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What is RERA Act and Its Importance?


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An image depicting a miniature house with a gavel beside it, symbolizing the legal aspects of real estate regulation under the RERA Act.


The Indian real estate sector, renowned for its remarkable growth, dynamism, and complexity, has consistently been a significant contributor to the country’s economy. However, conversely, this sector was also infamous for its lack of transparency and regulation, leading to numerous challenges for stakeholders, particularly homebuyers. Consequently, the landscape experienced a transformative change with the introduction of the Real Estate (Regulation and Development) Act, 2016, commonly known as the RERA Act. This comprehensive legislation aimed, therefore, to overhaul the real estate sector by introducing transparency, accountability, and efficiency, marking a paradigm shift in property dealings.

What is RERA Act?

The RERA Act (Real Estate (Regulation and Development) Act, 2016) in India aims to regulate the real estate sector, enhance transparency, and protect homebuyers’ interests. It mandates project registration, ensures transparency in project marketing, protects buyer investment, imposes penalties for project delays, and establishes a grievance redressal mechanism. This act significantly boosts buyer confidence and promotes fair practices in real estate transactions.

The Genesis of the RERA Act

Before delving into the specifics of the RERA Act, it’s essential to understand the context that necessitated its introduction. Prior to RERA, the real estate sector in India was largely unregulated. Homebuyers often found themselves at the mercy of developers with delayed project deliveries, diversion of funds, and changes in project plans without consent. There was a dire need for a regulatory body to protect consumer interests and ensure fair play in the real estate transactions.

In response to these challenges, the Government of India enacted the RERA Act on May 1, 2016, which came into full force on May 1, 2017. This act was a landmark decision to bring about the much-needed transparency and set accountability standards in the real estate sector.

Key Provisions of the RERA Act

The RERA Act brought several revolutionary changes to how the real estate industry operates in India. Here are some of the key provisions:

Registration of Projects and Agents: Under RERA, all commercial and residential real estate projects must register with the RERA authority. This is mandatory for projects where the land exceeds 500 square meters or includes more than eight apartments. Real estate agents are also required to undergo a registration process. This ensures that only legitimate and serious players operate in the market.

Transparency in Project Marketing: Developers are required to provide detailed information about their projects on the RERA website. This includes project plan, layout, government approvals, land title status, subcontractors involved, schedule for completion, and other essential details.

Protection of Buyers’ Interest: The RERA Act mandates that 70% of the buyers’ funds be deposited in a separate escrow account. This money can only be used for the construction of the project, preventing fund diversion.

Penalties for Delay in Project Completion: If there is a delay in the project completion, developers are liable to pay the same interest as the EMI being paid by the consumer to the bank.

Grievance Redressal Mechanism: RERA establishes a mechanism for the speedy redressal of grievances. Buyers can approach the RERA authority for any issues faced during their real estate transaction.

The Importance of the RERA Act

The RERA Act has significantly impacted the Indian real estate sector. Its importance can be understood from various perspectives:

Increased Transparency: The requirement for project registration and the necessity to provide detailed project information have enhanced transparency. Buyers are now more informed and can make better investment decisions.

Enhanced Buyer Confidence: With the safeguarding of buyers’ investment and an effective grievance redressal system, there is a renewed confidence among consumers. This is crucial for the long-term growth of the sector.

Promotion of Fair Practices: The RERA Act promotes ethical and fair practices in the real estate sector. This helps in reducing frauds and malpractices, ensuring a more stable and reliable market.

Streamlining the Sector: By bringing in standardization and reducing the risk of delays and frauds, the RERA Act has streamlined operations in the real estate sector, making it more efficient and investor-friendly.

Challenges and the Way Forward

While the RERA Act has been a game-changer, its implementation across states has been varied. Some states have been proactive and effective in implementing the act, while others have lagged. The need of the hour is for uniform and stringent implementation across the country.

Furthermore, as the real estate sector evolves, there might be a need for amendments in the RERA Act to address new challenges and market dynamics. Continuous monitoring and adapting to changes are essential for the act to remain relevant and effective.


The introduction of the RERA Act marked a new era in the Indian real estate sector. It brought about much-needed regulatory oversight, protecting buyers and ensuring fair play. While there are challenges in its implementation, the importance of the RERA Act in transforming the real estate landscape cannot be overstated. It stands as a testament to the government’s commitment to creating a more transparent, accountable, and consumer-friendly real estate market. As we move forward, the act’s role in shaping a more robust and reliable real estate sector will be crucial.

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Aayush Thakur
Aayush Thakur

Recognized as one of Gurgaon's elite real estate consultants, Ayush Thakur has transformed the cityscape with insightful strategies, unparalleled expertise, and a keen sense of market dynamics. A trusted name in property advisory.

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