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RERA FAQs

Q. What is RERA?

A. The Real Estate (Regulation and Development) Act, 2016 is an act of the Parliament of India which seeks to protect home-buyers as well as help boost investments in the real estate industry.

Q. Why is RERA made? What are the objectives? Why is it suddenly being talked about so much?

A. RERA is required in the country keeping in mind that due to the lack of activeness in the government work including project approvals, many promoters resort to unfair ways to continue their work. Also, the Real Estate Agency is establishing Central Agency Council and Real Estate Appellate Tribunal with RERA so as to boost the level of confidence in buyers for the builders and the agents and also to check the defaulters.

The importance of RERA can be highlighted by some of the following points-
  • 1) It will strengthen & protect prospective buyers from fraudulent developers and builders.
  • 2) It will weed out weak & unscrupulous builders from the business as they will find it difficult to comply with these rules.
  • 3) The stringent provisions buyers’ protection from non-performance & default by the Builders will stop them from cheating as such defaults come along with Criminal penal provisions.
  • 4) All real estate projects have to be registered with RERA prior to commencement. It’s the duty of RERA to fast track dispute resolution through adjudicating judges (district judges)
  • 5) The RERA is sort of judicial tribunal. Now the developer cannot presale the area in bulk but he will have to get registered with RERA. He has to first approach planning authority, Municipality, Municipal Corporation for the proposal of construction. If the proposal is in order, the authority issues Commencement Certificate [CC].

Q. Since when is RERA applicable?

A. The Act was passed on 10th March, 2016 and is applicable from 1st May, 2017.

Q. Does it cover the purchase and rental both?

A. RERA does not cover rental arrangements or agreements in any form.

Q. Does it cover Commercial projects too?

A. RERA covers all residential and commercial projects, including shops, offices and buildings.

Q. Will RERA be applicable to existing projects also or only to the future ones?

A. The Act applies to all ongoing projects, where completion certificates have not been obtained, irrespective of whether construction began prior to May 1, 2017. For instance, Section 3(1) of the Act, restrains a developer from advertising and selling any space in a project, without registering the project with the Real Estate Regulatory Authority (the Authority). For ongoing projects for which a completion certificate has not been issued, this registration is to be obtained mandatorily within a period of three months from May 1, 2017.

Q. Will it be mandatory for all builders/developers to register all their complexes under the Act?

A. Yes. It is totally mandatory for all the builders/developers to register all their complexes under the act.

Q. Are there any exceptions to Registration of projects under the RERA Act?

A. There are three exceptions for registration under the Act –

(a) Where area of land proposed to be developed does not exceed 500 sq m or the number of apartments proposed to be developed does not exceed eight, inclusive of all phases. While the central government provides for these minimum area requirements the local governments can change the area requirements to conform to the Act if required such minimum area threshold can be revised even lower.

(b) Where promoter has received completion certificate for Real Estate Project prior to commencement of Act

(c) For purpose of renovation or repair or re-development which does not involve marketing, advertising, selling or new allotment of any apartment, plot or building, under real estate project.

Q. Is RERA Act, 2016 Applicable To All Indian States?

A. Yes, this act is applicable to all Indian states excluding Jammu & Kashmir.

Q. Are There Any Supporting Government Bodies Set Up To Assist The RERA?

A. Yes, A Central Advisory council will be set up to advice the Central Government on the implications of the Act to recommend policies in order to protect consumers’ interest and to supervise the growth & development of the real estate sector. In addition, there will be a dedicated Appellate Tribunal set up for RERAs to hear appeals from orders of the RERAs and the adjudicating officer.

Q. Is There Any Validity Period For A Particular Project Registration?

A. The real estate developer has to specify the project completion time in the RERA application form. Hence, the real estate developer is accountable to follow the timelines otherwise; it will suffer losses/ penalties.

Q. Can RERA Extend The Validity Of The Registration?

A.The RERA, under given force majeure events, may extend the validity of the registration:

  • In the event of a natural calamity like flood, cyclone, drought, fire etc.
  • In the case of war.

However, the developer is still required to make a presentation to the RERA by paying the applicable fee and such extension will be valid for a period of one year in aggregate.

Q. Do All Projects Fall Under The Radar Of RERA? Are There Any Exceptions?

A. Every project measuring more than 500 square meters or more than eight apartments will have to be registered with the RERA.

Q. On what grounds can the RERA revoke a registration?

A. Upon receiving a complaint against the real estate developer, the RERA can revoke registration if it is satisfied that the real estate developer has not complied with the rules and regulations stated under the Act or rules and regulations made thereunder, or has violated the terms and conditions of approval given by competent authority or is involved in unfair practices to sell, market or advertise his project.

Q.What are the penalties that a real estate developer would face if he fails to adhere to the registration mandates or any other directions prescribed by the RERA?

A. If the real estate developer violates the registration procedures prescribed by the Act, he will be required to pay up to 10% of the total estimated cost of the project in question. If found continuing the offense, the real estate developer will be punishable either with imprisonment (up to 3 years) or a fine which may extend up to a further 10% of the above project cost.

Q. Are there norms on advertisements or promotions?

A. This is one big change coming through as a result of the imposition of stricter guidelines for marketing and timing of marketing of projects. It has been seen that real estate developers use attractive marketing material including brochures, media advertisements and other forms to lure consumers. However several times there is a big disconnect between actual product and what is being shown in the marketing collateral. The Act doesn’t permit such activities as anything shown in the marketing material needs to be in line with the final product or else real estate developer will be liable to penalties under the Act.

The advertisement or prospectus issued or published by the developer shall mention prominently the website address of the Authority, wherein all details of the registered project have been entered and include the registration number obtained from the Authority and such other matters incidental thereto.

Q. Can a real estate developer exit the project midway by selling to another developer or party?

A. While a developer is allowed to sell the project to another investor he can do so only by taking written approval of 2/3rd of project’s consumers and also the prior approval of the RERA. Again if a consumer or his family or by other means holds more than one unit in a project he is considered as one consumer only. Also, the RERA need to be informed of such sale and incoming party then assumes all the rights and liabilities as the previous promoter of the project (including project delivery timelines and other such matters).

Consumer Section

Q. What happens if an Appellate Tribunal is not established for a particular jurisdiction during the time of appeal?

A. In this case, the appropriate Government shall appoint any other body as Appellate Tribunal that currently exists to hear the appeals in the interim.

Q. Can the buyer get a refund in case there is any?

A. The buyer shall be entitled to claim the refund of amount paid along with interest at such rate as may be prescribed and compensation in the manner as provided under this Act, from the promoter, if the promoter fails to comply or is unable to give possession of the apartment, plot or building, as the case may be, in accordance with the terms of agreement for sale or due to discontinuance of his business as a developer on account of suspension or revocation of his registration under the provisions of this Act or the rules or regulations made there under.

Q. What is an escrow account and why is RERA mandating 70% funds collected be deposited in an escrow account by a real estate developer?

A. An escrow account is a temporary pass through an account held by a third party during the process of a transaction between two parties. This is a temporary account as it operates until the completion of a transaction process, which is implemented after all the conditions between the buyer and the seller are settled. One of the biggest pain points for consumers has been projecting delays. Amongst other reasons for the delay, the use of collections from one project into business expansion or construction of other project or siphoning of funds by real estate developers have also been primary causes. Thereby to protect consumer of a project the Act mandates that of all collections 70% funds be deposited in an escrow account maintained with a scheduled commercial bank. These funds can be accessed by a real estate developer solely for purpose of construction of the project to which it belongs. The real estate developer can withdraw funds from this account in proportion to the stage of work. The request for withdrawal of funds is to be certified by an engineer, architect and a chartered accountant in practice that real estate developer’s claims are justified. Thereby this de-risks consumer to an extent that his payments to the real estate developer are being channelized for the good of the project where he owns a unit/ units.

Q. What happens if an Appellate Tribunal is not established for a particular jurisdiction during the time of appeal?

A. In this case, the appropriate Government shall appoint any other body as Appellate Tribunal that currently exists to hear the appeals in the interim.

Q. In the above case, what will happen if the Appellate Tribunal is established during the course of hearing?

A. The particular appeal will be transferred to the established Appellate Tribunal under the Act and will no longer be with the one which is temporarily appointed.


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