RERA: Protecting Homebuyers

How India's Real Estate (Regulation and Development) Act protects people who buy homes under construction, and what problems it was designed to fix.

For years, many Indian homebuyers paid large sums for apartments under construction, only to face long delays, changed plans or projects abandoned altogether. To address this, India passed the Real Estate (Regulation and Development) Act in 2016, known as RERA. Its main provisions came into force in May 2017.

The problems RERA addressed

Delays: projects often finished years late, while buyers paid rent and loan instalments at the same time.
Diverted funds: developers used buyers’ money from one project to fund others.
Changing plans: layouts and amenities changed without buyers’ consent.
Carpet area confusion: buyers were charged based on inflated measures of area.
Weak redress: disputes dragged on in courts.

Key provisions

Project registration: residential projects above a certain size must register with the state RERA authority before advertising or selling, disclosing approvals, plans and timelines.
Escrow account: developers must deposit 70 percent of money collected from buyers in a separate account, to be used only for construction and land costs of that project.
Carpet area: sales must be based on carpet area, the usable area inside walls.
Penalties for delay: developers must pay interest to buyers for delays.
Structural defects: developers are responsible for fixing structural defects for five years after possession.
Regulatory authorities and tribunals in each state to handle complaints.

Results

RERA has improved transparency, and buyers can check project details online. But implementation varies across states, and many buyers of projects stalled before RERA continued to face problems. In 2019, a government-backed fund called SWAMIH was set up to complete stalled housing projects.

Checking a project before buying

A buyer considering a new apartment looks up the project on her state's RERA website. She finds its registration number, approved plans, completion date and the developer's past projects. When the developer's advertisement promises a date later than the registered one, she asks questions before signing. Information that was once hard to find is now public.

Thinking RERA guarantees on-time delivery

RERA provides rules, transparency and compensation for delays, but projects can still be delayed. Buyers should still check developers' track records and project details.

Key takeaways

RERA, passed in 2016, protects buyers of homes under construction.
Developers must register projects and keep 70 percent of buyers' money in an escrow account.
Sales must be based on carpet area, with penalties for delays and liability for structural defects.
RERA improved transparency, but implementation varies and stalled projects remain an issue.