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Implication of the RERA (Real Estate Regulatory Act, 2017) on the Real Estate Sector

The Act (RERA) ushers in the much-desired accountability, transparency and efficiency in the sector, defining the rights and obligations of both the buyers and developers.
-Venkaiah Naidu

On May 1, 2017, the Real Estate (Regulation and Development) bill which was introduced in 2013 by the UPA government was passed by making several amendments to it. This Act as very much obvious from the quotation above by Venkaiah Naidu, the Housing and Urban Poverty Alleviation minister will benefit both the buyer (who were in the most disadvantageous position in real estate sector earlier) and the seller. The Act was passed amid the situation when India’s rank in the World Bank’s report which was published in April, 2017 on Ease of Obtaining Construction Permit Index was 185 out of 187 countries, even worse than the war-torn countries in the world.
Prior to this Act, there remain no such structured law in Real Estate sector beside some State laws on it which also have a limited jurisdiction. This Act will override all those State Acts on the subject matter. The one basic question regarding this Act that will arise in anyone’s mind will be that how come Parliament got the power to make laws on land in real estate, as that is a subject of State List (only States are empowered to make laws on it). Well that’s clear because the primary aim of the Act is to regulate contracts and transfer of property, both of which are in the Concurrent List. The reason behind implementation of this Act is grave, as 80% of the projects are delayed, the money that had been deposited as advance has been used in some other project. Also the delay is unprecedented, some of the projectare delayed by 5-6 years.

Now the question before us is that how is RERA Act, 2017, will change the present regime under the Real Estate Sector.


All the real estate projects before they would start construction have to register with the authority created under the RERA Act, which is a subject matter of the State government. Also those projects which are pending also have to register under this, and then only they can continue their construction work. For registration also they have to follow certain guidelines like they have to disclose the details of their projects, land status, carpet area to be allotted, agreements with the buyers, real estate agents working for them, and also the details of the employees working on the project like engineers, construction workers etc. And all the details have also to be uploaded on the RERA website of that State. If the project is not registered then they have to pay 10% of the project cost as penalty. It doesn’t stop here, this Act will also regulate and organize the working of the Real Estate agents by making it mandatory that they have to register with the appropriate RERA authority.

Separate Bank Account

For every separate project it is compulsory to have a separate escrow account. Also the account must have the 70% of the total deposited money by the buyers. This amount has to be used for the construction of that particular project only. While the State government can lower the escrow account amount below 70%.

Appellate Tribunal

Under the Act there should be a separate appellate tribunal to hear the matters coming under the RERA Act. The Act completely bars the jurisdiction of the Civil Courts in matters related to RERA. The Appellate authority has to clear the cases within 60 days and the appeal to the High Court has to be made within 60 days. Any non-compliance with the orders of the Appellate Tribunal by the buyer or the brokers will attract a penalty of 10% of the apartment’s cost and a jail term of 1 year, while in case of builders it may extend to 3 years.

The RERA Act will particularly create a transparency in the real estate sector which was not there previously. Now the consumer or buyer need not have to wait for long to get their home sweet home. All the possible activities of the builders to cheat the buyers in anyway will be checked. But this can only be possible only with the support of the State governments who have to ultimately enforce the law and had to make the necessary arrangements. This can be evident from the very news that till now only Madhya Pradesh has formed one regulatory authority. But as good things need time, so hope for the best.

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