RERA Rules and Regulations That Benefit Builders but Buyers May Not Know

The Real Estate (Regulation and Development) Act, 2016 (RERA) was introduced to bring transparency, accountability, and efficiency to the real estate sector in India. While it is widely acknowledged as a pro-buyer legislation, RERA also contains provisions that benefit builders, some of which buyers may not be fully aware of. Understanding these rules can help buyers navigate their property purchase with greater awareness and insight.

1. Grace Period for Builders to Rectify Defects

RERA mandates that builders rectify any structural defects reported by buyers within five years of possession. However, buyers may not realize that:

• Builders are given a reasonable timeframe to fix defects before legal action can be initiated.
• Not all issues qualify as ‘structural defects’ under RERA, which may lead to disputes about what is covered.
• Builders can challenge defect claims if they believe the problem arose due to buyer negligence or improper use.

2. Permission for Project Delays Due to Force Majeure

While RERA penalizes developers for delays, it also protects them in certain situations:

• If delays occur due to ‘force majeure’ events (natural disasters, government actions, or unforeseen legal hurdles), builders can apply for an extension.
• This means that in some cases, buyers may have to wait longer than expected for possession without compensation.
• The interpretation of ‘force majeure’ is often in favor of builders, making it challenging for buyers to claim delays as builder negligence.

3. Flexible Fund Management

RERA mandates that builders deposit 70% of the project funds into a dedicated escrow account to prevent fund diversion. However, buyers may not realize that:

• Builders can withdraw funds in phases based on project completion and certification by an engineer and a chartered accountant.
• This still provides some flexibility to developers in managing their finances.
• Builders can structure their withdrawals strategically, prioritizing certain projects over others despite legal obligations.

4. Limited Refund Obligations for Cancellations by Buyers

While buyers can seek refunds for project delays, RERA also protects builders in cases where the buyer defaults:

• If a buyer cancels a booking voluntarily, the builder can deduct a cancellation charge.
• Refund timelines for voluntary cancellations are not as stringent as those for builder delays.
• Builders often structure agreements to make cancellations financially burdensome for buyers, discouraging exit from contracts.

5. Registration of Only Large Projects

RERA applies primarily to large-scale developments, with exemptions for smaller projects:

• Builders do not need to register projects that cover less than 500 square meters or have fewer than eight apartments.
• This means that many small-scale projects may operate outside RERA regulations, limiting buyer protection in such cases.
• Builders working on smaller projects may not have to disclose project details or follow RERA guidelines, reducing accountability.

6. Developers Can Modify Project Plans with Approval

RERA ensures that buyers receive projects as promised, but it also allows changes under certain conditions:

• Minor changes in layout can be made without buyer consent.
• Major modifications require approval from two-thirds of the buyers, but builders often have ways to influence this process.
• Builders may use proxy buyers or leverage their influence to secure the necessary approvals for modifications.

7. Exemption from Liability for Third-Party Delays

Builders are responsible for delivering projects on time, but RERA acknowledges that some delays may be beyond their control:

• If approvals from government bodies or legal permissions take longer than expected, builders can seek deadline extensions.
• This reduces their liability and shifts the burden of delays to regulatory bottlenecks.
• Builders can sometimes anticipate these delays and factor them into project timelines, reducing penalty risks.

8. Advertising Benefits for Registered Projects

While RERA restricts misleading advertisements, it also gives registered developers an advantage:

• Only RERA-registered projects can be legally advertised and marketed.
• This creates a level playing field for compliant builders while limiting the marketing of smaller, unregulated developments.
• Builders can leverage RERA certification as a marketing tool to boost buyer confidence, even when issues may still exist.

9. Limited Scope for Buyers to Exit Agreements

Once a buyer signs an agreement with a builder, their exit options are restricted:

• Buyers cannot easily back out of agreements without financial penalties.
• This ensures builders have financial security and stability in sales transactions.
• Some agreements include clauses that further limit the ability of buyers to contest changes or delays.

10. Builders Can Appeal RERA Rulings

While RERA provides a grievance redressal mechanism for buyers, builders also have strong legal recourse:

• Developers can appeal RERA rulings to the Real Estate Appellate Tribunal if they disagree with a decision.
• This allows them to contest penalties or unfavorable judgments.
• The appeal process can be lengthy, making it difficult for buyers to get timely relief.

Conclusion

While RERA is primarily seen as a consumer-friendly law, it also contains several provisions that work in favor of builders. Many of these regulations provide builders with opportunities to manage risks, finances, and project timelines effectively. Understanding these aspects helps buyers approach real estate transactions with realistic expectations and greater preparedness. It is crucial for buyers to read agreements carefully, stay informed about RERA regulations, and seek legal advice if needed to safeguard their interests. Being aware of both buyer and builder advantages under RERA ensures a more balanced and fair real estate transaction.