances has markedly declined as developers increasingly
collaborate with registered brokers. This shift towards a regulated environment has
empowered homebuyers to make informed decisions.”

IV. RERA and Urban Development

“The Real Estate (Regulation and Development) Act (RERA) has catalyzed a transformative
shift within the Indian real estate sector. By prioritizing transparency and accountability,
RERA has significantly enhanced market sentiment. The entire real estate value chain, from
land acquisition to property delivery, has benefited from increased efficiency and clarity,
fostering a more conducive environment for both consumers and developers. Consequently,
India has emerged as a more attractive destination for domestic and foreign investment in the
organized real estate sector.10”

However, the implementation of RERA has exhibited considerable inter-state disparities, with
certain jurisdictions, such as Maharashtra, demonstrating exemplary leadership. Conversely,
inadequate infrastructure and delayed RERA notifications in other states have impeded

8
“Kumar, B. K. B., Chawla, N., & Mohanty, B. (2018). Reform in the Indian real estate sector: an analysis.
International Journal of Law and Management, 60(1), 55–68. [Link]
9
How RERA is Improving the Demand for Affordable Housing in India – Home Loan Stories – Kotak Bank.
(n.d.). Kotak Mahindra Bank. [Link]
improving-the-demand-for-affordable-housing-in- [Link]#:~:text=Under%20this%20program%2C
%20potential%20home,for%20properties%20by%20home%20buyers (Accessed: 9 August 2024).
10
Gupta, N. (2023, November 11). Real estate regulatory reforms shaping the future. The Hindu.
[Link]
(Accessed: 9 August 2024).
progress and hindered revenue generation. The establishment of RERA tribunals has also
been inconsistent across India.11

To address these challenges, the Confederation of Real Estate Developers' Association of

India (CREDAI) advocates for uniform RERA adoption nationwide to expedite dispute
resolution and reduce the burden on higher judiciary. The organization proposes the
formation of RERA conciliation panels, in collaboration with industry stakeholders, to
facilitate efficient dispute resolution. By replicating Maharashtra's successful model, India
can further optimize the benefits of RERA and create a more robust and investor-friendly real
estate market.12

3. Legal Implications of RERA for Real Estate Developers

I. Consumer Grievance Redressal Mechanisms Provided Under Rera for Resolving

Disputes Between Homebuyers and Developers

The Real Estate (Regulation and Development) Act, 2016 established the Real Estate
Regulatory Authority (RERA) as a dedicated adjudicatory body for resolving real estate
disputes. The Act incorporates stringent timelines, such as a sixty-day limit for appellate
tribunal decisions, to expedite dispute resolution and mitigate delays previously encountered
in consumer forums.13 RERA's functions extend beyond adjudication to encompass the
regulation, monitoring, and promotion of the real estate sector. Notably, the Act also
provisions for an Adjudicating Officer (AO) to determine compensation under specific
sections. Consequently, a dual dispute resolution mechanism emerges: RERA for general
complaints related to Act violations, and the AO for compensation claims. This bifurcation of
jurisdiction raises questions about the optimal allocation of responsibilities between these two
bodies.14

II. RERA And Environmental Compliance in Real Estate Projects

11
Chawla, N., & Kumar, B. (2022). Does Indian real estate regulation protect urban homebuyers? policy
implications. Cogent Business & Management, 9(1). [Link]
12
Id.
13
“Taxmann. (n.d.). [Link] [Link]
story/105010000000020474/an-analysis-of-the-dispute-redressal-mechanism-under-rera-vis-a-vis-the-effect-of-
arbitration-and-conciliation-amendment-act-2015-experts-opinion (Accessed: 9 August 2024).
14
Id.
The Real Estate (Regulation and Development) Act (RERA) primarily focuses on the
administrative facets of real estate development and does not explicitly address
environmental concerns. Nonetheless, real estate projects are subject to a constellation of
environmental regulations, including those stipulated by the Environment Impact
Assessment15, Coastal Regulation Zone Notification16, and the Water and Air (Prevention and
Control of Pollution) Acts17. Compliance with these mandates is a prerequisite for project
initiation.

As state-level entities, State Pollution Control Boards (SPCBs) and RERA authorities share a
common jurisdictional sphere. A comprehensive understanding of the interplay between these
regulatory bodies is essential to elucidate the framework for environmental protection in the
real estate sector. While the powers and functions of SPCBs are delineated in both the Water
and Air Acts, this analysis primarily focuses on the provisions of the Water Act, given their
analogous nature to those in the Air Act.

Real estate projects exceeding 20,000 square meters necessitate Environmental Clearance
and, consequently, the acquisition of consent from the State Pollution Control Board (SPCB).
Conversely, Section 3 of the Real Estate (Regulation and Development) Act (RERA) exempts
projects below 500 square meters or eight apartments from registration requirements.

While the SPCB exercises regulatory authority over projects exceeding 20,000 square meters,
its jurisdiction extends to RERA-regulated projects (below 20,000 square meters) in specific
areas such as the establishment of Sewage Treatment Plants (STPs) in accordance with state
regulations and the installation and monitoring of emission control devices for diesel
generator sets.18 This overlapping regulatory framework underscores the interconnectedness
of environmental and real estate regulations.

III. Judicial Interpretation of Rera Provisions

The enactment of the Real Estate (Regulation and Development) Act, 2016 (RERA) on May
1, 2017, precipitated a pivotal role for the judiciary in interpreting and applying its provisions
to a myriad of disputes arising among stakeholders. A comprehensive analysis of landmark
15
Environment Impact Assessment Notification, 2006.
16
Coastal Regulation Zone Notification, 2011.
17
The Water (Prevention and Control of Pollution) Act, 1974.
18
The Real Estate (Regulation and Development) Act, 2016, §3. “Prior registration of real estate project with
Real Estate Regulatory Authority.””
Supreme Court judgments offers valuable insights into judicial trends and perspectives on
RERA.

i. Constitutional Validity of RERA – In the initial phase following RERA's

implementation, real estate industry participants, particularly promoters, contested
the Act's constitutional validity. These challenges were escalated to the Supreme
Court, which subsequently transferred related petitions to the Bombay High Court
for expeditious adjudication. The case of Neelkamal Realtors Suburban Pvt. Ltd.
v Union of India19 and others culminated in a landmark judgment affirming
RERA's constitutionality and its applicability to ongoing projects subject to
mandatory registration. The Court's ruling established the retroactive nature of
certain RERA provisions, necessitating project registration and the formulation of
revised completion timelines by promoters.

ii. Power of Other Redressal Agency – The Supreme Court of India, in M/S. Imperia
Structures Ltd v Anil Patni and Another20, clarified the jurisdictional overlap
between RERA and the Consumer Protection Act. The Court determined that the
availability of an alternative dispute resolution mechanism does not preclude
recourse to the Consumer Protection Act, thereby establishing the National
Consumer Disputes Redressal Commission (NCDRC) as a potential forum for
homebuyer grievances.

iii. In a landmark judgment on July 23, 2019, the Supreme Court of India imposed
stringent measures against Amrapali Silicon City Private Limited for egregious
misconduct.21 The case, involving 45,000 aggrieved homebuyers, culminated in
the cancellation of the developer's RERA registration and lease agreements. The
Court issued a scathing indictment of Amrapali promoters for misappropriating
substantial sums from homebuyers to fund lavish personal lifestyles. To rectify the
situation, the Court appointed the National Building Construction Corporation to
complete the stalled projects and ordered a comprehensive investigation into
potential money laundering and foreign exchange violations by the developer.

19
“Neelkamal Realtors Suburban Pvt. Ltd. v. Union of India, 2017 SCC OnLine Bom 9302, order dated 06-12-
2017.
20
M/S. Imperia Structures Ltd v Anil Patni and Another Civil Appeal No. 3581-3590 Of 2020.
21
Bikram Chatterji & Ors v. Union of India, Writ Petition(C) No. 940/2017.
 These actions underscore the Court's commitment to protecting consumer interests
and holding errant developers accountable.

iv. “Homebuyers as Financial Creditors Under the IBC – A significant development

in the protection of homebuyer interests occurred with the Supreme Court's
upholding of the IBC (Second Amendment) Act, 2018, which classified
homebuyers as financial creditors. This decision, challenged by over 150
developers in Pioneer Urban Land and Infrastructure Limited vs. Union of
India22, granted homebuyers concurrent remedies under RERA, the Consumer
Protection Act, and the Insolvency and Bankruptcy Code (IBC). The Court further
clarified that in case of conflicts between these laws, the IBC would prevail. A
subsequent judgment in May 2022 reinforced the status of homebuyers as
financial creditors with distinct rights, enhancing their legal position.”

v. “Expanding Avenues for Homebuyer Redressal – The Supreme Court of India has
significantly fortified the legal position of homebuyers in their disputes with real
estate developers. A pivotal judgment in M/S. Imperia Structures Ltd v Anil
Patni and Another23 affirmed the concurrent jurisdiction of consumer courts and
the Real Estate Regulatory Authority (RERA) in addressing delayed project
delivery. This dual recourse empowers homebuyers to seek compensation for
service deficiencies through consumer courts while simultaneously pursuing
remedies under RERA for violations of the Act. The Court imposed substantial
financial penalties on the errant developer, underscoring its commitment to
consumer protection.”

vi. In a subsequent ruling in M/s. Newtech Promoters and Developers Pvt. Ltd. v
State of UP & Others24, the Court mandated the retroactive application of RERA
to all projects, irrespective of completion status, and delineated RERA's exclusive
authority in imposing penalties, refunds, and interest. This decision effectively
streamlined dispute resolution and deterred frivolous challenges to RERA orders
through the imposition of a pre-deposit requirement for appeals.

22
Pioneer Urban Land and Infrastructure v Union of India [2019 SCC OnLine SC 1005].
23
M/S. Imperia Structures Ltd v Anil Patni and Another Civil Appeal No. 3581-3590 Of 2020.
24
Civil Appeal No(s). 6745-6749 of 2021, 2021 (11) ADJ 280.
These landmark judgments collectively underscore a paradigm shift in favor of homebuyers,
providing them with a robust legal framework to safeguard their interests. The decisions are
expected to catalyze significant reforms in state-level RERA regulations to align with the
evolving jurisprudence and enhance consumer protection.

4. Challenges and Reform Proposals for RERA

I. Implementation Challenges of RERA

The effective implementation of RERA has been impeded by a confluence of infrastructural

and human resource deficiencies. A prevalent reliance on ad-hoc operational procedures
characterizes many state-level RERA authorities. Challenges such as recruitment difficulties,
inadequate office facilities, and insufficient staffing have hindered the timely resolution of
consumer complaints. Despite six years of operation, RERA's capacity to eradicate corruption
and malpractices remains limited.25

Enforcement of RERA orders presents a significant obstacle for both regulatory authorities
and homebuyers. Structural constraints impede the execution of numerous consumer-friendly
directives.26 While RERA mandates specific timelines for order execution and authorizes the
recovery of penalties as land revenue arrears, the absence of enforcement powers over other
agencies poses challenges. The consequence has been a persistent failure to deliver on the
promise of RERA, resulting in disillusionment among homebuyers. Although recent efforts to
empower RERA authorities with recovery warrant issuance represent a step forward, the
problem of non-compliance persists.27

II. Future of RERA- Proposed Amendments and Reforms

RERA's pre-launch marketing restrictions and requirement for project registration are
commendable in ensuring consumer protection. However, the phased nature of many real
estate projects necessitates multiple registrations, often leading to delays due to the absence
of a single-window clearance system. The lack of accountability for government agencies
contributes to project delays and increased costs.

25
“Chawla, N., & Kumar, B. (2022). Does Indian real estate regulation protect urban homebuyers? policy
implications. Cogent Business & Management, 9(1). [Link]
26
Id.
27
Id.
Additionally, while RERA accurately defines carpet area, a more precise delineation of net
usable area as the exclusive space allotted to buyers, excluding internal partition walls, would
enhance clarity and consumer understanding.

Recommendations

 To streamline the development process, it is imperative to establish clear

accountability mechanisms for government agencies to prevent project delays caused
by bureaucratic inefficiency.
 Implementing a single-window clearance system would significantly expedite
approvals and project completion.
 To safeguard the integrity of RERA's provisions, states should be prohibited from
enacting diluting amendments.

These measures are essential to optimize the Act's effectiveness and protect the interests of
both developers and consumers.