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How is the Real Estate Regulation Act turning the tide for the realty sector?


The Real Estate Regulation and Development Act came into force in the year 2016 and the country achieved its first realty regulator act. By bringing in transparency and various other perks for both buyers and developers alike, the act is set to transform the sector for its betterment.

Parameters of RERA:

The regulatory act is set to bring in about 83,000 builders with registration under the purview. With proper regulation and accountability, investments from domestic and foreign financing institutions are expected to increase. Credibility of the developers and builders increase as the focal area of the act is on mandating proper disclosure of the projects which includes details such as land status, clearances, approvals, etc.

Transparent pricing patterns along with quick and efficient redressing process enhance the builder’s accountability. The act also ensures that the buyer’s money is used for the mentioned project and mandates the necessity of revealing all the information. It also mandates developers to commit to a planned time period with a detailed cost plan, which is the final cost for the buyer.

Delays in payment and completion of projects by the buyers and builders respectively are subjected to penalties. With the act, it is mandatory for the developers to deposit 70% of the project cost in a separate bank account. This is primarily to cover project development activities and it ensures proper completion of projects in time and also acts as a security in case of a delay. Developers will not be able to divert the funds for other projects under their name.

Liabilities of the developer under the act:

Under the RERA reform, it is mandatory for the promoter to register with the authority established under the act before advertising, booking or selling any plot/apartment/building with a land area of more than 500 square meters and more than eight apartment units.

In case of delay in completion, the developer is liable to pay the buyer with the same interest as the EMI paid by the buyer to the bank as a penalty. Builders are also liable for any structural defects for up to 5 years. Furthermore, the developer should also list information like interest to be paid in case of delays, area on the basis of which the units are to be sold and the details of utilisation of funds received from the buyers, period of warranty and compliances after delivery. The developers and promoters should also be transparent and sell only by carpet area rather than selling by the super built up area.

Other benefits from the regulatory act:

With the RERA under function, even small property brokerage firms also come under the act. Agents and respective agencies must be registered with the regulator so that small fraudulent shams are swept away for good. In this case, buyers are protected and they have easy access to instant legal resolutions if anything goes wrong. Smaller agencies should work with large and organized realty advisory groups to gain credibility and improve their business.

Apart from these, even online realty platforms get better with the regulatory act. When they have verified and authentic information, buyers will be able to choose their best option by considering many aspects of the builders like their previous project information, delays in projects, credibility and so on. For example, if a buyer from Chennai wants to know about the credibility and authenticity of a builder with flats for sale in Pallavaram, then he/she will be able to get almost all the necessary details including land statuses, approvals, clearances, etc.

Possibilities of future impact:

Builders are guessing that the cost of construction would increase by at least 10% to 15%. Another grey area under the act is that there is no proper addressing of maintenance costs as it is mandatory for the developer to maintain the project for at least 5 years. Like any other new law, the realty sector is on an uncertainty period right now. There might be a shift to the idea of building and selling model, so that non-compliance risks are cut down considerably.


Under the new act, buyers in the country will be beneficial with clear transparency, buyer-friendly regulations and accountability of the builders or developers. More housing projects will spruce up under the new act and the realty sector will transform into a consciously responsible sector on the whole.   
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