High Court Rules: Lease-Based Real Estate Projects Exempt from RERA Registration

The High Court of Judicature at Allahabad, Lucknow Bench, has made a significant ruling that real estate projects developed on leasehold land, where the developer lacks the authority to sell units, do not fall under the purview of the Real Estate (Regulation and Development) Act, 2016 (RERA). This decision hinges on the mandatory condition of 'sale' for a project to be considered a 'real estate project' under the Act.

The case in question involved M/s Maa Bhagwati Commercial Reality N Resorts LLP (the Respondent), which applied for registration of its project 'Samrajya' with the U.P. Real Estate Regulatory Authority (RERA) on February 2, 2025. The project was being developed on land owned by a public charitable trust, 'Udasin Sangat Rishi Aashram,' which had leased the land to the Respondent for 29 years and 11 months.

U.P. RERA rejected the registration application on March 4, 2025, citing concerns over the Trust’s authority to grant sub-leasing rights and the limited lease period. The Respondent challenged this rejection before the Real Estate Appellate Tribunal (REAT), Lucknow, which allowed the appeal on September 25, 2025. REAT directed RERA to grant the registration. Subsequently, U.P. RERA moved the High Court to challenge the Tribunal’s order.

The Appellant (U.P. RERA) argued that the Respondent did not qualify as a 'promoter' under Section 2(zk) of the Act because it could not sell the units and could only assign leasehold rights via sub-leases. They contended that under Section 17 of the Act, a promoter must execute a registered conveyance deed in favor of allottees, which was not possible here as the Respondent was merely a lessee.

The Respondent, while initially seeking registration, eventually filed a short counter-affidavit agreeing with the Authority’s stance that they were beyond the purview of the Act. They argued that since they lacked the right to sell and could only sub-lease, they were not 'promoters' as defined under Section 2(zk) and thus should be absolved from the requirement of registration.

Justice Syed Qamar Hasan Rizvi analyzed the definitions of 'promoter' under Section 2(zk) and 'real estate project' under Section 2(zn) of the 2016 Act. The Court observed that the purpose of selling is a sine-qua-non for a person to be a promoter within the meaning of the Real Estate (Regulation and Development) Act, 2016, but the Respondent, admittedly, does not have the right to sell the property.

The Court further noted that a conjoint reading of the statutory provisions yields two mandatory conditions for the Act to apply: 1. There must be development or construction activity. 2. Such activity must be undertaken for the purpose of sale to allottees.

The Court cited the Supreme Court decisions in District Mining Officer vs. Tata Iron & Steel Co. (2001) and M/s Newtech Promoters and Developers vs. State of U.P. (2021) to emphasize that statutes must be interpreted according to the literal and true intention of the legislature.

The Bench remarked that a lessee, who does not sell units to prospective allottees, does not fall within the ambit of 'promoter'. Further, as per Section 2 (zn), a 'real estate project' necessarily contemplates development for the purpose of sale.

The High Court concluded that since the Respondent does not possess the legal authority to sell the plot, apartment, or building, the project does not attract the mandatory registration provisions of Section 5 of the Act. The Court held that the Respondent is neither obligated to seek registration nor can it be compelled to obtain registration. Consequently, the Court disposed of the appeal, stating that U.P. RERA is under no obligation to provide a registration number or login ID. Furthermore, the Court directed the Authority to withdraw the prohibitory and restrictive clauses (Form-D) previously issued against the Respondent’s project.