Evaluating the Impact of RERA on India's Real Estate Market

The Real Estate (Regulation and Development) Act, 2016 (RERA) was introduced to enhance transparency and accountability in the real estate sector. However, after nine years, it has faced significant challenges in achieving its objectives.

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Evaluating the Impact of RERA on India's Real Estate Market

Real Estate News:What does a house mean in India? Data indicates that over 77% of the total assets of an average Indian household are invested in real estate, making it the most significant investment an individual makes in a lifetime. Real estate in India encompasses not only structures and land but also emotions, cultural beliefs, security, tax benefits, and practical utility. According to the 2024 financial report, India’s real estate market has attained a valuation of USD 482 billion and is projected to escalate to USD 1.184 trillion by 2033. The real estate sector currently contributes approximately 7.3% to GDP and is projected to rise to 15.5% by 2047.

The real estate sector serves a pivotal role in addressing the demand for housing and infrastructure in the country. For a long time, home buyers have expressed dissatisfaction with real estate transactions, perceiving them as disproportionately advantageous to developers. The sector had systematic irregularities, including project delays, fund misallocation, and the lack of a specialized dispute resolution process. Home buyers often could not obtain comprehensive information to ensure accountability from builders and developers due to the lack of an effective method. Although the Consumer Protection Act of 1986 was designed to meet the demands of home buyers in the real estate sector, it failed to serve the needs of both home buyers and promoters effectively.

The government’s objective was to establish a more equitable and fair transaction process between sellers and buyers, particularly in the primary market, to simplify real estate purchases while enhancing accountability and transparency. The Real Estate (Regulation and Development) Act, 2016, stands as a significant legislative measure by the Indian Parliament aimed at safeguarding home buyers’ properties from the shady actions of builders in India. The Act pertains to the sale transactions (either freehold or leasehold) of apartments, buildings, or plots exclusively within residential and commercial projects. However, it excludes transactions where an individual is provided with an apartment, building, or plot for rent.

RERA is a central legislation, though land is a state subject on which only the state government is empowered to frame laws. Every State/UT in India, with the exception of Nagaland, has established its own rules and regulations to implement RERA within their jurisdictions. The Act outlines the mandate for establishing the Real Estate Regulatory Authority in each state to ensure the proper and effective implementation of the Act. Every State/UT, with the exception of Meghalaya, Sikkim, and Ladakh, has established a regulated authority along with dedicated adjudicating officers to address issues related to delayed possession, refunds from builders, and other related complaints.

Any real estate projects exceeding 500 square meters or comprising more than eight flats must be registered with the State Real Estate Regulatory Authority. Promoters are required to disclose detailed project information, including timeline, company details, property card, legal title report, and information about architecture, design standards, government approval like sanctioned Floor Space Index (FSI), number of buildings, and amenities. The authority must grant registration within 30 days, with promoters having 7 days to respond. The new regulations clarify the definition of carpet area and allow buyers to pay only for the carpet area. RERA mandates 70% of buyer funds to be used for specific projects, preventing fund diversion. Developers must update progress quarterly, prohibit advertisements before registration, compensate buyers for delays, and real estate agents must register and adhere to ethical standards.

The Act establishes a three-tier grievance redressal mechanism: the Real Estate Regulatory Authority, the Adjudicating Officer, and the Appellate Tribunal. This framework is mandated to resolve disputes within sixty days, enhancing access to swift justice. However, after nine years of implementation, RERA has significantly fallen short of providing the promised protections across various provisions. The then Minister of Housing and Urban Affairs, Mr. Hardeep Singh Puri, had taken a strong stance against the States for weakening the regulations under RERA. Additionally, the Supreme Court also instructed the central government to review the rules established by the States under RERA to ensure they align with the central legislation.

Numerous judicial rulings, notably the Supreme Court’s observation in Newtech Promoters and Developers Pvt. Ltd. v. State of UP (2021), have recognized that although the Act is fundamentally oriented towards consumer interests, its execution is severely weak. In the case of M/s Imperia Structures Ltd. v. Anil Patni (2020), the Court noted that, notwithstanding established statutory timelines, consumers faced extended litigation, thereby undermining the legislative purpose of ensuring prompt resolution under RERA. In the case of Pioneer Urban Land and Infrastructure Ltd. v. Union of India (2019), the provisions of the Apartment Buyer’s Agreement were determined to be disproportionately advantageous to the developer, systematically disadvantaging the allottee at every juncture. In the case of DLF Ltd. v. Manmohan Lowe (2022), the National Consumer Disputes Redressal Commission (NCDRC) observed that, notwithstanding the explicit guidelines set forth by RERA, developers frequently postpone payments or provide insufficient settlements, thereby compelling buyers to engage in extended disputes.

In March 2025, a Supreme Court Bench led by Justice Surya Kant and N. Kotiswar Singh, adjudicating a petition against private builders, was prompted by a statement regarding the “domino effect” in the real estate sector. The Supreme Court previously stated that the functioning of the Real Estate Regulatory Authority (RERA), formed under a Central legislation to safeguard homeowner investments and promote the real estate sector, has been “disappointing.” They noted that the Real Estate Regulatory Authority (RERA) has transformed into a rehabilitation centre for bureaucrats who have undermined and frustrated the object of the Real Estate (Regulation and Development) Act, 2016. Homebuyers continue to face difficulties as the majority of builders have not delivered flats timely.

The case of NBCC (India) Ltd. v. Amrapali Home Buyers (2019) exemplifies the necessity for judicial intervention to safeguard the interests of buyers when the frameworks set forth by RERA fail to operate efficiently. Fundamental challenges, including inadequate enforcement authority, protracted judicial processes, institutional shortcomings, and constrained administrative capabilities, have led to the ineffectiveness of RERA. Although RERA may not eradicate the risks associated with real estate investments, the efficacy of legislation in a nation’s development depends on political will, its design, especially its alignment with developmental objectives. The real estate sector continues to be subject to unethical business activities due to builders’ infringement of laws and regulations. Through the enforcement of transparency, regulation of proper fund utilization, and provision of prompt grievance resolution, RERA substantially enhances the position of homebuyers within the real estate framework.

Frequently Asked Questions

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

RERA is a central legislation aimed at regulating the real estate sector in India to enhance transparency, accountability, and consumer protection. It mandates the establishment of Real Estate Regulatory Authorities in each state to oversee the implementation of the Act.

Who does RERA protect?

RERA primarily protects home buyers by ensuring that developers adhere to regulatory requirements, such as timely project completion, proper fund utilization, and transparent communication.

What are the key provisions of RERA?

Key provisions of RERA include mandatory registration of real estate projects, detailed disclosure of project information, a three-tier grievance redressal mechanism, and the requirement for developers to use 70% of buyer funds for specific projects.

Why has RERA faced criticism?

RERA has faced criticism for its weak implementation, inadequate enforcement, and the tendency of some states to weaken the regulations. Judicial rulings have also highlighted the Act's shortcomings in providing timely and effective protection to home buyers.

What is the current status of RERA implementation?

As of now, most states have established their RERA authorities, but the effectiveness of these authorities varies. There are ongoing efforts to address the challenges and improve the implementation of RERA.