Why is RERA losing credibility

Why is RERA losing credibility

During a recent hearing, the Supreme Court delivered a strong critique of the functioning and enforcement of the Real Estate (Regulation and Development) Act (RERA). The Bench observed that in several cases, RERA authorities appear to be assisting defaulting builders rather than protecting homebuyers. The judges expressed concern that the fundamental objective of the law—to safeguard buyers—was not being effectively realised. In particularly strong remarks, the Court even suggested that if RERA institutions fail to provide genuine protection to homebuyers and instead shield errant developers, “it might be better to abolish this institution.”

Background

The Real Estate (Regulation and Development) Act, 2016 was enacted with the primary objective of protecting homebuyers and bringing greater transparency and accountability to the real estate sector. Prior to the Act, aggrieved buyers largely depended on remedies under the Consumer Protection Act. This increased the burden on the Consumer Commissions, often resulting in delayed justice. This is a matter of concern in any sector but particularly in a sector as large as real estate, projected to reach a value of nearly US$1 trillion by 2030.

The Act introduced several key mechanisms intended to strengthen consumer protection:

Grievance Redressal:
Regulatory Authorities are empowered to address complaints from homebuyers. If a buyer is dissatisfied with the Authority’s decision, they may appeal before the Appellate Tribunal established in each state.

Penal Provisions:
RERA authorities can issue show-cause notices to developers, promoters, and real- estate agents who violate their obligations under the Act. Failure to justify such violations may attract substantial financial penalties. 

Timely Completion:
Developers are required to deposit 70% of the funds collected from buyers into a separate escrow account dedicated exclusively to the project concerned. This provision was designed to prevent the diversion of funds to other projects and to ensure timely completion. In cases of delay, developers are required to either refund buyers or pay interest on the amounts received.

Transparency:
At the time of project registration, developers must disclose critical information including sanctioned plans, approvals, and project completion timelines. 

Protection of Buyers’ Interests:
Developers are required to repair structural defects occurring within five years of purchase. Further, they cannot collect more than 10% of the project cost from buyers as advance or application fees before entering into a formal agreement for sale.

Implementation Gaps and Emerging Concerns

However, in the years since the Act came into force, several lacunae in its implementation have been identified that undermine its intended consumer protection objectives.

One frequently cited issue concerns the interpretation of the term “ongoing project.” In the early years of the Act, there was significant confusion regarding whether projects launched before the enactment of RERA but still under construction were required to register under the new regulatory framework. This ambiguity led to inconsistent implementation across states and allowed some developers to avoid regulatory oversight.

Beyond such interpretational issues, several systemic concerns have also been identified. Studies examining the implementation of RERA have pointed to uneven enforcement across states, delays in adjudication of complaints, and limited institutional capacity within regulatory authorities. In many cases, even when homebuyers obtain favourable orders from RERA, enforcement remains difficult because recovery proceedings must often be carried out through other administrative authorities such as District Collectors. This additional procedural layer can significantly delay the actual recovery of funds owed to buyers.

Another major challenge is the large number of projects that remain either unregistered or incompletely disclosed on RERA portals, despite the statutory requirement for registration. Inconsistent disclosure practices reduce transparency and limit the ability of buyers to make informed decisions. Similarly, many regulatory authorities face shortages of staff and technical expertise, which slows the processing of complaints and project approvals.

Reports from across the country also indicate that developers frequently prolong disputes by filing appeals before appellate tribunals or courts, thereby delaying compliance with RERA orders. As a result, homebuyers who have already endured delays in project completion often face further delays in obtaining effective relief.

These gaps between the law on paper and its implementation in practice have led to increasing frustration among homebuyers. Although RERA was intended to transform the sector by ensuring accountability and timely delivery, delays, weak enforcement mechanisms, and administrative constraints continue to undermine its effectiveness.

A unique case from Tamil Nadu

A specific example from Tamil Nadu illustrates another challenge that complicates an already complex landscape. Section 3(2)(a) of the Act provides exemptions from mandatory project registration where the land proposed for development does not exceed 500 square metres or the number of apartments does not exceed eight, inclusive of all phases. Given that RERA is a consumer-protection statute, a purposive interpretation would require registration if either threshold is exceeded. This interpretation was consistently adopted and enforced by the Tamil Nadu Real Estate Regulatory Authority (TNRERA).

However, in 2023 the Madras High Court, in Devinarayan Housing and Property Developments vs. Manu Karan, adopted a literal and disjunctive interpretation of the provision. The Court held that compliance with just one of the criteria was sufficient for a project to claim exemption from registration. As a result, even a luxury villa project spread across 3,000 square metres but containing only six units—potentially involving transactions worth several crores of rupees—could fall outside the regulatory framework of RERA. This effectively creates a regulatory vacuum where buyers in such projects may not benefit from the protections of the Act.

Following the 2023 judgment, TNRERA has adopted the High Court’s interpretation. In fact, its website now explains mandatory registration as applying only to projects where both conditions are met—that is, where the land area exceeds 500 square metres and the number of apartments exceeds eight. This shift significantly weakens consumer protection.

Given the far-reaching implications of the ruling, the interpretation should ideally be challenged before a higher court. Alternatively, if ambiguity in the statutory provision persists, legislative amendments may be required to restore the protective intent of the law.

Section 3(2)(a) also empowers state governments to reduce the thresholds of 500 square metres and eight apartments for exemption from mandatory registration. Civil society organisations have repeatedly called for the use of this power in order to extend RERA protection to buyers of smaller projects. The 2023 ruling of the Madras High Court therefore represents a major setback to these efforts.

The Way Forward

The Real Estate (Regulation and Development) Act, 2016 remains a progressive piece of consumer-protection legislation aimed at promoting transparency and accountability in the real estate sector. However, its objectives can only be realised if regulatory authorities ensure strict compliance by developers and provide accessible and time-bound grievance redressal for consumers.

RERA authorities should actively educate consumers on how to approach the regulator for dispute resolution. Orders and decisions should also be widely disseminated, including through publication in newspapers and other public platforms, in order to increase consumer awareness and deter non-compliance by erring developers.

In addition, all RERA authorities should regularly publish annual performance reports. Such reporting would significantly enhance transparency and accountability. Unfortunately, several authorities do not currently comply with this requirement, which weakens public confidence in the system.

In conclusion, abolishing RERA would be a regressive step. Despite its shortcomings, the introduction of the Act has already brought greater discipline and transparency to the real estate sector. The Act itself has added a significant psychological protective layer, offering homebuyers a level of peace of mind. It also has, to some extent, regulated the sector, ensured transparency in project approvals, and improved timelines, and fund utilization. The challenge now lies not in dismantling the institution but in strengthening it.

What is needed is greater consistency in the functioning of regulatory authorities: rigorous monitoring of project registrations, timely uploading of disclosures and documents, prompt issuance of notices, and swift enforcement action against defaulting developers. Establishing conciliation forums within RERA, with participation from civil society, could also provide a constructive mechanism for resolving disputes more efficiently.

Considerable effort has gone into designing the legislative and regulatory framework. Weakening or dismantling it would undermine these gains. The priority should instead be to strengthen enforcement, close implementation gaps, and restore consumer confidence in the system.