Real Estate Act comes into force; how it will protect interests of home buyers

Know how the Real Estate Act will protect interests of home buyers.  

Real Estate Act comes into force; how it will protect interests of home buyers

Zee Media Bureau

New Delhi: The much awaited Real Estate Act, 2016 was Sunday (May 01) came into force that seeks to put in place an effective regulatory mechanism for orderly growth of the sector which is the second largest employer after agriculture.


The Act also seeks to protect the interests of the large number of aspiring house buyers while at the same time enhancing the credibility of construction industry by promoting transparency, accountability and efficiency in execution of projects.

Highlights of the Act

-The Act regulates transactions between buyers and promoters of residential real estate projects.  It establishes state level regulatory authorities called Real Estate Regulatory Authorities (RERAs).

-Residential real estate projects, with some exceptions, need to be registered with RERAs.  Promoters cannot book or offer these projects for sale without registering them.  Real estate agents dealing in these projects also need to register with RERAs.

-On registration, the promoter must upload details of the project on the website of the RERA.  These include the site and layout plan, and schedule for completion of the real estate project.

-70% of the amount collected from buyers for a project must be maintained in a separate bank account and must only be used for construction of that project.  The state government can alter this amount to less than 70%.

-The Bill establishes state level tribunals called Real Estate Appellate Tribunals.  Decisions of RERAs can be appealed in these tribunals.

Real Estate Regulatory Authorities, Appellate Tribunals

-All states and union territories (UTs) must establish state level regulatory authorities, called Real Estate  Regulatory Authorities (RERAs) within one year of the Act coming into force.  Two or more states or UTs  may set up a common RERA.  A state or UT may also establish more than one RERA.   

-Functions of a RERA include: (a) ensuring that residential projects are registered, and their details uploaded  on the RERA website, (b) ensuring that buyers, sellers, and agents comply with obligations under the Act,  and (c) advising the government on matters related to the development of real estate.   

-Each RERA will consist of a chairperson and at least two full time members with experience in sectors such as real estate, urban development, law and commerce.  

-One or more tribunals, called Real Estate Appellate Tribunals, will be established in states and union  territories to hear appeals against decisions of RERAs.  One Tribunal may be established for two or more  states.  Each Tribunal will consist of a chairperson and two members, one with a judicial background and one  with a technical background.   

-If a RERA observes that an issue impacts competition, it may refer the case to the Competition Commission.     

-A Central Advisory Council, consisting of representatives from union ministries, state governments, RERAs  and representatives of the real estate industry, consumers, and labourers will be established. The Council will  advise the central government on major questions of policy, and protection of consumer interests.  

Registration of real estate projects and agents

-The Act requires that all residential projects, with some exceptions, be registered.  Promoters cannot book or  offer these projects for sale without registering them.  Registration is not required for projects that: (a) are less than 1000 square metres, or (b) entail the construction of less than 12 apartments, or (c) entail renovation/repair/re-development without re-allotment or marketing of the project.   

-State governments can establish a lower limit for the exemption.  Where a project is developed in phases, each phase must be registered separately.  In order to register, the promoter must provide details such as the layout plan of the project, and the carpet area of property for sale to the RERA.   

-If the applicant does not hear back from the RERA within 15 days of the application for registration, the project will be considered registered.

-Registration may be revoked after giving 30 days notice to the promoter. In case of revocation, the RERA can recommend the completion of the project through the competent authority or association of buyers or in any other manner.  Here, competent authority refers to the local authority responsible for land development.

-Real estate agents must register with a RERA in order to facilitate the sale or purchase of property in real estate projects that have been registered.  Registered agents must not facilitate the sale of unregistered projects or mislead buyers regarding services offered.  

Duties of the promoter and the buyer

-On registration, the promoter shall upload details of the project on the website of the RERA including the number and types of properties for sale, and quarterly updates on the status of the project.  In addition, the promoter must make the site and layout plans of the project, and the schedule of completion of the project available to the buyer.  In case a buyer incurs a loss because of false advertising, and wishes to withdraw from the project, the promoter must return the amount collected, with interest.   

-70% of the amount collected for the project from buyers must be used only for construction of that project. The state government can change this amount to less than 70%.  The promoter shall not accept more than 10% of the total cost of the property as an advance payment without entering into a written agreement.   

-The promoter shall: (a) obtain a completion certificate from the relevant authority, (b) form an association or society of buyers, and (c) provide essential services till the association of buyers takes over the maintenance of the project.  If the promoter is unable to give possession of the property, he shall be liable to return the amount received by him for the property, with interest.   

-The buyer must make required payments within the term specified in the agreement signed with the promoter. He will be liable to pay interest for any delay in payment.  Buyers must participate towards the formation of an association/society/cooperative society.   


-In case the promoter fails to register the property, he may be penalised up to 10% of the estimated cost of the project. Failure to register despite orders issued by the RERA will lead to imprisonment for up to three years, and/or an additional fine of 10% of the estimated cost of the project.  The promoter will have to pay up to 5% of the estimate cost of the project if he violates any other provisions of the Act.   

-Real estate agents will have to pay a fine of Rs 10,000 for violating any provisions of the Act, for each day  the violation continues.