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Formation and existence

RERA stands for Real Estate Regulatory Authority was introduced by the UPA 2 government in 2013 and it came into existence in 2016 as per the Real Estate (Regulation and Development) Act. On march 2016, the bill of this Parliament of India Act was passed by the Upper House (Rajya Sabha). The RERA Act aims at protecting the home purchasers and also boosts the real estate investments and it came into effect on and from 1 May ,2016. At that time, only 52 sections out of 92 were notified whereas all the other provisions were effective on and from 1 May 2017.

Reasons for the formation of RERA

For long, home buyers have complained that real estate transactions were lopsided and heavily in favour of the developers. RERA and the government’s model code, aim to create a more equitable and fair transaction between

the seller and the buyer of properties, especially in the primary market. It is hoped that RERA will make real estate purchase simpler, by bringing in better accountability and transparency, provided that states do not dilute the provisions and the spirit of the central act. It will give the Indian real estate industry its first regulator as The Real Estate Act makes it mandatory for each state and union territory, to form its own regulator and frame the rules that will govern the functioning of the regulator.

RERA in states

Under the RERA act, every state and UT must have its own regulator. Developers will not be able to market their ongoing or upcoming projects, till they register either with the permanent or interim regulator in states. For ongoing projects, where completion or occupancy certificate has not been given, the deadline for registrationended on July 31, 2017 and as on July 31, 2017, 23 states and union territories (UTs) have either established their permanent or interim regulatory authorities. Only four states – Gujarat, Maharashtra, Madhya Pradesh and Punjab

– have established their permanent Real Estate Regulatory Authority, while 19 states/UTs have established interim authorities. A total of nine states/UTs have appointed interim Appellate Tribunals under the Real Estate Act, while only seven states have started the online registration under the Act. Only 23 States/UTs have notified the rules under the Act, while six states have drafted the rules but have not yet notified.

Definition of Carpet area under RERA

According to the RERA, carpet area is defined as ‘the net usable floor area of an apartment, excluding the area covered by the external walls, areas under services shafts, exclusive balcony or verandah area and exclusive open terrace area, but includes the area covered by the internal partition walls of the apartment .As per the RERA guidelines the exact carpet area must be disclosed by the builder so that the customer will have the knowledge of what he is paying for and his interest remains protected. However, the act does not make it mandatory for the

builders, to sell a flat on the basis of carpet area.


The Real Estate (Regulation and Development) Act, 2016 was made to establish the Real Estate Regulatory Authority (RERA) for the regulation and promotion of the real estate sector and to ensure sale of plot, apartment or building, or real estate project, in an efficient and transparent manner and to protect the interest of consumers in the real estate sector and to establish an adjudicating mechanism for speedy dispute redressal and also to establish the Appellate Tribunal to hear appeals from the decisions, direction or orders of the Real Estate

Regulatory Authority and the adjudicating officer and for matters connected therewith or incidental thereto.


1. Registration of the project with RERA- Before launching a commercial or residential real estate projects where the land is over 500 square meters, or 8 apartments, one need to get them registered with RERA. Before giving any advertisement, builders need to give each and every details such as sanctioned plan, layouts, the location of the project etc. to RERA. This rule is made to ensure transparency.

2. Quarterly updates on construction progress- it is mandatory for builders to upload all the details regarding the project after every three months. Builders need to give details regarding-

  • Number and types of units sold out

  • Government approval taken or pending

  • Completion scheduled every 3 months

  • If any litigation is going on related to the property then all the documents need to be uploaded

3. Escrow A/C- to ensure that builder is not using the investor’s money in other projects builders need to deposit 70% of the money received from customers to an escrow account. They can withdraw this amount after the approvals from engineers and chartered accountants they appoint.

4. Sale agreement standardization- earlier only home buyers were penalized for any default, now to ensure equality promoters will be also penalized for any default. Also RERA will protect buyers from various penalties and charges.

5. Maximum 10% of cost of project to be paid as an advance payment- without any written agreement for sale builders can’t ask for more than 10% of the cost of the project as an advance payments form home buyers.

6. 5 years of defect liability period- now it is the duty of the builder that for the initial 5 years the builder need to rectify all the structural defaults and poor quality in the project otherwise the builder will be given punishment.

7. Disclose the size of the apartment- now builder need to disclose the size of the apartment on the basis of carpet area. This will ensure that homebuyers will get the correct sized home or apartment.

8. Title representation- builders need to clearly disclose the title of property and the project. Buyers can ask for compensation if he or she finds any defect in the title of the property or project.

9. False information to home buyers- if any buyer made an advance payment and later on the buyer finds that the builders has given any false information in his prospectus or advertisement then the buyer can ask for the refund. If the buyer wants to continue with project then the builder needs to give compensation which can go up to 5% of the cost of project.

10. Failure to complete possession on time- if the builder fails to complete the project on time then the buyer can ask for the refund of full amount and in case the buyer wants to continue with the project then the builder need to give interest for every month of the delay till the buyer receive the possession.

11. Change in sanctioned plan – in case the builder wants to change the sanctioned plan he/she needs to take permission of 2/3rd number of total buyers.

12.No transfer of project to 3rd party – the builder can’t transfer the majority of rights and liabilities of real estate project to 3rd party without the prior written consent of the buyers and without the prior written approval of RERA.

13.Mandatory registration of agent- it is compulsory for every real estate agent to get registered with RERA before selling or advertising any property. Agent need to maintain books properly and not indulge in any kind of fall practices.

14.Grievance redressal- If any buyer, promoter or agent has the problem with the project than they can file a complaint with RERA. RERA need to resolve this dispute within 60 days. If decision is not satisfactory than one can file a case at Appellate Tribunal within next 60 days. Similarly if the decision of Appellate Tribunal is not satisfactory than one can a file a case at High court and Supreme Court.


1. Standardized Carpet Area:

Carpet area is the area that can actually usable area which is to be covered by a carpet, or the area of the apartment, excluding the thickness of inner walls. Before Rera act builders have their own method or formula for calculating the carpet area of a flat/property, but Rera has standardized or formulate how a builder calculates the carpet area.

2. Right to Information About the Property:

This is one of the main benefits of the RERA act for Home Buyers. You as a Home buyer need to know all the necessary information about the property you are buying. The Developer or Builder is entitled to share all the details regarding the individual project such as Plan Layout, Stages of construction, Plan of execution, Status of completion, etc.

3. Builders Won’t Be Able to Delay the Projects:

Under this Benefit of new RERA act. 2016, each property developer has to give a due date of the possessions of the flat. And if the developer is not able to complete the project until that date, then they will have to face many penalties. If the developer failed to give possession on the given date then the buyer has the following options –To withdraw from the project wherein he is entitled to get a full refund along with the interest, or To continue with the project – in this case, he/he is entitled to get compensation along with interest.

4. Builders Will Be Held Responsible for Any Defect or Fault in The Construction:

If a buyer discovered any defect or fault in the construction, Quality or provision of the flat within 5 years after the possession of the flat such defect will be rectified by builder within 30 days at no extra cost. If the builder failed to repair the defect, then the buyer shall be entitled to get compensation.

5. Grievances Will Be Addressed and will Solved Quickly:

If the buyer finds any dissatisfied with the construction or issue regarding the flat, then the buyer has authority to take action against the builder in Appellate Tribunal under RERA act. The tribunal will address your case within 60 days of Grievance case files.

6. Advance Payments:

A Builder cannot take more than 10% of the cost of the Flat as an advance or application fees before entering in the agreement of sales.

7. Right Of the buyer in case of any false promises:

In Case of any mismatch in the commitment or Promises made by the builder regarding the actual project. Then the buyer has the option to withdraw from the projects, wherein he is entitled to get a full refund of the amount he paid as advance or in some cases interest and claim compensation.

8. Builders will need all clearances before selling

Earlier days, builders used to sell a project that did not have all clearances. Results many complected problems to the home buyers. But under RERA Act. All developers, builders and real estate agents will have to register himself with the regulator, and disclosing all each and every detail about the projects and then only they can sell projects only after the necessary clearance have been verified.

9. Builders won’t be able to use your money for some other project:

According to Economic times, almost all the real estate project launched between 2010 and 2013 had defaulted their possession date primarily because of the fund collected by the builder from buyer were diverted to a new project. However, under new RERA act the developer will have to transfer 70% of the money received from the buyer to an escrow account.

10. Reduction in Prices of Real Estate:

When RERA act comes to action in 2016 it has a direct impact on the price of the home, land and interest rate of your home loan. Because of the RERA act, the trust and transparency in the real estate business have been improved. Investment is also increased in the real estate sector. All these signals give Growth to the sector and higher demand is slowly decreasing the price and therefore the interest rate on home loans.


1. Registration of Real Estate Agents:

The act has made prior registration of real estate agents mandatory with Real Estate Regulatory Authority (RERA), who are willing to facilitate the sale or purchase of any plot, apartment or building registered under RERA, thus ensuring accountability.

2. Transparency to the buyers:

Upon receiving his login ID and password after registration, the promoter must create his webpage on the RERA website and enter all information for public viewing, such as details of registration granted by RERA, quarterly updates, etc. so that buyers can stay updated.

3. Carpet Area Defined:

“Carpet area” is net usable floor area, excluding the area under the external walls, services shafts, balcony and open terrace, but including area under internal partition walls. The price of the property depends on the Carpet area, and now, builders and developers cannot use their own method of calculation and buyers are saved from the manipulation to increase carpet area to increase prices.

4. No Diversion of funds:

The promoter has to make sure that 70% of the amount realized for the project is deposited in a separate bank account in a specified bank to cover costs like constructions, land, etc and is not used for any purpose other than for which it is withdrawn, in proportion to the percentage of completion of project as certified by an engineer, an architect, and a practicing CA. It shall be verified that funds have not been diverted elsewhere and have been withdrawn in compliance with the specified proportions.

5. Defect Liability:

In case of any structural or other defect in workmanship, quality of provision of services, or any other duty of the promoter, if brought to the attention of the promoter within 5 years of possession by the allottee, becomes his duty to rectify within 30 days, free of charge, failing which compensation is provided.

6. Adherence to sanctioned plans/specifications:

The promoter shall not make any alterations or additions in the plans/specifications of the buildings or the common areas without the previous written consent of at least two-thirds of the allottees, other than the promoter, except minor alterations as may be required, by the allottee, or due to architectural and structural reasons, but with prior intimation.

7. Obligations of promoter regarding insurance of project:

The promoter must have all the necessary insurances notified by the appropriate authority and pay the premium and charges of the same, which will be transferred to the allottee/(s) at the time of agreement for sale.

8. No deposit/advance to be taken by promoter without entering into agreement for sale:

The developer must have a prior written agreement for sale with the buyer to accept a sum more than 10% of the cost of the apartment, plot, or building, as an advance payment or an application fee and register the agreement for sale.

9. Obligation to obtain Completion Certificate:

The builder should be responsible to obtain the completion certificate, occupancy certificate, or both, as applicable, from the relevant authority as per the law and to make it available to the allottee/(s).

10. Liability of the allottee:

Every allottee who has entered into an agreement for sale to take an apartment, plot or building has to make necessary payments as specified including his share of registration charges, municipal taxes, water and electricity charges, ground rent, etc. failure to pay makes allottee liable to pay interest. However, these obligations may be reduced when mutually agreed between promoter and allottee.

11. Grievance Redressal:

RERA provides sound grievance redressal policy to promoters, real estate agents and buyers. Any aggrieved person can file a complaint with RERA for violation of the Act’s provisions, or appeal to the Appellate Tribunal the specified time. When a promoter files an appeal, he has to deposit a percentage of the penalty decided by the Tribunal or the total amount to be paid to the allottee including interest and compensation, if any, before the appeal is heard. If unhappy with decision, appeal can be filed in the High Court.


The Real Estate Regulation (and Development) Act, 2016 (RERA) came into effect on May 1, 2017. It aims to boost investments in the real estate sector and create a more transparent environment for property buyers by increasing the accountability of builders. There are three groups of people who are the main stakeholders in the real estate sector - builders, brokers and buyers. Let us take a look at how each of these groups has been impacted:


Builders are required to register all properties above 500 square meters or those having eight units in order to facilitate regulation. RERA also requires builders to do away with terms like built up area. Property is now to be sold on the basis of carpet area, which has been clearly defined in the act. Builders are also liable for structural defects for up to 5 years from handing over possession to buyers. It is mandatory for the builders to deposit 70% of the project money collected from homebuyers like you in bank accounts through cheques. This means builders can no longer engage in fraudulent transactions or in money laundering. From now on every rupee spent and every rupee gained has to be accounted for. - Builders have to update the status of their project development at every stage on the RERA website. This allows homebuyers to keep track of the progress of the project. - There will be one model sale agreement between all builders and homebuyers to prevent fraudulent or harmful terms. Any new projects will need to be licensed and approved by RERA before they can commence development, leading to a decrease in the approval of new projects.


Real estate brokerage in India has been relatively unorganized. In accordance with RERA, real estate brokers will have to register themselves and acquire a license. They are also required to provide complete and correct information to buyers and perpetuation of any false information on their part can result in heavy penalties. These regulations will serve to weed out brokers who engage in malpractices to win the confidence of buyers.


Buyers now enjoy more power as the new regulations have laid down the foundation for a more transparent buying process. Developers are now going to be held accountable for their actions and can face severe penalties for deviating from RERA requirements. Each state is going to have regulatory bodies as well where disputes between buyers and builders are to be resolved within a period of 60 days. In order to combat the issue of late delivery of property, RERA has also established regulations where the developer has to pay interest to buyers in the event of any delay in the transfer of possession. The real estate sector is set to greatly benefit from RERA. It will go a long way in increasing buyers’ trust in the sector and will serve to encourage foreign investment as well.

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