What Happens if an Allottee in a Real Estate Project Violates the RERA (2016) Act?

RERA Apr 27, 2021

About the RERA Act (2016)

The Real Estate (Regulation and Development) Act (the ‘Central Act’) was enacted in 2016 by the Central government to establish a single regulatory framework to govern real estate in India. Before the enactment of this Act, State governments had their own governing their respective real estate sectors; there were very few commonalities in the way real estate was governed across different States. One of the key objectives of the Act was to protect the interests of real estate purchasers and promote an environment of transparency in the real estate sector [1]. It was often referred to as a ‘buyer-friendly’ legislation by experts.

Violation of Central Act provisions by the allottee

Sections 67 and 68 of the Central Act enumerate the penalties to be imposed upon a flat buyer or allottee in a RERA project in case he violates any of the Act’s provisions. These penalties include:

  • If any allottee violates the directives of the RERA Authority, he is liable to pay a fine during the duration of his default, which can amount to 5 percent of the cost of the plot, building or apartment.
  • If he fails to comply with any order issued by the State RERA Tribunal, he is liable to be imprisoned for up to a year or pay a certain penalty everyday which can amount to 10 percent of the total cost of his project.

Is RERA (2016) really a buyer-friendly legislation?

Although the Central Act imposes heavy penalties on the allottee for its violation, it does the same for real estate promoters as well. The Central Act has further imposed a set of conditions upon the real estate developer. These include:

  • It is mandatory for the promoter to upload his registration details related to his project.
  • The promoter must deposit 70 percent of the funds he receives from his customers in an escrow account and use them solely for project implementation.

The Central Act stipulates that the violation of the RERA provisions by the promoter could lead to his imprisonment of up to 3 years or a fine which could extend up to 10 percent of the estimated cost of the project

(You can find a detailed review of the implementation of RERA in different States in our white paper titled ‘Key Features and Implementation of the Real Estate (Regulation and DevelopmentAct, 2016)


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