The important Real estate (Regulation and Development) Act 2016 (RERA), was recently passed in the parliament and was acknowledged by the president of India on 25 March 2016. It is a means to regulate the real estate industry in India, which thus far remained deregulated.

This has paved the way for setting up a real estate regulator, which is proposed to be set up within one year from the date of coming into force of the Act. In the interim, the appropriate government (i.e. the central or state government) shall designate any other regulatory authority or any officer, preferably the secretary of the department dealing with housing, as the regulatory authority.

This is a major reform, which would surely bring in the much-needed transparency and accountability in the real estate sector, It will enhance consumer protection by facilitating that the consumer gets the desired product and on time as promised, thereby increasing consumer trust as well as helping to create lasting developer brands strong on quality and timely delivery.



This policy would try to eradicate the common practice among many developers of pre-launching projects without getting recommended approvals from the local authorities and all projects would have to be registered with the regulator. Developers will also have to disclose all necessary details of projects such as approval status, project layout and timeframe for completion to the regulatory board as well as to customers.

Developers are now required to deposit 70% of the project funds in a separate account, which can only be used for the earmarked project. Diversion of funds to other projects was a major reason for project delays and this will address this issue effectively.

The bill also proposes to impose a penalty on buyers for not paying their dues on time. At the same time, buyers would now have the option to exit from a delayed project or be compensated for the delay. Buyers will also have the benefit of security regarding land titles and building in which the units they are interested in is being constructed which are required to be insured by the developer, and continuing the obligation of the developer to be liable to the buyer for defect in title of the land.


1. Project Registration:

The developer has to register their project (residential as well as commercial) with the Regulatory Authority before starting the sale process. Not only that, in case a project is to be promoted in phases, then each phase is required to be considered as a standalone project and register each phase.

In case of ongoing projects on the date of commencement of the Act, which have not received a completion certificate prior to the commencement of the Act, promoters are required to make an application to the Regulatory Authority for registration of their project within three months of the commencement of the Act.

The following types of projects shall not be required to be registered before the Regulatory Authority:

  • Where the area of land under development does not surpass 500 square meters or the number of flats to be built in the venture does not surpass eight apartments.
  • Projects where the completion certificate has been obtained prior to commencement of the Act;
  • Projects undertaken for the purpose of renovation or remodeling which do not involve marketing, selling and allotment of any apartment plot or building.

2. Sale By Carpet Area

Developers can now only sell units based on carpet area and not on built-up area as was the case previously. Some prominent developers have already started selling by carpet area and more will follow suit shortly.

3. Restriction on Changing Plans

Developers cannot make additions or alterations on sanctioned plans without prior consent from the unit allottees. Further, developers cannot make changes to sanctioned plans of common areas of the projects without the consent of at least two-thirds of the allottees.

4. Structural Defects

Any structural defects or any defects in the workmanship, quality or provision of services or any other obligation that is brought to the developers notice within five years of handover should be rectified by the developer. Aggrieved buyers are entitled to compensation by the developer.

5. Advertisement

Advertisements or prospectus issued by the developer should prominently mention the website address of the Regulatory Authority which includes all the details of the registered project. Buyers that make an advance or deposit based on the claims in the advertisement are liable to be compensated in case of any false or incorrect statement in the advertisement.

6. Mandatory deposit of 70% of realization

As mentioned above, 70% of the amount realized from the allottees is to be maintained in a scheduled bank. This is proposed so that developers ensure there are adequate funds available for completion of the project.

7. Restriction on Transfer and Assignment

The developer cannot transfer or assign his majority rights and/or liabilities in a project to a third party without consent from two-thirds of the allottees and without permission from the Regulatory Authority.

8. Refund of Amount in Case of Delay

In the event the developer is unable to complete the project on time then the developer is liable to return the advance received with interest and compensation. If the allottee does not intend the withdraw from the delayed project, he/she will be paid interest by the promoter for every month of the delay till handover.

Do you have any questions about the Indian Real Estate (Regulation and Development) Act of 2016? Let us know in the comments and we will clarify them to the best of our knowledge.