1.1. RERA Act is a key legislation with the aim of ensuring transparency in the real estate sector from a foreign and domestic financial institutions perspective as well as to help protect the interest of home buyers.

1.2. RERA Act, amongst other important aspects, aims at promoting uniformity and standardizing business practices and transactions in the real estate sector and seeks to establish symmetry of information between the promoter and purchaser, transparency of contractual conditions, set minimum standards of accountability and a fast-track dispute resolution mechanism.


2.1. The state level Real Estate Regulatory Authority (RERA) regulates and administers property transactions in a similar manner as the Securities Exchange Board of India does for the security transactions in the capital markets. To ensure transparency, every residential project that has an area of more than 500 square meters or eight apartments, must compulsorily register with RERA before commencement of any sale. Details of the project including the number and types of homes available for purchase, site and layout plans, payment schedules, time frame for the project completion must be provided.

2.2. RERA Act stipulates that 70% of the total amount received from purchasers must be deposited in a different ledger (escrow account) reserved for each project. Any sum from the record must be pulled back after it is certified by the developer, an engineer and a chartered accountant that the withdrawal is in proportion to the stage of completion of the project.

2.3. In the interest of buyers, the RERA Act stipulates that the cost estimates should be provided based on the carpet area rather than the built-up area.

2.4. Any change in the layout or plans after the sale must be approved by two-thirds of the buyers in that project.

2.5. In case of any missed instalment commitments or delayed completion, the buyer and the promoter, respectively, will be liable to pay penal interest at comparative rates. Buyers can complain to the RERA for review in the event the developer has defaulted on its duties.

2.6. In the event a developer leaves a project midway, the allottees will have the right of refusal and seek return of their money along with interest. Alternatively, the allottees may request the Government authority to have the project completed through another developer.


3.1. While undoubtedly RERA Act promotes transparency and accountability, the prerequisite of 70% of sale proceeds be deposited in an escrow account may impact the use of project receivables and increase promoter reliance on institutional capital, which may prompt an acceleration in project costs.

3.2. RERA Act envisages that necessary approvals be obtained before project launch, which could postpone the project initiation and limit the supply of new properties.

Disclaimer: Please note that the contents of this note are not meant to be a substitute for obtaining legal advice. This note is only an introduction and we urge you to consult your lawyers for specific advice.


Please note that the contents of this note are for general information purposes and not meant to be a substitute for obtaining legal advice. This note is only a brief introduction, which may not be up to date and we urge you to consult your lawyers for specific advice.

Categories: Real Estate


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