Gujarat National Law University

Real Estate (Regulation & Development) Act,

2016

Critical review of the Evolution and impact of the

RERA Act on Indian Real Estate Landscape.

Real Estate Law

Submitted by:

AAKRITI SINGH RIPUL SWATI KUMARI

16A003 16B130

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 INTRODUCTION

The real estate sector in India has witnessed a remarkable growth over the years in terms of
volume of construction activities driven by the rise in demand both of the home seekers and
the investors. Still, the real estate market did not have the required regulatory framework,
professionalism and transparency. There was a long felt need for a regulated market where
the investor or end user consumer is protected and simultaneously, results in boost in
investments in this sector. 

The Real Estate (Regulatory and Development) Act, 2016 (in short ‘the Act’) was passed by
Parliament and it received the assent of the President on 25th March, 2016. The Act came
into effect from 1st May, 2016. 

This Act establishes the Real Estate Regulatory Authority for regulation and promotion of the
real estate sector and to ensure sale of plot, apartment or building, as the case may be, and
regulates selling of any real estate project, efficiently and in a transparent way and ensures
the protection of consumers’ interests in the sector and aims at establishing an adjudicatory
mechanism for fast track dispute redressal and also at establishing the Appellate Tribunal
which can hear appeals from the directions, orders or decisions of the Real Estate Regulatory
Authority and of the adjudicating officer and in relation to matters connected therewith or
incidental thereto.

Thus, this Act is a positive step towards the development and regulating the real estate sector
by making disclosures of various information mandatory, thereby bringing in transparency,
and protect not only the home buyers but also the investors and in turn increase the
investments in this sector.

REASONS FOR INCEPTION

The real estate sector has witnessed significant progress in recent times yet it has still
remained unregulated with regard to consumer protection. Even though consumer protection
laws are in force, the resort available under it are only corrective, but not deterrent. This
factor has had a huge affect on the all round potential growth of the real estate sector due to
the lack of standardization and professionalism. Due to delays in the project approvals,

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unethical practices and passive dispute resolution forum, the long-standing demand of the
industry and consumers was not getting fulfilled. This bespoke an amendment and the dire
requirement of certain changes and regulations in the real estate sector.
The RERA has also given India its first regulator, and it seeks to protect the interests of
buyers while ensuring that errant builders face penalty for inconveniencing consumers, or
indulging in illegal profiteering during the course of the construction projects.
RERA also helps developers by ruling that buyers must make payments on time and ensure
that every step of the process of completing a home purchase – including registration, taxes
and payment that is made to private and public parties – should be done in a well-ordered and
in a properly documented way.

EVOLUTION OF RERA

2013 UPA

The Real Estate Regulatory Authority (RERA) Bill was introduced by the government.

9th Sept 2013

The Bill referred to the standing committee on Urban Development for examination on 9th
September, 2013.

8Th Oct 2013

The briefing of the Ministry of Housing and Urban Poverty Alleviation was heard by the
standing committee.

6th Nov to 12th Dec 2013

The view of the NGOs working in the field of real estate was considered by the standing
committee.

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12Th Feb 2014

The report was prepared by the standing committee after having public option

13Th Feb 2014

Report submitted by the standing committee on Urban Development.

7Th April 2015

The Union Cabinet under the chairmanship of P.M. Mr. Narendra Modi gave its approval to
amendments in the bill.

6th May 2015

The Bill was introduced in the Rajya Sabha and was referred to the standing committee
comprising of 21 members of Rajya Sabha.

3Rd July 2015

The select Committee held 17 sittings to examine the bill.

10Th Dec 2015

The Cabinet accepted 20 odd major amendments to the bill.

30th July 2015

The Committee submitted its report to Rajya Sabha.

15th March 2016

The Bill was passed by Lok Sabha and received the assent of the President.

1st May 2016

The Real Estate (Regulatory & Development) Act RERA came into force.

5 WAYS RERA WILL CHANGE THE REALITY MARKET

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1. HIGHER TRACTION IN UNDER-CONSTRUCTION PROPERTIES END-USER CONFIDENCE
RE- EMERGES.

Where purchasing of under-construction apartments categorically is a characteristic of the

Indian market, still the last three years have witnessed a downward trend in sale of such
properties. The sale agreements are usually in favor of the developers to a great extent, which
is one of the main cause that has deterred the buyers from buying under construction projects
and are preferring completed ones over them, which in turn has had a negative effect on
action being taken by buyers against delay in completion of projects and uninformed changes
in plans and terms of payment. Taking recourse to legal action in our civil courts is very
expensive and the process is very slow and often delayed, also it is not a very viable option
for most of the buyers. Fall in demand over the past few years has led to the developers
experiencing a lack of cash and has resulted in critical delays in completion of projects across
the country. This has had a negative impact on homebuyers' sentiments, as a result of which
they have started avoiding buying any under-construction projects, reason being delays and
sometimes, non-completion in certain instances. Now, every project that falls under RERA’s
ambit will guarantee the timely completion and delivery of each such project. A fast track
redressal system and a robust consumers’ protection umbrella will be made accessible to the
buyers and they will be able to approach the Appellate Tribunal, if they have any grievances.
Incorporation of such provisions will lead to an upward trend of individual / retail buyers
buying under construction projects.

2. COMPLIANCE COST TO RISE. DEVELOPERS TO EASE LAUNCHES

This year will probably witness the developers making fewer new launches, as a part of their
plan to make inherent changes in the structure of their operations, business and marketing
strategies to ensure compliance with norms of RERA. The existing projects have to be
necessarily registered with their specific State RERA within a span of 90 days from the date
the Act comes into force. As a consequence of this, developers have actively initiated the
process documentation of all the essentials and getting approvals at time, for getting their
projects registered, restructuring of agreements of sale, keeping clear and transparent project
records, sales, maintaining separate accounts for escrow transactions for each project,
ensuring the provisions for fine, payment, etc. This will ensure the restriction on the
developers from getting revenue at the initial stage of any project, and therefore, making
them to focus on only a few projects at one time.

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Another major development that is probably going to have an effect on the number of
launches, is going to be the uncertainty with respect to the effect of RERA rules on joint
ventures (JVs) and joint development agreements (JDAs). Till now, most of the landlords
who entered into JDAs were screened from the liabilities and penalties which were taken care
of by the developer solely. However, the Central Act (and rules notified by Maharashtra), has
made all stakeholders who enjoy the profits of sales proceed in a project, ie. developer,
landlord, private equity partner etc. responsible for penalties and liabilities of each project.
Therefore, the landlords are now going to diligently assess this provision’s affect on
themselves before entering into a JDA, while some may even choose to dispose off their
land. If this happens to become a trend, developers will be forced to collect large funds first
in order to buy the land, which will lead to delay in the launches.

3. SMALL DEVELOPERS MAY OPT FOR PROJECTS BELOW 500 SQUARE METERS OR LESS
THAN 8 APARTMENTS TO AVOID RERA
All projects involving area of land of up to 500 square meters or less than 8 apartments, will
not be covered under the ambit of RERA. The developers of such projects are not required to
make any disclosures, nor it is mandatory for them to comply to any of the RERA laws.
Therefore, the market for such smaller projects, especially in a tier 2 & 3 cities and some
established locations in tier 1 cities in will continue to be fragmented. The buyers of these
small projects will have to be very cautious while purchasing such projects.

4. INCREASING INVESTMENT OPPORTUNITY FOR ORGANISED / INSTITUTIONAL

INVESTORS.

RERA has set the stage for a more transparent and organized sector which is going to make
better the image of the Indian markets. This will lead to building back the confidence of the
end-user buyers and give a boost to sales over the next few years. An increasing in housing
projects sales and more transparent financial management through the way of separate
accounts for separate projects is also going to boost confidence of the institutional investors
who have been making more investments in commercial assets since past few years. RERA
will help in bringing back the focus on residential assets with increased consumers’
confidence, along with improving and making the sector more corporatized.

5. INCREASED ACCOUNTABILITY OF REAL ESTATE AGENTS

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Since there are only a few barriers and a few checks in place, real estate agents in India
operate in a very unstructured and unorganized environment. Registration under RERA of all
real estate agents is compulsory and they will be held accountable for their actions, and even
developers will be made to disclose details of these agents who are associated with each
project. As a Consequence of this, agents will be required to maintain documents and books
of account related to every transaction, will be required to share all information about
projects, and will be made liable for making any false representation-whether oral, written, or
visual. Any infringement of these rules could lead to levy of hefty penalty and even
imprisonment of agents in some cases. Real estate agents will have to pay a fine of INR
10.000 if found violating any of these provisions, for each day the violation continues, or be
imprisoned for up to one year.

THE GAME CHANGER- IMPACT ON STAKEHOLDERS

 HOUSING SECTOR
The residential sector will become more consolidated as the reputed developers will
start partnering with small cash-lacking developers to harvest more potential. The
definitions such as area, promoter, etc. will become more uniform and thus any
possibility of malpractices such as advertising before approvals and changes in area or
specifications, etc. will be eliminated. Launch of new projects will be adversely
affected for a short while as the industry tries to adjust to the new norms.

 DEVELOPERS
Depositing the sale proceedings in separate accounts for separate projects will ensure
the projects are completed on time and will ensure the creditability of these
developers. Moreover, it will also ensure more compliance and better risk coverage
(title insurance made necessary).

 HOME-BUYERS

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 It rebuilds the confidence of customers to book under-construction project as the Act
provides for penalty for delays, providing relief to buyers. A redressal mechanism for
the grievances of consumers in Courts protects their interest.

 INVESTORS
Timely development of quality projects and timely delivery will provide wider
options for investments Greater transparency will encourage more investors and
larger investments overall.

CURRENT UPDATIONS IN RESPECT OF RERA

 The Supreme Court stayed an order passed by the Allahabad bench of the National
Company Law Tribunal (NCLT) on Jaypee Infratech. The Allahabad bench of the
tribunal had accepted IDBI Bank’s plea and classified Jaypee Infratech as insolvent.
 Madhya Pradesh government has amended its rules by including non-planning area in
RERA preview and issued the list of such non planning area.

IMPORTANT CASE LAWS IN RERA:

1. Amol Kadam (Complainant) Versus Horizon Projects Pvt Ltd. (Respondents)

(COMPLAINT NO: CC006000000000031):-
Fact of case: The builder has refunded substantial amount of the booking amount but
allottee has filed the complaint to refund the entire booking amount.
Conclusion of Case: It was argued by the builder that as per the allotment letter, in
case of cancellation: whole booking amount shall be forfeited if cancellation is done
without any fault of builder but even then the builder has already refunded substantial
amount.
MahaRERA decision after hearing both the parties, we are of the opinion that in
accordance with the terms and conditions of the allotment letter signed between the

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 Complainant and the Respondent, the Respondent cannot be directed by MahaRERA
to refund any further amount to the Complainant.

2. Kishor Jadhav (Complainant) Versus 1. Jayantibhai Patel and 2. Hiral Patel of M/s.
Vinayak Associotes (Respondents) (COMPLAINT NO: CC006000000000345) 
Fact of case: The complainant has alleged that disclosure made by the respondent at
the time of registration of project is false. He says that actual promoter of the project
and the respondent were the co-promoters by virtue of joint development agreement
and respondent suppressed this fact. As a matter of fact, the complainant has also
registered the same project which has already been registered with MAHARERA by
showing respondent as co-promoter and therefore complainant has requested to cancel
the registration made by respondent. 
Conclusion of Case: The MahaRERA observed that the IOD uploaded in the project,
is issued by SRA in the name of both complainant and respondent jointly and
therefore they should have jointly registered the said project as AOP.
In view of these facts, MahaRERA directs the complainant and the respondent to
jointly update the relevant information and make suitable modifications in the
information of the registered project bearing No. P51800000626. The other
registration of project bearing No. P51800003929 will have to be cancelled.

WHAT’S MISSING IN THE ACT?

The RERA Act is all-encompassing and aims to make the sector a fair ground for all
stakeholders including buyers, developers, promoters and agents. However, amidst the
several positives, the Act is believed to have certain loopholes.
 
 No rules for delayed project approvals: RERA lays emphasis on penalising
developers for untimely project deliveries. However, a majority of the delay in
execution of projects happens during the process of acquiring approvals and
clearances from various authorities. Currently, there are close to 50 odd approvals that
developers need to obtain before launching a project. The average time for acquiring

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 all the approvals can range from 1-2 years. The Act does not make the government
agencies accountable for the delay and places complete responsibility on developers.
It lacks a stringent policy to force authorities to meet timelines or fasten the process
of granting approvals.
 
 No provision for a single window clearance:  While the Act asks for a formation of
a regulatory body, it does not give clarity on establishing a single window clearance
mechanism, something that the industry is asking for a very long time.
 
 Lack of strict deadlines: The central government has been lenient with the states
regarding the deadline to draft RERA rules and their compliance with the Centre’s
regulations. Of the 14 states that have met the deadline, almost all have diluted certain
rules, thus, defeating the purpose of strengthening the real estate sector.
 
 Ambiguity over state-specific content: There are certain provisions in the RERA
drafts of various states that lack clarity. For instance, the rules framed by Delhi,
Karnataka, Haryana, Gujarat, Tamil Nadu, and Uttar Pradesh do not specify the form
and content of audit certificates to be issued by architects, engineers and chartered
accountants. This may lead to overlapping and duplication of roles of the various
stakeholders and might lead to inconsistent verdicts. A few states have also failed to
give detailed information about the paperwork and the fee required to be submitted
for the registration of real estate agents.
 
 A few other points where the Act lacks clarity is the definition of land cost,
construction cost and whether garage space can be sold to an allottee

CONCLUSION

The Act is a standard-setting instrument for the real estate sector and performs the critical
task of identifying and allocating risks associated with construction and development
projects. The current approach of the Act is to uniformly regulate and promote different types
and sizes of projects and its implementation will require significant capacity building at the

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state-level. The Act disrupts existing sector practices to raise efficiency of the real estate
market and is likely to benefit all stakeholders by imposing financial and operational
discipline, accountability and diligence.

BIBLIOGRAPHY

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(REGULATION AND DEVELOPMENT) ACT, Experion .
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 you need to know’, The Economic Times, 30 April. Available at:
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