What is RERA? Understanding the Real Estate (Regulation and Development) Act, 2016

Nov 15, 2024

The Real Estate (Regulation and Development) Act, commonly known as RERA, was introduced by the Indian government in 2016 to protect homebuyers and boost investments in the real estate sector. The Act aims to create transparency and accountability in an industry often plagued with delays and misleading promises. Here’s a breakdown of RERA, its purpose, and its impact on the real estate market.

Key Objectives of RERA:

Enhancing Transparency - Prior to RERA, buyers often faced challenges due to a lack of transparency in project details and delivery timelines. RERA mandates developers to register their projects with the Real Estate Regulatory Authority before marketing or selling units. Builders must disclose detailed project plans, timelines, and other relevant information, creating a level of accountability.
Timely Project Completion - Delayed possession of properties was a common grievance among homebuyers. Under RERA, developers are obligated to adhere to set deadlines and pay penalties for delays, offering much-needed assurance to buyers. This ensures developers plan and execute projects more effectively to meet committed timelines.
Escrow Account Mandate - Developers must deposit 70% of project funds in a dedicated escrow account, which can only be used for that specific project’s construction and related costs. This practice prevents the diversion of funds and accelerates project completion, safeguarding buyer investments.
Consumer-Centric Approach - The Act empowers buyers to approach the RERA authority if they face issues with project delays, misleading advertisements, or poor construction quality. It provides a platform for dispute resolution and acts as a watchdog for builders who might deviate from commitments.
Quality Assurance and Accountability - RERA holds developers accountable for structural defects and quality issues for up to five years from possession. If defects arise, builders must rectify them at no additional cost, protecting buyer interests and enhancing construction standards.

Impact of RERA on Buyers and Builders:

For Buyers: RERA has given homebuyers greater confidence when investing in real estate, making the sector more attractive and reducing the risk of misrepresentation or project failure.
For Builders: While builders must comply with stricter guidelines, RERA has weeded out unscrupulous developers and set industry benchmarks, leading to a more regulated and trustworthy real estate environment.

RERA has been a game-changer for India’s real estate market, bringing transparency, reliability, and structure. It empowers buyers to make informed decisions, ensuring their money is well spent. Builders, in turn, gain credibility and must uphold standards that create long-term value in the industry. For anyone planning to buy property or invest, RERA has made the landscape more reliable and transparent than ever before.