Reforms in

Real Estate
Sector
RERA-2016
“
RERA has strengthened the trust
between the customers and the
real estate developers”
- Prime Minister, Narendra Modi
(13 February 2019)
Chapters

1. Introduction................................................................................................ 01
2. Real Estate Sector: Issues before Reforms............................................. 03
3. Enactment of Real Estate (Regulation and Development)
Act, 2016 [RERA]........................................................................................ 07
• Genesis
• Key Provisions
4. Measures for Homebuyers....................................................................... 15
5. Before and After: A Paradigm Shift........................................................ 17
6. Heralding hope and positivity- A case study.......................................... 21
7. A new ERA- media glimpses..................................................................... 23
Introduction

India is witnessing rapid urbanisation. According

to Census 2011, India’s urban population was 37.7
crore, which is projected to grow to about 60
crores by 2030. Urbanization in India has become
an important and irreversible process, and it is
an important determinant of national economic
growth and poverty reduction.
In such scenario, Real Estate sector has an
important role to play. The Real Estate sector
contributed around 7 % to India’s GDP in 2018-19
and its share is expected to grow to around 13%
of India’s GDP in 2025. As per Economic Survey
2017-18, the sector employed around 4 crore
people in 2013, which is estimated to be around
5.5 crore in 2020. It is a sector with strong forward

1 Reforms in Real Estate Sector RERA-2016

and backward linkages, particularly with the core
sectors of the economy, such as steel, cement, and
other building materials and directly/ indirectly
impacts 270 different industries. Clearly, growth
of Real Estate Sector has serious socio-economic
gains to offer.

India’s Urban Population

Reforms in Real Estate Sector RERA-2016 2

Chapter 2

Real Estate Sector:

Issues before
Reforms
• Prior to initiation of the reforms, Real
Estate Sector was facing various issues and
irregularities such as duping of homebuyers
by builders through various malpractices,
rampant use of black money, diversion of funds
and lack of accountability.
• In the absence of any specific law to regulate
this sector, homebuyers were constrained to
seek remedy under the laws such as- Indian
Contract Act and Consumer Protection Act,
involving lengthy litigation process. There was
no recourse to any speedy grievance redressal
mechanism in case of any genuine problem
faced by either the homebuyers or developers.
In other words, for want of a preventive law,
recourse was made to curative measures.
3 Reforms in Real Estate Sector RERA-2016
• Despite full payment, homebuyers were facing
problems regarding the timely completion
and delivery of homes. Builders would
unscrupously divert funds to other lucrative
investments and the homebuyers would not
only loose their life time savings but also be
saddled with the burden of repaying the loan
along with interest to the banks with no roof
of their own over their heads.
• Due to one-sided agreements tilted heavily in
favor of developers, homebuyers were forced
to pay various extra charges including cost
escalation whereas developers were not held
responsible even in case of any contravention
of promised deliverables. Moreover, there
was unequal rate of interest to be paid by the
promoters and buyers in case of default or
delays thus bringing inequity and injustice in
operations.
• Home buyers would fall prey to unscrupulous
builders, luring them to invest in non-approved
projects, promising high returns. Developers
used to mislead the homebuyers by making
false promises regarding various features,
layout and amenities of the project but later
Reforms in Real Estate Sector RERA-2016 4
 retracted on the same.
• Terms such as- super buildup area, carpet area,
covered parking etc. were used arbitrarily
by developers to their advantage thereby
cheating the homebuyers. The homebuyers
paid for super area whereas they got very less
actual usable space in their flats/homes.
• Real Estate Agents, who play a vital role in real
estate transactions, were not regulated and
in many instances used to defraud innocent
homebuyers.
• On the other hand, developers had to
seek umpteen numbers of sanctions and
approvals through complex processes before
commencement of project construction. For
example- even a simple task of getting the
project layout map approved would take years,
resulting in delays and cost escalation.

5 Reforms in Real Estate Sector RERA-2016

“A middle class person wants to
construct his own house, wants
to buy a flat. Builders lobby
shows him a beautifully printed
booklet and the helpless soul falls
prey to it. He is not having any
technical knowledge, he pays the
installments but he is not getting
the promised house in time.
A middle class makes one house in
his whole life and in it he invests all
his capital. Brothers and Sisters,
we have put a check by passing
the “Real Estate Bill”, so that a
middle class should not face any
problem if he wishes to own a
house. We have worked for this.
- Prime Minister, Narendra Modi
(15 August 2016)

Reforms in Real Estate Sector RERA-2016 6

 Chapter 3

Enactment of Real
Estate (Regulation
and Development)
Act, 2016 [RERA]
In view of various issues plaguing the harmonious
development of Real Estate sector and to protect
the interest of homebuyers, need for specific
legislation was being felt for a long time which
culminated in enactment of The Real Estate
(Regulation and Development) Act, 2016 [RERA].

Genesis of RERA:
A Concept Paper on legislation for regulation of
real estate was prepared in 2008. However, due
to various reasons it could not see the light of
the day. Thereafter in 2014, work on proposed
legislation recommenced with great fervor. After
detailed deliberations and consultations with all
7 Reforms in Real Estate Sector RERA-2016
stakeholders, The Real Estate (Regulation and
Development) Act, 2016 [RERA] was passed in
both the houses of parliament in March 2016.
Certain Sections of RERA were notified with
effect from 1 May, 2016 and remaining sections
from 1 May, 2017.

RERA: Withstanding the legal scrutiny

The constitutionality / legality of the provisions
of RERA was challenged through various Writ
Petitions in various High Courts. Accordingly,
Hon’ble Supreme Court of India by an order
dated 4 September 2017, passed its direction
to High Court of Judicature of Bombay to take
up the connected matters together and assign
the cases to a particular Bench for expeditious
decisions of the matters within two months.
Accordingly, in line with the directions of Hon’ble
Supreme Court of India, the controversies
involved in the present petition, has been
authoritatively concluded by the Hon’ble High
Court of Bombay vide its judgement dated 6th
December 2017 and has held various sections of

Reforms in Real Estate Sector RERA-2016 8

the Real Estate (Regulation and Development)
Act, 2016 as constitutional, valid and legal.

Key Provisions
• RERA was enacted to ensure regulation and
promotion of Real Estate Sector in an efficient,
transparent and accountable manner and
to protect the interest of homebuyers. This
transformative legislation seeks to address
vital issues of fair transactions, timely delivery
and quality construction through speedy
adjudication of disputes, thus empowering
the home buyers.
• Enactment of RERA marked the beginning of a
new era in Real Estate Sector and a step towards
reforming the sector, encouraging greater
transparency, citizen centricity, accountability,
and financial discipline.
• Establishment of Regulatory Authorities,
Adjudicating Officers and Appellate Tribunals
for speedy dispute resolution: To ensure

9 Reforms in Real Estate Sector RERA-2016

 faster resolution of dispute, each State/UT
has to establish its own Real Estate Regulatory
Authority and Appellate Tribunal and also
appoint Adjudicating Officers. For faster
disposal, the cases are to be decided within
sixty days from the date of application/appeal.
• Applicability of RERA: RERA extends to
residential and commercial real estate. It
applies to both private and public bodies
engaged in sale.
• Mandatory Registration of Projects: Under
provisions of RERA, homebuyers’ interests are
protected as only all the projects (above 500 sq
mtrs. and above 8 apartments) registered with
Regulatory Authority can be launched thereby
obviating possibility of any misrepresentation/
false promises by the developers.
• Registration of Real Estate Agents: All agents
dealing in real estate projects also need to
register with respective State Real Estate
Regulatory Authorities. No deposit or advance
to be taken by developer without first entering
into agreement for sale with homebuyer.

Reforms in Real Estate Sector RERA-2016 10

• Project details to be furnished before
Registration: At the time of registration of
project, developer has to furnish specific details
related to project: Sanctioned plan, layout
plan and specifications of the proposed project,
proforma of Allotment Letter, Agreement
for Sale & Conveyance Deed proposed to be
signed with homebuyers; number, type and
the carpet area of apartments & garages, Time
period within which project is to be completed.
• Separate Bank Account for each project: 70%
of the amount collected from homebuyers for
a project must be maintained in a separate
bank account and only be used for construction
of that project only and land cost. Withdrawal
of money from this account shall be done
after certification of engineer, architect &
chartered accountant in regards with of
project completion.
• Online Information of registered projects:
Through the online portal, the homebuyers
are empowered to take the informed decision
to buy their dream homes as well. Further,
promoter has to quarterly update the relevant
details of the project along with project status.
11 Reforms in Real Estate Sector RERA-2016
• Mandatory mentioning of RERA registration
Number: Developers have to mention
RERA registration number in each of his
advertisement or prospectus.
• Equal treatment for homebuyers &
developers: Developers are now legally obliged
to pay similar rate of interest to homebuyers
in case of delay.
• Formation of Resident Association:
Developers have to enable the formation of
Association of homebuyers/Residents and
after paying all outgoings, execute a registered
conveyance deed for common areas in favour
of Association of homebuyers.
• No change in project layout without consent
of homebuyers: Developers can’t do alteration
or addition in the sanctioned plans, layout
plans and specifications of project layout,
without the previous written consent of 2/3rd
of allottees/ homebuyers.
• Refund in case of delay: If developer fails
to complete the project as per terms of
agreement for sale, homebuyer can either seek
refund of paid amount along with interest or
Reforms in Real Estate Sector RERA-2016 12
 ask for interest for every month of delay, till
the handing over of the possession.
• Penal Provisions: RERA provide strict penal
provisions of imprisonment in addition to
provisions for refund, interest and penalty
in case of non-compliance by developers,
allottees and agent

13 Reforms in Real Estate Sector RERA-2016

RERA Implementation Status (Till 10 July 2021):

Other than West Bengal and Nagaland, 34 States/UTs

have notified rules under RERA.

30 States/UTs have set up Real Estate Regulatory

Authority.

28 States/UTs have set up Real Estate Appellate Tribunal.

Regulatory Authorities of 27 States/UTs have

operationalized their websites under the provisions of
RERA.

More than 67,313 Real Estate Projects and

approximately 51,895 Real Estate Agents have been
registered under RERA across the country.

More than 70,001 Complaints have been disposed-off

by the Real Estate Regulatory Authorities across the
country.

Reforms in Real Estate Sector RERA-2016 14

Chapter 4

Measures for
Homebuyers

15 Reforms in Real Estate Sector RERA-2016

Reforms in Real Estate Sector RERA-2016 16
Chapter 5

Before And After: A Paradigm Shift

S. Post-RERA Situation
No. Category Pre-RERA Situation
1. Regulation The Real Estate The Real Estate
sector was largely (Regulation &
unregulated till the Development)
year 2016, which Act, 2016 (RERA)
resulted in various ensures regulation
unfair practices, and promotion of
ultimately affected Real Estate Sector
the interests in an efficient,
of homebuyers transparent and
adversely. accountable manner
and protects
the interest of
homebuyers.
2. Malpractices There were Unscrupulous
many cases of activities followed
unscrupulous by the few of
builders cheating stakeholders of
the homebuyers by the Real Estate
not delivering flats/ Sector have sharply
homes despite full declined. RERA
payment. seeks to address
vital issues of
fair transactions,
timely delivery and
quality construction
through speedy
adjudication of
disputes, thereby
empowering the
home buyers.

17 Reforms in Real Estate Sector RERA-2016

 S.
No. Category Pre-RERA Situation Post-RERA Situation

3. Diversion Due to diversion of RERA Mandates

of Funds funds collected from that 70% of the
homebuyers, there amount collected
were issues of delay from homebuyers
in construction for a project must
& possession on be maintained in
agreed timeframe. a separate bank
account and can
only be used for
construction of that
project and land
cost. The practice
of diversion of the
funds collected from
the homebuyers
has reduced
substantially.

4. Lop-sided Due to lop-sided In the post RERA

agreements agreements tilted era, format of
heavily in favor ‘Agreement to sale’
of developers, has to be furnished
homebuyers at the time of
were forced to registration under
pay various extra RERA. Homebuyers’
charges including interests are
cost escalation protected as only
whereas developers registered projects
were not held can be launched.
responsible even Implementation
in case of any of RERA is
contravention bringing in much
of promised required positivity,
deliverables. transparency and
Moreover, there accountability in
was unequal rate of real estate sector.

Reforms in Real Estate Sector RERA-2016 18

 S.
No. Category Pre-RERA Situation Post-RERA Situation

interest to be paid Moreover, after

by the promoters RERA both builders
and buyers in and homebuyers
case of default are treated equally
or delays thus so far as interests/
brining inequity penalties are
and injustice in concerned.
operations.

5. Corruption There was issue Due to a well

of corruption at established
various levels. regulatory oversight
mechanism,
the incidence of
bribery, money
laundering, fraud
and black money
in the real estate
sector has reduced
significantly, thereby
curbing the growth
of parallel economy.
It has boosted
the confidence of
investors as well.
6. Misrep- Developers used Developers are now
resentation to mislead the legally obliged to
/ False homebuyers by ensure transparent,
promises making false accountable and
promises regarding time-bound delivery
various features, of projects to the
layout and home buyers. Now,
amenities of the developers can’t
project but later change the layout
retracted on the without the consent
same. of 2/3rd allottees/
homebuyers.

19 Reforms in Real Estate Sector RERA-2016

 S.
No. Category Pre-RERA Situation Post-RERA Situation

7. Delay in In case of a dispute, Established fast

getting legal homebuyers had to – track dispute
remedies wait for years to get resolution
relief from Courts. mechanism and also
ensured disposal
of complaints
within stipulated
timeframe.

8. Penal There was no Specific provisions

Provisions specific provision for refund, interest,
for penalty, interest, compensation
compensations and penalty on
from developers all stakeholders
to homebuyers in the event of
in case of frauds, contravention of
misrepresentations legal obligations.
or delays.
9. Regulation Real Estate Agents, Real Estate Agents
of Real who play a vital dealing in the
Estate role in real estate projects also
Agents transactions, were need to register
not regulated. with respective
State Real Estate
Regulatory
Authorities.
10. Stalled There were major Developers are now
projects issue of stalled legally obliged to
projects due to ensure transparent,
non- adherence accountable and
of developers time-bound delivery
of the promised of projects to the
deliverables. home buyers under
regulatory oversight
framework of RERA.

Reforms in Real Estate Sector RERA-2016 20

Chapter 6

Heralding Hope and

Positivity-
A Case Study
Beneficiaries Speak
The residents of one of the housing projects of
Jai Prakash Associates Ltd. at Gautam Budh Nagar
approached Uttar Pradesh Real Estate Regulatory
Authority upon lapse of project registration.
Because of extra-ordinary delay in the project,
the allottees were not willing to pay the pending
installments and the promoter did not have
sufficient financial resources to complete the
project without getting the pending payments
from the allottees.
After exploring possibility of getting the
remaining work of the project completed,
Regulatory Authority intervened and constituted
a committee under its conciliator and after

21 Reforms in Real Estate Sector RERA-2016

sustained deliberations with promoter and the
allottees, an action plan was finalized and put in
place to carry out the balance work of the project
under strict supervision of the Authority with
specific terms and conditions.
As per finalized plan, the promoter agreed to
contribute Rs. 45 Cr and invest Rs.12 Cr upfront
to give momentum to the project and further
undertook to provide the required amount
to ensure the completion within a year. It was
also arranged that the allottees will pay their
pending dues in four installments after the
restart of the project. A joint committee of RERA,
the Association of Allottees and the Promoter
has been constituted for rigorous monthly
monitoring of project progress.
The construction work has restarted in September
2020 and same is likely to be completed by June-
July 2021. Accordingly, 302 allottees of the project
who had almost given up on the possibility of
getting their dream houses will soon be able to
get the possession of their houses.

Reforms in Real Estate Sector RERA-2016 22

Chapter 7

A new ERA-
Media glimpses

23 Reforms in Real Estate Sector RERA-2016

Reforms in Real Estate Sector RERA-2016
 Ministry of Information and Broadcasting
Government of India

25 Reforms in Real Estate Sector RERA-2016