Benedicta Baidooa 5th-year Law Student specializing in Corporate Law at the School of law, Lovely Professional University has written this blog explaining ” Drawbacks of RERA Act 2016″
RERA was created to provide order to India’s formerly unorganized and unregulated real estate market. The number of tussles and disagreements between homeowners and developers was on the rise in the absence of an effective regulator.
Furthermore, the lack of uniformity in regulations across different states has resulted in a fragmented and confusing regulatory framework, making it difficult for developers and investors to navigate the system. In addition, corruption and bureaucratic delays have been major issues in the land sector. Henceforth, leading to a lack of transparency and accountability.
Despite these challenges, the Indian government has taken several steps in recent years to streamline and regulate the land sector. The Real Estate (Regulation and Development) Act (RERA) was introduced in 2016, which seeks to protect the interests of homebuyers and promote transparency and accountability in the real estate sector. In addition, several state-level authorities have been merged into a single authority to regulate the land sector.
However, there is still a long way to go in terms of creating a more investor-friendly and transparent regulatory framework for the land sector in India. The implementation of RERA and other regulatory reforms needs to be strengthened, and corruption and bureaucratic delays must be further addressed. With the right policies and regulatory framework in place, the land sector in India has the potential to drive economic growth and development in the country.
Drawbacks of the RERA
The Real Estate (Regulation and Development) Act, commonly known as RERA, is legislation passed by the Indian government in 2016 with the aim of regulating the real estate sector and protecting the interests of homebuyers. While RERA has brought many positive changes and benefits for homebuyers, it also has some drawbacks. Here are some of the main drawbacks of RERA:
RERA applies only to new projects and does not cover properties that have already been completed or are under construction. This means that homebuyers who have already invested in a property before RERA came into effect do not get the benefit of its provisions.
While RERA has provisions for penalizing developers who do not comply with its regulations. Then also its enforcement has been slow and inadequate in many cases. This has led to situations where developers have flouted RERA regulations with impunity, causing losses to homebuyers.
While RERA mandates that developers complete projects on time, there have been many cases where projects have been delayed beyond the stipulated timelines. While RERA does provide compensation to homebuyers in such cases, the compensation amounts are often inadequate. Moreover, the process of claiming compensation can be long and cumbersome.
Limited powers of the authority:
RERA has an authority in each state to oversee the implementation of the act. The authority has limited powers to take action against developers who violate its provisions. This has led to situations where developers continue to flout regulations and avoid penalties.
RERA has increased compliance costs for developers. It has ultimately led to an increase in the cost of properties for homebuyers. This has made homes less affordable for many people, especially those from lower-income groups.
High compliance costs:
One of the major drawbacks of RERA is that it has increased compliance costs for developers, which in turn increases the cost of projects. Developers are required to register their projects with the authority, maintain a separate escrow account, and provide regular updates on the progress of the project.
Delayed project approvals:
Another drawback of RERA is the approval process for new projects. As of now, it can take a long time, which can delay the launch of projects. This is because developers have to obtain various clearances from different authorities before they can register their projects with RERA.
RERA only covers the residential real estate sector and does not cover commercial real estate. This means that commercial real estate projects are not subject to the same regulations as residential projects.
Lack of uniformity:
RERA is a state-level regulation, and each state has its own rules and regulations. This can create confusion for developers who operate in multiple states. As they need to comply with different regulations in each state.
Limited protection for buyers:
While RERA protects buyers against fraudulent practices, there are some limitations. For example, RERA only applies to projects that are registered with the authority, which means that buyers of unregistered projects are not protected.
Slow dispute resolution:
RERA provides for the establishment of a Real Estate Regulatory Authority. It also establishes an Appellate Tribunal to resolve disputes between buyers and developers. However, the dispute resolution process can be slow, which can be frustrating for buyers who are seeking a quick resolution to their complaints.
Overall, while RERA has brought many positive changes to the real estate sector, there are still some challenges that need to be addressed to ensure that its benefits are fully realized by homebuyers.
Streamline approval processes:
To avoid delays in project approvals, the government should consider streamlining the approval process by creating a single-window clearance mechanism. It will help developers to obtain all the necessary approvals from various authorities in a time-bound manner.
The government should launch awareness campaigns to educate buyers, developers, and other stakeholders about RERA and its provisions. This can help prevent fraudulent practices and promote transparency in the real estate sector.
The government should consider extending the jurisdiction of RERA to cover the commercial real estate sector as well. This can help bring greater transparency and accountability to the sector.
To ensure uniform implementation of RERA across all states, the government should encourage states to adopt a common set of rules and regulations.
Improve dispute resolution:
The government should work towards improving the dispute resolution mechanism under RERA. Setting up fast-track courts or tribunals to handle disputes related to real estate projects can be done to address this issue.
To reduce compliance costs for developers, the government should consider simplifying the compliance process. Reducing the number of compliance requirements or introducing online compliance mechanisms can be done to address this issue.
Reducing the number of compliance requirements or introducing online compliance mechanisms can be done to address this issue.
To ensure effective implementation, the government needs to streamline approval processes, increase awareness, extend jurisdiction, improve dispute resolution, and simplify compliance. Overall, while the act has the potential to transform the real estate sector in India, addressing these drawbacks will be crucial in achieving its objectives.
For a detailed article on Relation between RERA & Real Estate Agents: Click here
 Drawbacks of RERA Act, 2016, available at: http://lawzilla.in/uncategorized/drawbacks-and-shortcomings-of-real-estate-regulation-and-development-act-2016/ (Visited on, March 28, 2023)
 Limitations of RERA Act, available at: https://taxguru.in/corporate-law/real-estate-regulation-development-act-2016.html (Visited on, March 28, 2023)
 Suggestions and Conclusion, available at: http://lawzilla.in/uncategorized/drawbacks-and-shortcomings-of-real-estate-regulation-and-development-act-2016/ (Visited on, March 28, 2023)
 RERA Act, available at: https://www.legalserviceindia.com/legal/article-4003-rera-a-boon-or-bane-for-real-estate-sector.html (Visited on, March 28, 2023)