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Real Estate Regulation Act, 2016: Key Points

Published on Saturday, May 06, 2017


  • Real Estate (Regulation and Development) Act, 2016 (RERA) is an Act which seeks to protect homebuyers from inordinate project delays and shoddy quality of construction as well as help boost investments in the real estate industry. 
  • The bill was passed by the Parliament last year and the Act came into force on 1 May 2016 with 59 of 92 sections notified. Remaining provisions came into force on 1 May 2017.
  • However, as on April 30, only Gujarat, Uttar Pradesh, Madhya Pradesh, Maharashtra, Odisha, Delhi, and Andhra Pradesh have notified the rules. Only one state Madhya Pradesh has set up RERA while 9 others including Kerala, Maharashtra, Punjab, Rajasthan, Haryana, and Delhi have set up interim regulators.


Real Estate Regulatory Authority and Appellate Tribunal:
  • Each state will set up regulatory bodies as appellate tribunals to solve the disputes between buyer and builder within 120 days.
  • In a case of violation of orders of Appellate Tribunals and Regulatory Authorities, developers will be imposed imprisonment of up to 3 years and up to 1 year in the case of agents and buyers. 
  • The Act also seeks to impose strict regulations on the promoter and ensure that construction is completed on time.
  • In order to enable informed decisions by buyers, websites of RERA will ensure publication of information relating to profile and track record of promoters, details of litigations, advertisement and prospectus issued about the project, registered agents and consultants, development plan, financial details of the promoters, the status of approvals and projects etc.

Protection of buyers:

  • The developer will have to deposit 70% of the funds collected from a buyer in a separate bank account in case of new projects. 
  • 70% of unused funds in case of ongoing projects, to meet the construction cost of the project.
  • The buyer will pay only for the carpet area (area within walls) which has been clearly defined in the bill to include usable spaces like kitchen and toilets. 
  • To add further security to buyers, RERA mandates that developers can’t ask more than 10% of the property’s cost as an advanced payment booking amount before actually signing a registered sale agreement.
  • A developer’s liability to repair structural defects has been increased to 5 years from the earlier 2 years.
  • In case, a developer wants to make any structural changes after the commencement of the project, it needs the consent of 2/3rd buyers, without which no structural changes can be made.


  • The Real Estate Act makes it mandatory for all commercial and residential real estate projects where the land is over 500 sq. mt. to register with the Real Estate Regulatory Authority (RERA) for launching a project. 
  • On-going projects will have to seek registration within 3 months if they have not received completion certificate on the date of commencement of the Act.

How will RERA affect builders and developers?

  • The builders will benefit from the RERA, as it proposes to impose a penalty on the buyer for not paying dues on time. 
  • Malpractices are expected to be curbed since the builders have to get all the necessary clearances before they could sell the project.


Experts believe that these Real Estate Regulation Rules would bring more transparency between buyers, developers, and real estate agents and boost investments in Real Estate Sector as it contributes 9% to gross domestic product to India’s growth.
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