RERA Act: Regulatory of Real Estate

Real-Estate plays a catalytic role to fulfil the needs and demands for housing and infrastructure in the country. Real-Estate is also a crucial pillar in the economy of the country.

The growth in the real estate sector has been prominent in recent years. But, the harsh truth is unlike the other sectors, the real estate sector is highly unregulated. The irregularity is a lack of professionalism, standardisation and lack of consumer protection. This lack of professionalism and standardisation has been a constraint in the growth of the real estate sector. To resolve all such issues, the Government of India enacted the Real estate (Regulatory Authority) Act, 2016. Real Estate (Regulation and Development) Act, 2016 is popularly known as RERA Act, 2016 or Real Estate Act.

What is the RERA Act?

RERA stands for Real Estate Regulatory Authority. The Real Estate Regulatory Authority or RERA got established under the Real Estate (Regulation and Development) Act, 2016, and came into effect on 1st May 2017.

The RERA Act, 2016 aims to protect and regulate the real estate sector and buyers of homes. The RERA Act 2016 requires the registration of real estate projects. The state established the Real Estate Regulatory Authority to regulate the real estate sector, and the authority acts as the adjudicating body for speedy dispute redressal.

Need for RERA Act

The real sector was highly unregulated as there was no standardisation of business practices and transactions. There were issues like delay in delivery of possession, price and quality of construction. The delay in the project was an issue in the real estate sector. In fact, there were numerous cases where developers and buyers got cheated, which led to an increase in black money in the real estate sector. And there was no grievance redressal mechanism to deal with such cases.

So, to resolve all such matters, there was a need to bring a law that could change the scenario. Hence, the RERA Act, 2016 got enacted.

The objective of the RERA Act

Following are the objective of the RERA Act:

  • To maintain transparency and reduce fraud.
  • To bring professionalism and implement PAN India (Presence Across Nation) Standardisation.
  • To enhance the flow of the correct information between the buyers and sellers.
  • To impose responsibility on builders and investors.
  • To boost the confidence of domestic and foreign investors in the real estate sector.
  • To provide a uniform regulatory environment to ensure speedy adjudication of the dispute.
  • To safeguard the home buyers’ rights.

Salient features of RERA Act, 2016

Salient features of RERA Act, 2016 are:

  • Establishes the Real Estate Regulatory Authority to promote the real estate sector.
  • Ensures the sale of plots, apartments of buildings, or the sale of real estate projects efficiently and transparently
  • Ensures the interest of consumers in the real estate sector
  • Establishes an adjudicating mechanism for the speedy redressal of dispute and appellate tribunal to hear appeal decision, direction or orders of Real Estate Regulatory Authority.
  • Regulates the transaction between the buyers and promoters of residential real estate projects
  • Establishes Real Estate Regulatory Authorities as Real Estate Regulatory Authority (RERA)
  • Registers the residential real estate projects with RERA.
  • Promoters cannot book or offer the project for sale without registering with RERA.
  • The promoter must upload the project details on the website of RERA. The details include the site and layout plan and schedule of project completion.
  • Amount collected from buyers for the project must be maintained in a separate bank account. The amount can get used for construction, and the state government can alter the amount.
  • Imposes a penalty on promoters and real estate agents

Some Points under RERA Act

  • Security: As per RERA Act, 2016 minimum of 70% of the amount paid by buyers and investors are kept in a separate account. The amount can only be allowed to the builder for construction and cost related to the land. Builders and developers cannot ask for more than 10% of the price or property in advance before the sale agreement is signed.
  • Transparency: Builders have to submit the original documents of the project and cannot make changes to project plans without the buyer’s consent.
  • Fairness: RERA instructed developers to sell the properties based on the Carpet area. If the project gets delayed, the buyer must get back the invested amount.
  • Quality: The builder must rectify issues the buyer faces within five years of purchase. Any issue that arises must get rectified within 30 days of the complaint.

Advantages of RERA Act

  • Standardisation of Carpet Area: Before the enactment of the RERA Act, 2016, there was no particular calculation of the carpet area of the project. The RERA Act provided the formula to calculate the carpet area. So the promoters cannot increase the carpet area to increase the price.
  • Reducing insolvency risk of the builder: The builders generally have multiple projects developed at the same time. Earlier, developers were allowed to move funds from one project to another; this is not possible after RERA. After the enactment of RERA, 70% of the funds raised get deposited in a separate bank account. These funds can be drawn only after certification as an engineer, chartered accountant, and architect.
  • Advance Payment: A builder cannot take more than 10% of the project’s cost in advance. So, this saves the buyer from borrowing funds fast and paying a massive amount.
  • Rights to the buyer in any defect case: In case of a structural defect or problem in quality occurs within five years of the possession, the builder shall repair the damages within 30 days with no cost to the buyer.
  • Interest to be paid in case of default: As per the RERA Act provision, the promoter pays the interest if he fails to hand over the possession of the property on time. The interest should also get paid for not paying the promoter on time.
  • Buyers right in case of false promises: In case there is a difference in terms of what was promised and what’s delivered. Then the buyer gets entitled to receive the full paid amount in return. In some instances, the builders provide the interest to the buyer.
  • Buyers’ right in case of a title defect: If a buyer discovers any defect in the property title, he can claim compensation from the promoter.
  • Right to Information: The buyer entails the right to know all information related to the project. It includes plans about layout, execution and status of completion.
  • Grievance Redressal: If the buyer, promoter, or agent have complaints about the project, they can file the complaint with RERA. If the party is unsatisfied with the RERA’s decision, a complaint can get filed with the appellate tribunal.

Impact of RERA Act

RERA impacted the real estate sector in many ways— the RERA act made the builders answerable to the buyers. RERA helped the government in boosting investment in the real estate sector. The Impact of RERA are as follows:

  • Mandatory registration of the projects: RERA has made it necessary for the residential and commercial real estate project to register with the real estate regulating authority. The builders are also required to submit the details like layout, sanction plan and location of the project. Only after getting the clearance from the RERA, the builders can advertise to sell the property.
  • Regular Update: The builders have to upload the project details every quarter. The details include the flats sold, types of flats sold and the schedule of completing the project.
  • Standardisation of the Sale Agreement: Earlier, the agreement for sale was prepared so that for any default, the buyers have liability for a penalty, but the promoters were free from a penalty in every case. However, after the enactment of RERA, the sale agreement included every minute detail related to the project. The details mentioned in the sale agreement includes the date of possession of the flat, internal and external development work etc. this is done to protect the buyer from paying any penalty or charges later.
  • Proper calculation of carpet area: The carpet area gets calculated in three ways—the RERA carpet area, built-up area and super built area. It leads to misunderstandings about what a buyer has to pay. The price quoted on the website should be according to the RERA carpet area.
  • Approval from the buyer for alteration: If a builder wants to make any alteration in the property for which a buyer has already paid the amount, he must take prior approval from the buyer. And if such alteration is related to the entire layout or the common area, then the buyer must take approval from two-thirds of the total number of buyers.

RERA Act and Rules

The Real Estate (Regulation and Development) Act, 2016 under Section 84 provides that within six months from the date of commencement of the Real Estate Act, the state government will set rules to carry on the provision associated with the Act. On 31st October 2016, through HUPA (Housing and Urban Poverty Alleviation) Ministry, the centre released the RERA rules as general rules of the Real Estate (Regulation and Development) Act, 2016.

Carpet Area

But what does carpet area mean? In general terms, Carpet Area means the area to lay carpet. However, according to Section 2(k) of the RERA Act, 2016, ‘Carpet Area’ means the net usable area of the floor of an apartment which excludes the area covered under the external walls, service shafts, balcony or veranda. So, the carpet area includes the area covered by the internal partition walls.

All the developers and the builders must sell the property by quoting the Carpet Areas as per RERA and not by any other type. If the project is under construction and there is a difference in the mentioned carpet area and actual carpet area, the buyers get entitled to a refund.

Built-Up Area and Super Built Up Area

Built-Up Area

When the area of the premises gets measured from the external parameter wall surface, it incorporates the carpet area and the wall thickness. It also includes the area of other apartments like balcony, terrace, flower beds etc.

Simply, the Built-up area equals the sum of carpet area and area of walls.

Super Built-Up Area

Super Built-Up Area means the premises which are saleable areas and includes carpet area, terrace area, wall, lift, stairs and balconies.

In simple words, the super built-up area includes the sum of carpet area, area of walls and common area.

Calculation of RERA Carpet area

It is simple to calculate the RERA carpet area as it is 70% of the built-up area. For instance, the built-up area of the property is 1000 sq. ft. the carpet area would be 700 sq. ft.

Penalties for Non- Compliance of the RERA Act

Chapter VIII of the RERA Act 2016 provides offences and penalties for Non-Compliance with the provision of this act.

Offence and penalties for promoter

Section 59 of the RERA Act, 2016, provides offence of non-registration of the project. According to this section, the penalty for non-registration of the project is 10% of the project’s estimated cost.

Further, if the promoter does not comply with the orders in connection with the offence of non-registration, in that case, the penalty is up to 3 years imprisonment with a fine extending to 10% of the project’s estimated cost or with both.

Section 60 of the RERA Act, 2016 provides a penalty to provide false information or contravening the provision of section 4. The person under this section is liable with a penalty that may extend up to five per cent of the project’s estimated cost.

Section 61 of the RERA Act, 2016 provides a penalty for contravention of any order of the RERA. According to this section, the penalty for contravention of order may extend to 5% of the project’s estimated cost.

Section 64 of the RERA Act, 2016 provides a penalty for failure to comply with orders of the Appellate Tribunal. As per section 64, on failing to comply with the orders of the appellate tribunal, the promoter can get 3 years of imprisonment with or without a fine. The fine can get imposed every day till the default continues but may extend to 5% of the project’s estimated cost.

Offence and Penalty for Real Estate Agent

Section 62 of the RERA Act, 2016, provides a penalty for non-registration and failure to comply with sections 9 and 10 of the RERA Act, 2016 provisions. According to this section, the person committing such offence shall be liable with a penalty of Rs. 10000/- per day for the default period, such cumulative penalty may extend to five per cent of the RERA approved project’s estimated cost.

Section 65 of the RERA Act, 2016 provides a penalty for contravention of any order of the RERA. According to this section, the penalty for contravention of order may extend to 5% of the cost of the property for which sale or purchase is generated.

Section 66 of the RERA Act, 2016 provides a penalty for failure to comply with orders of the Appellate Tribunal. According to this section, for failure to comply with the orders of the appellate tribunal, the promoter can be imposed with the imprisonment of 1 year with or without a fine. This fine can be imposed every day until the default continues but may extend to 10% of the RERA approved project’s estimated cost.

Offence and Penalty for Allottees

Section 67 of the RERA Act, 2016 provides a penalty for contravention of orders of the RERA. As per the section, the penalty for the default period can cumulatively extend to 5% of the cost of the building or apartment.

Section 68 of the RERA Act, 2016 provides a penalty for Contravention of orders of the appellate tribunal. According to this section, the penalty may extend to imprisonment of up to 1 year with a fine. The fine for every day till the default continues may cumulatively extend up to 5% of the value of the apartment or building.

Registration of Project under RERA

As per section 4 of the RERA Act, 2016, the promoter makes the application for the registration with the prescribed fee. The RERA registration process varies from state to state.

The registration process is online, and the application can be made through the official website of RERA of the state. The real estate agents and promoters need to submit the documents with the application.

After making the application for registration, it must be approved or denied within 30 days from the date of application. After successful registration, the promoter will get a RERA registration number, a login id and a password.

Documents required to be submitted

The promoter has to enclose the following documents along with the application:

  1. The detailed information of the enterprise including:
    • the name, registered address, type of enterprise, particulars of the registration and names and photographs of the promoter
  2. The details of the project launched by him in the last five years. It includes both developed and developing projects, their current status and delay in completion. It also contains details of pending cases, type of land and pending payments.
  3. An authenticated copy of the approval and commencement certificate from the competent authority as applicable by the laws applicable on real estate projects. It also includes where the project was proposed to be developed in phase and the approval and commencement certificate’s authenticated copy from the competent authority of each phase.
  4. The development plans and facilities provided. The facilities include a fighting facility, drinking water facility, emergency evacuation service and use of renewable energy.
  5. The detailed location of the project. It includes clear demarcation of the land.
  6. The performa of the allotment letter, agreement for sale and conveyance deed
  7. The carpet area of the apartment is for sale, along with the exclusive balcony or veranda and open-terrace areas.
  8. Area of the garage for sale
  9. The names and addresses of the real estate agent
  10. The names and addresses of the contractor, architect and structural engineer. It includes persons concerned with the development of proposed projects.
  11. A declaration supported by the affidavit and signed by the promoter or any person authorised by him.
  12. If the owner of the land is not a promoter. Then:
    • The promoter has legal title to the land on which the development gets proposed to be made, including legal documents with authentication. If the land gets owned by another person then, authentication of such title.
    • Copy of Collaboration Certificate
    • Development agreement
  13. That the land is free from encumbrances or as per the case (Non-Encumbrance Certificate)
  14. The period in which he undertakes the project.
  15. Seventy per cent of the amount realised for the project by allottees gets deposited in a separate account, maintained in the scheduled bank.


The Real Estate Regulation and Development (RERA) Act, 2016 get regarded as one of the landmark legislation passed by the Government of India. The aim of the Act is a reformation of the real estate sector in India. Also, to encourage transparency, accountability and financial discipline. The RERA Act was expected to boost the demand of the real estate sector. RERA is a regulatory body established under RERA Act, 2016. The motive behind the formation of the Real Estate Regulatory Authority is to protect the interest of consumers. The Act also makes it mandatory for the promoter to disclose the information, including the details of a real estate agent, contractor etc., to the consumer.


What do you mean by the RERA Carpet area?

Carpet Area as per RERA Act means the net usable floor area of the apartment. But it excludes areas covered by the external walls, service shaft area, balcony and terrace area, and it includes the area covered by internal partitions of walls.

What is the difference between the RERA carpet area and the Carpet Area?

The only difference between the RERA carpet area and carpet area is that the RERA Carpet area includes an area covered by internal partitions of walls. The carpet area excludes internal partitions of walls.

Is it necessary that promoters register under RERA?

Yes, a promoter must register under RERA Act, 2016, to sell even a single apartment.

What amount is required to be deposited into a RERA Designated Bank Account?

A minimum of 70% of the amount realised from allottees gets deposited into RERA designated Bank Account.

About Author

Anshita Surana, born in the year 1999 in Guwahati, Assam and brought up in Hanumangarh, Rajasthan, where I completed my elementary and secondary education from the CBSE board.

Currently, Pursuing B.B.A.LL.B(H) from K. R. Mangalam University, Gurugram.

Related Posts