Onkar Kedia*

Day in and day out, we keep hearing stories of unscrupulous builders, cheating hapless consumers. The Amrapali case being handled by Hon’ble Supreme Court is an example. In several Amrapali projects in NOIDA and Greater NOIDA, people booked their flats, but their money was diverted and the situation came to such a pass that there was no hope of the flats being delivered to the allottees ever. It was only due to the intervention of Hon’ble Supreme Court that the projects have been revived and hope has been ignited for thousands of allottees. Similarly, allottees of projects of Jaypee, Unitech and several other builders found themselves at the receiving end.

Local authorities and banks were desperate to get back their money stuck in the stalled projects, leaving the buyers in the lurch. It is not to say that all builders are unscrupulous. There are some who keep the interest of the allottees in mind and deliver their projects on time, maintaining the promised quality. But the truth is that common people, with hardly any bargaining power vis-à-vis builders have often victims of one or more of the following problems.

  • Diversion of funds.
  • Non-delivery or late delivery of projects.
  • Huge cost over-run.
  • Poor quality of construction.
  • Sale of units without approvals in place.
  • Lack of transparency about projects.
  • High interest for default on the part of buyers and low interest for default on the part of sellers.
  • Absence of a quick and effective dispute resolution mechanism.

The real estate sector being largely unregulated, there was crisis of credibility. There was no standardization of business practices and transactions. All this was detrimental to attracting investment to the real estate sector.

It was against this backdrop that the Real Estate (Regulation and Development) Act was passed by Parliament in 2016. Some sections were notified for commencement with effect from 1st May, 2016 and some from 1st May, 2017.

After teething troubles, most states have now set up the institutional mechanism, envisaged under the Act. Real Estate Regulatory Authority (RERA) and Real Estate Appellate Tribunal (REAT) have been set up to give effect to the provisions of the Act.

Under the Act, registration of projects with RERA is mandatory if at least 8 units are being constructed or if the plot size is at least 500 sq. metres. This applies not only to new projects, but also to the projects ongoing on the date of commencement of the Act. Without such registration, promoters can neither advertise nor offer their units for sale. All necessary approvals have to be in place before the registration can be granted. So, once a project gets registered under RERA, it is a guarantee of the builder having received from different authorities the approvals required to go ahead.

Once registered, the builder has to deposit 70% of the amount collected from the allottees in a separate bank account. This amount can be used only for construction and towards land cost. This puts a check on diversion of funds which has been a major problem in the real estate sector, leading to delays in construction and cost overruns.  

There is a strong grievance redressal mechanism under RERA. For any violation whether on the part of the promoter or the allottee, one can approach RERA. There are provisions for quick disposal of cases and refund of consideration money with interest and penalty. RERA is required to dispose of all applications which come up before it within sixty days. It has the powers of a civil court under which it can seek discovery and production of books of accounts and other documents,  summon and enforce attendance of persons and examine them on oath. If one is aggrieved by the decision of RERA, one can approach REAT. REAT is also required to dispose of an appeal within 60 days. It also has the powers of a civil court. Thus, in the form of RERA and REAT, the Act seeks to establish a mechanism for speedy and effective redressal of grievances pertaining to a real estate project.

A promoter has to make available details of his/her project on web page for public viewing. This is intended to ensure transparency about the project.

The Act also provides for registration of real estate agents. Only a registered agent can facilitate sale or purchase of units in a RERA-registered real estate project. The Act puts several obligations on a registered real estate agent in the interest of allottees.

The Real Estate (Regulation and Development) Act,2016 is a welfare legislation, intended to ensure that people who dream of a roof over their head do not find their hard-earned money going down the drain. Before proceeding to invest in a project, one should check if the project is registered with RERA. Such registration itself will provide a lot of protection to allottees. For any default on the part of the promoter, one can easily approach RERA.

With the institutional mechanism in place, what is required is the creation of awareness about what the provisions of the Act are and how common people who dream of having their own house can get the intended benefit out of the legislation. The Real Estate (Regulation and Development) Act,2016 is relatively a new legislation. Creation of awareness about its provisions is going to be a slow process, but only after builders, real estate agents, allottees, prospective allottees and other stake-holders become aware of the provisions of the Act will it be possible to achieve the objectives of the Act. 


Disclaimer: The views expressed in this article are the personal opinion of the author and do not reflect the views of, which does not assume any responsibility for the same.

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