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The Real Estate (Regulation and Development) Act 2016

The Real Estate (Regulation and Development) Act 2016

Why in news?

  • Real Estate (Regulation and Development) Act (RERA) is an act passed by the Parliament in 2016 that came into effect fully from 1st May, 2017.
  • It seeks to protect home-buyers as well as help boost investments in the real estate sector by bringing efficiency and transparency in the sale/purchase of real estate.

What is RERA?

  • RERA, 2016 is a central legislation which aims to regulate the real estate sector. It seeks to empower and protect property consumers and make transactions fair and transparent.
  • The RERA Act was enacted under Entry 6 and 7 (dealing with contracts and the transfer of property) of the Concurrent List of the Constitution of India.

Key Issues In The Real Estate Sector

  • Lack of clear land titles
  • The lengthy approval process for project clearances
  • Diversion of funds received by the developer towards one project to more lucrative ones
  • Prevalence of black money.    The Real Estate (Regulation and Development) Act 2016
  • Developer changes the layout or building plans after purchase
  • Construction work has come to a standstill or the developer has left without completing the project
  • Endemic issues – For Ex recessive conditions in the past few years.
  • Legal disputes (It had to be settled in the courts)
  • The distress caused by two drought years has also cut demand in the rural and semi-urban segment.

Need for the RERA

  • Huge generation of black money in real estate sector.
  • Real estate sector had been largely unregulated, no standardization of business practices and transactions.
  • Numerous instances where developers cheated property buyers.
  • Prevalence of issues like delays, price, quality of construction. Delays in projects had been a major issue plaguing real estate sector- huge cost overrun due to delays.
  • No grievance redressal mechanism.


  • The Act stipulates that no project can be sold without project plans being approved by the competent authority and the project being registered with the regulatory authority, putting to an end the practice of selling on the basis of deceitful advertisements.          The Real Estate (Regulation and Development) Act 2016
  • The mandatory disclosure of unit sizes based on “carpet area” strikes at the root of unfair trade practices.
  • Promoters are required to maintain “project based separate bank accounts” to prevent fund diversion.
  • The provision for payment of “equal rate of interest” by the promoter or the buyer in case of default reinforces equity.

Objectives of RERA

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


  • Furnishing of accurate project details: In the construction stage, builders promote their projects defining the various amenities and features that will be part of the project. But not everything goes as per plan, with several features missing. As per the Act, there can’t be any changes to a plan. And if a builder is found guilty of this, he/she will be penalized 10% of the project’s costs or face jail time of up to three years.
  • Timely delivery of flats: Developers often make false promises about the completion date of the project, Strict regulations will be enforced on builders to ensure that construction runs on time and delivered on schedule. If the builder is not able to deliver the flats on time, he/she will have to refund the purchaser with interest.
  • All clearances are mandatory before beginning a project: Builders often attract buyers with huge discounts and pre-launch offers. And, the buyer, enticed by the offers, does not bother about the clearance. But, due to delays in getting clearance, the buyer does not get the flat on time. This Act ensures that developers get all the clearances before selling flats.                The Real Estate (Regulation and Development) Act 2016
  • Specifying carpet area: Generally, builders sell flats on the basis of built-in area, which includes a common passage area, stairs and other spaces which are 20-30% more than the actual flat’s area. But, not all buyers are aware of the concept of carpet area. With this Act it will become mandatory to declare the actual carpet area.
  • After sales service: As per an interesting clause in the Act, if the buyer finds any structural deficiency in the development of the building, the buyer can contact the builder for after sales service. But, the buyer should approach the builder within 5 years of purchase to rectify such defects without further charges.
  • Each project should have a separate bank account: Developers raise funds through pre-launch offers and use them to purchase some other land or invest it in other projects. This Act will make it compulsory that a separate bank account be maintained for each project. Each transaction will have to be recorded, and diversion to another project will not be entertained.


  • Past real estate projects not included: Only new projects are covered by the Act.Projects that are ongoing, completed or stuck due to clearance or financial issues, don’t come under this. Hence, many buyers will not be benefitted by it.
  • No compulsory regulation for projects less than 1000 square meter: Registration with the regulator will not be mandatory for projects less than 1000 square meter. So, small developers will not be bound to register.
  • Delay from government agencies: There can be delays caused by the government, which sometimes takes a lot of time to clear a project. It is up to government bodies to follow strict time frames to approve projects, so that developers can launch, complete and deliver them on time.
  • New project launches expected to be delayed: Because a project will not be allowed to launch without the requisite clearances from the government (which generally takes two to three years), projects will automatically get delayed.

How RERA 2016 act was better than RERA 2013 act? 

  • The RERA 2013 act had the following issues;
    • It did not cover either “ongoing projects” or “commercial real estate”.
    • Also, the minimum limit for registration of projects was so high that it excluded many projects from the coverage under law.
    • These exclusions made the 2013 bill meaningless and harmful to the interests of home buyers.
  • However, the 2016 RERA act has fixed all the loopholes in the RERA act 2013,
    • First, after a holistic review along with multiple stakeholder consultations both “ongoing projects” and “commercial projects” were included in the act.
    • Second, the minimum limit for registration of projects was reduced to cover more projects. It reduced evasion under law.



Mussoorie Times

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