7 Must-Know RERA Provisions Before You Buy Property in India

The real estate sector in India, for decades, has been notorious for its lack of transparency, frequent project delays, and unregulated practices. Buyers would often find themselves at the mercy of builders and developers, with little recourse in case of delayed projects or quality issues. In 2016, a landmark legislation was passed to address these issues—the Real Estate (Regulation and Development) Act, or RERA. For many, this Act was a much-needed solution to the frustrations they faced while buying property.

Since its introduction, RERA has transformed how the real estate market operates, ensuring greater transparency, accountability, and protection for homebuyers. But what exactly is RERA, how does it work, and why should you, as a buyer or investor, care about it?

In this blog, we’ll dive deep into everything you need to know about RERA—its objectives, key provisions, benefits for buyers and developers, and how it has reshaped the Indian real estate landscape.

Let’s get started!

1. What is RERA?

RERA (Real Estate Regulatory Authority) is a legislative initiative aimed at regulating the real estate sector in India. Enacted by the Indian Parliament in 2016 and implemented in 2017, RERA’s primary goal is to protect the interests of homebuyers and bring about more transparency and accountability within the sector. The Act applies to both residential and commercial properties and ensures that all real estate transactions adhere to a common set of rules.

Before the enactment of RERA, many developers operated with little regulation, often leading to delayed projects, unfair practices, and non-compliance with promised standards. RERA introduced a clear framework that binds builders, developers, and real estate agents to a set of guidelines.

• Fact Check: According to a report by JLL India, about 40% of all real estate projects in major Indian cities were delayed before RERA came into force, impacting buyers’ trust in the sector.

2. Why Was RERA Introduced?

The real estate market in India had long been characterized by chaos and a lack of regulation, which made homebuyers feel vulnerable. Several factors necessitated the introduction of RERA:

a. Frequent Project Delays

Before RERA, project delays were a common occurrence. Homebuyers would often face years of delay beyond the promised possession date, with little to no explanation from developers.

b. Lack of Transparency

Buyers frequently found themselves uninformed about the status of projects, leading to confusion and dissatisfaction. Developers could change plans or increase costs without informing the buyers.

c. Inadequate Legal Recourse for Buyers

There was little recourse for buyers in case of non-compliance by developers. Builders often operated without fear of legal action or significant financial consequences.

d. Unethical Practices

There was no standardized procedure for handling real estate transactions, allowing unethical practices like pre-launch offers and selling units without proper approvals.

RERA was introduced to bring about a fundamental shift in how real estate was regulated in India. By placing both developers and buyers on an equal footing, RERA aimed to restore trust in the sector and protect consumers’ rights.

3. Key Provisions of RERA

The Real Estate (Regulation and Development) Act has several key provisions aimed at ensuring transparency, accountability, and protection for homebuyers. Let’s explore the most important ones:

a. Mandatory Registration of Projects

Under RERA, any real estate project, whether residential or commercial, with a plot size of over 500 square meters or involving more than 8 apartments must be registered with the state’s Real Estate Regulatory Authority. Without this registration, the developer is not allowed to market, advertise, or sell the property.

• Pro Tip: Always check if a project is RERA-registered before proceeding with a purchase. You can find this information on the respective state RERA website.

b. Provision for Escrow Accounts

One of RERA’s most significant provisions is the requirement for developers to maintain 70% of the project’s funds in a separate escrow account. These funds can only be used for construction-related expenses and land acquisition. This ensures that the money raised for a project is not diverted to other ventures, reducing the chances of project delays.

c. Timely Project Delivery

RERA mandates that developers must adhere to the agreed-upon project completion timelines. In case of delays, buyers are entitled to compensation, including a full refund if they wish to opt out of the project. Additionally, developers must pay interest on the delayed period at the same rate that buyers were charged for delayed payments.

d. Transparency in Project Plans

Developers are required to disclose detailed project plans, including the number of units, layout, approvals, and phases of development. Any changes to the project plan, once approved, cannot be made without the consent of at least two-thirds of the buyers. This ensures that buyers are kept in the loop and are not misled about what they are purchasing.

e. Defect Liability Period

Under RERA, developers are responsible for fixing any structural defects or poor workmanship within five years of handing over possession. If any defect is found, the developer must rectify it within 30 days at no extra cost to the buyer.

• Fact Check: The defect liability clause provides a critical safeguard for homebuyers who might otherwise struggle to get builders to fix issues post-possession.

f. Regulation of Real Estate Agents

Not only developers, but real estate agents are also covered under RERA. Agents must register with their respective state RERA bodies to ensure that only authorized professionals are involved in real estate transactions. This adds an additional layer of accountability and protects buyers from fraudulent practices.

4. Benefits of RERA for Homebuyers

For homebuyers in India, RERA has been a game-changer. Let’s look at some of the significant benefits RERA brings to the table:

a. Increased Transparency

Homebuyers now have access to more information about the project, including approvals, timelines, and construction progress. This transparency ensures that buyers are not left in the dark regarding the status of their investments.

b. Buyer Protection

In case of project delays or changes in plans, buyers now have legal protection and the right to claim compensation. RERA also allows buyers to raise complaints directly with the regulatory body, ensuring faster resolution.

c. Standardized Payments

Earlier, builders would charge buyers based on ambiguous calculations like "super built-up area," which often included common areas. Under RERA, payments are made on the carpet area, which refers to the net usable area of the property, ensuring fairness in pricing.

• Fact Check: The standardization of carpet area has removed much of the confusion surrounding property prices and area calculations, making the process more straightforward for buyers.

d. Reduced Risk of Default

Thanks to the escrow account provision, the risk of funds being diverted to other projects has been minimized. This ensures that the money you pay goes toward the timely completion of the property you’re purchasing.

e. Timely Possession

With strict penalties for delays, developers are now motivated to complete projects within the agreed timelines. This reduces the likelihood of long waiting periods and gives buyers peace of mind.

5. Impact of RERA on Developers

While RERA primarily focuses on protecting buyers, it has also brought several changes to how developers operate.

a. Increased Accountability

Developers are now held accountable for every promise they make, whether it’s regarding delivery timelines, amenities, or approvals. This has forced many developers to professionalize their operations, leading to improved service quality and reduced buyer grievances.

b. Streamlined Processes

Since developers must submit all approvals and project plans before registration, the process has become more streamlined and organized. This has led to fewer disputes between developers and buyers and enhanced confidence in the market.

c. Reduced Speculation

Earlier, developers would often sell properties before obtaining necessary approvals, leading to delays or project cancellations. RERA mandates that all approvals be in place before a project is marketed or sold, reducing speculative practices in the sector.

6. RERA Across Different Indian States

It’s important to note that while RERA is a central law, each state in India has its own Real Estate Regulatory Authority, with slight variations in rules and regulations. States like Maharashtra (MahaRERA), Karnataka, and Uttar Pradesh have made significant progress in implementing RERA, while others are still catching up.

• Pro Tip: Always check your state’s RERA website for updates, project registrations, and the status of your chosen property.

7. Challenges and Limitations of RERA

While RERA has brought about substantial improvements in the real estate sector, it’s not without its challenges. Some of the limitations include:

a. Lack of Awareness

Despite being in place for several years, many homebuyers are still unaware of their rights under RERA. Increased efforts are needed to educate the public on how they can use RERA to protect their interests.

b. Inconsistent Implementation

Not all states have fully embraced RERA, leading to inconsistent enforcement. While states like Maharashtra have been proactive, others lag behind in setting up functioning regulatory authorities and addressing grievances promptly.

c. Exclusions from RERA

Not all projects fall under RERA’s purview. For example, projects under 500 square meters or with fewer than 8 units are exempt, which leaves a portion of the market unregulated.

Conclusion

RERA has undeniably been a game-changer for the Indian real estate sector. It has empowered homebuyers, ensured transparency, and brought much-needed regulation to an industry that was previously plagued by uncertainty and unethical practices. For anyone looking to invest in real estate today, understanding RERA is critical to making informed decisions and safeguarding your investment.

As a buyer, you now have access to legal protection, clear information, and faster resolutions to grievances. RERA has truly shifted the balance of power, placing you in control. So, before you make your next real estate investment, make sure you leverage the benefits of this revolutionary Act to secure your dream home with confidence