RERA, short for the Real Estate (Regulation and Development) Act, 2016, is the Indian law that regulates the real estate sector by requiring projects and agents to register, mandating transparent disclosure and setting up state-level regulators to protect home buyers and promote orderly growth. Parliament passed the Act in March 2016, and it became fully operational across the country by May 2017.
Before RERA, buyers of flats and plots in India relied mainly on consumer courts and civil suits, and the sector had no dedicated regulator. This guide explains how the real estate sector works, what RERA requires of developers and agents, how the 70% escrow rule and the carpet-area definition protect buyers, and how complaints and appeals are handled. It was last reviewed on 13 October 2026.
| Attribute | Detail |
|---|---|
| Full name | Real Estate (Regulation and Development) Act, 2016 (RERA) |
| Passed by Parliament | March 2016 |
| Came into force | Partly on 1 May 2016 and fully on 1 May 2017 |
| Administering ministry | Ministry of Housing and Urban Affairs (MoHUA) |
| Regulators | State and Union Territory Real Estate Regulatory Authorities (RERAs) |
| Appeal body | Real Estate Appellate Tribunal in each state or Union Territory |
| Key mandates | Project and agent registration, 70% escrow account, carpet-area sales, five-year structural defect liability |
| Upheld by | Bombay High Court (2017) and the Supreme Court in Newtech Promoters v State of Uttar Pradesh (2021) |
Key Takeaways
- The Real Estate (Regulation and Development) Act, 2016, commonly called RERA, created a statutory regulator for real estate in every Indian state and Union Territory and became fully operational on 1 May 2017.
- Under RERA, a promoter must register a project with the state Real Estate Regulatory Authority before advertising, marketing or selling units, and real estate agents must register too.
- RERA requires promoters to deposit at least 70% of the money received from buyers for a project into a separate escrow account, to be used only for that project’s construction and land cost.
- RERA defines carpet area as the net usable floor area of an apartment, excluding external walls, and requires flats to be sold on that basis rather than on a vague super built-up area.
- A promoter is liable to repair structural defects reported within five years of handing over possession, and a delayed project earns the buyer interest or a refund.
- Disputes under RERA go first to the state authority or an adjudicating officer, then to the Real Estate Appellate Tribunal, and finally to the High Court.
What is the real estate sector in India?
The real estate sector in India is the industry that develops, sells, leases and manages land and buildings, including housing, offices, retail space, warehouses and hospitality property. It is organised into residential, commercial, retail, industrial and land-development segments, and it is shaped by builders and developers, buyers, banks and housing finance companies, brokers and local authorities.
The sector is among the largest contributors to economic activity and employment in India. It is often described as the second-largest source of employment after agriculture because construction draws on a large number of skilled and unskilled workers, and it has strong links with steel, cement, paints, tiles, fittings and financial services. Because housing is the biggest purchase a family ever makes, the sector also has high social importance.
Why did India need a real estate regulator?
India needed a real estate regulator because home buyers had few effective remedies against delays, diverted funds, misleading advertisements and unclear area claims before 2016. Buyers often paid large advance amounts for projects that were unfinished or had changed plans, and the sector had no single authority to supervise developers.
The common problems before RERA included the following.
- Delayed possession: projects frequently ran years behind schedule with no compensation formula.
- Fund diversion: money collected from buyers of one project was used for land purchases or other projects.
- Opaque area claims: developers sold on “super built-up area”, which included common areas of varying size.
- One-sided agreements: builder-buyer agreements carried penalties for the buyer but few for the builder.
- Weak enforcement: remedies were through consumer forums or civil courts, which were slow.
Some states had earlier laws, such as Maharashtra’s Ownership Flats Act, 1963 and the Housing (Regulation and Development) Act, 2012 passed in Maharashtra, but the framework was uneven. The central RERA brought one national standard.
What does the RERA Act, 2016 do?
The RERA Act, 2016 establishes a regulator in each state, makes registration of projects and agents mandatory, standardises disclosure and sets obligations for promoters and buyers alike. Its stated objectives are to protect the interests of consumers, promote transparency, accountability and efficiency, and encourage investment in the sector.
The Act contains provisions on registration, duties of promoters, rights of allottees, the establishment and powers of the regulatory authorities, the appellate tribunal, offences and penalties. It also provides for a Central Advisory Council to advise the Central Government on policy matters.
The Ministry of Housing and Urban Affairs administers the Act, but state and Union Territory governments frame their own rules and set up their own authorities. This federal design led to differences in rules between states, even though the core obligations are the same.
Which real estate projects must register under RERA?
Under RERA, a real estate project must be registered if the land proposed to be developed exceeds 500 square metres or the number of apartments exceeds eight, including all phases. Registration must be done with the state Real Estate Regulatory Authority before the promoter advertises, books, sells or invites investment in the project.
Some categories are exempt. These include small projects below the thresholds, projects that already had a completion or occupancy certificate when the Act commenced, and renovation, repair or redevelopment work that does not involve marketing, advertising or sale of new units.
During registration the promoter must disclose a range of information.
- Details of the promoter and past projects
- Sanctioned plans, layout and approvals
- Land title and encumbrances
- The project schedule with the date of completion
- Number and type of apartments, and the carpet area of each
- Details of the bank account maintained for the project
Each registered project receives a RERA registration number, which must appear in advertisements and agreements, and promoters have to update progress on the authority’s website regularly. Buyers can use this number to check the project’s status.
What is the 70% escrow account rule under RERA?
The 70% escrow account rule under RERA requires a promoter to deposit seventy per cent of the amounts collected from buyers for a project into a separate bank account maintained for that project. The money may be used only to cover the cost of construction and the land cost of that project.
The rule stops promoters from diverting buyer funds to other ventures, which was one of the main causes of stalled projects. Withdrawals from the account must match the stage of construction, and the withdrawal needs certification from an engineer, an architect and a chartered accountant. The promoter must also get the account’s accounts audited and file the results with the authority.
The balance thirty per cent may be used by the promoter for other purposes. The rule does not increase project costs; it makes the flow of money traceable.
What is carpet area under RERA?
Under RERA, carpet area is the net usable floor area of an apartment, excluding the area covered by external walls, areas under services shafts, exclusive balcony or verandah areas and exclusive open terrace areas, but including the area covered by internal partition walls. Promoters must quote the price of an apartment on the basis of carpet area.
This definition replaced the practice of selling on super built-up or saleable area, which blended the usable flat with a share of corridors, lifts, lobbies and amenities. The carpet-area rule lets buyers compare prices per square foot fairly across projects. A balcony or open terrace can still be sold, but its area has to be shown separately.
| Term | Meaning |
|---|---|
| Carpet area | Net usable area of the flat inside, including internal partition walls |
| Built-up area | Carpet area plus thickness of walls and exclusive balcony or terrace areas (a common industry term) |
| Super built-up area | Built-up area plus a proportionate share of common areas such as lobbies, lifts and clubhouse (a common industry term) |
How does RERA protect home buyers?
RERA protects home buyers by making builders accountable for what they promise on timelines, quality, area, money and information. The Act turns many sales promises into legally enforceable obligations and gives buyers, called allottees, a clear route to remedies.
Key buyer protections
- Truthful advertising: a promoter is responsible for the accuracy of advertisements, and a buyer who suffers loss from a false statement can claim compensation.
- Cap on advance: a promoter cannot take more than ten per cent of the cost of the unit as an advance or application fee without first signing a registered agreement for sale.
- No unilateral changes: major changes to sanctioned plans, layout or specifications need the consent of a specified share of allottees.
- Delay compensation: if possession is delayed, the buyer can either stay in the project and receive interest for every month of delay, or withdraw and receive a refund with interest and compensation. In many states’ rules the rate is linked to the State Bank of India’s highest marginal cost of funds based lending rate plus two per cent, and buyers pay the same rate on their own delays.
- Structural defect liability: the promoter must fix structural defects or poor workmanship reported within five years of possession, within a stipulated period and without charge.
- Title and approvals: the promoter must disclose title and sanctions, and must form an association of allottees and hand over common areas.
- Clear paperwork: a standard agreement for sale format is prescribed, so one-sided clauses are limited.
Who must register as a real estate agent under RERA?
Every real estate agent who helps buyers or sellers transact in a plot, apartment or building within a RERA-registered project must register with the state authority. Agents, brokers and similar intermediaries cannot facilitate sales in registered projects unless they hold a valid registration number.
Registered agents have specific duties. They must not facilitate the sale of unregistered projects, must maintain and produce books of accounts and records, must not engage in unfair practices such as misleading statements, and must help buyers with the documents the promoter is required to provide. Registration is valid for a fixed period and can be renewed.
What are the penalties under RERA?
The penalties under RERA are financial penalties, which can reach a share of the estimated project cost, and imprisonment for serious non-compliance with orders. The Act sets penalties as percentages of the project’s estimated cost so that they remain meaningful for large developments.
| Violation | Consequence under RERA |
|---|---|
| Developing or advertising a project without registration | Penalty that may extend to ten per cent of the estimated project cost |
| Giving false information or contravening the registration conditions | Penalty that may extend to five per cent of the estimated project cost |
| Agent violating Act provisions | Penalty for each day of default, with a cap linked to the price of the unit |
| Failing to comply with the authority’s orders | Further penalty, calculated per day of default up to a percentage of project cost |
| Failing to comply with the Appellate Tribunal’s orders | Imprisonment up to three years or a fine up to a further ten per cent of project cost, or both |
The authority may also revoke a registration for serious violations, take over the project in appropriate cases and arrange for its completion through the association of allottees.
How do complaints and appeals work under RERA?
Complaints under RERA are filed with the state Real Estate Regulatory Authority or its adjudicating officer, and orders can be appealed to the Real Estate Appellate Tribunal and then to the High Court. A buyer may file a complaint for matters such as delay in possession, violation of the agreement or false advertisement, and the process is meant to be quicker than a civil suit.
Steps in the grievance process
- Complaint: the buyer files a complaint online or in writing with the regulatory authority; matters about compensation and interest are heard by the adjudicating officer.
- Hearing and order: the authority hears both sides and issues directions, penalties or refund orders.
- Appeal: a party unhappy with the order may appeal to the Real Estate Appellate Tribunal, usually after depositing the required amount if the promoter is appealing.
- High Court: a further appeal on a question of law lies before the High Court.
Civil courts do not have jurisdiction over matters the authority or tribunal can decide, though some consumer remedies may still be available in parallel.
Is RERA legally valid and how has it been tested?
Yes, RERA has been upheld by the courts as constitutionally valid. The Bombay High Court upheld the Act in 2017, and in 2021 the Supreme Court, in Newtech Promoters and Developers v State of Uttar Pradesh, upheld the Act’s validity and held that the buyer’s right to a refund with interest for delayed possession under RERA is unconditional.
These judgments strengthened the authority of the state regulators. They also clarified that RERA applies to ongoing projects that had not received a completion certificate when it came into force.
Bottom Line
RERA changed the real estate sector in India by replacing informal practice with registration, disclosure, escrow discipline and a dedicated grievance system. It does not remove every risk, because enforcement still varies across states, but it gives home buyers clearer rights than they had before 2016.
Frequently Asked Questions
What is RERA in India?
RERA is the Real Estate (Regulation and Development) Act, 2016, a central law that regulates the real estate sector. It requires projects and agents to register with state regulators and sets duties for promoters. It became fully operational on 1 May 2017.
What is the 70% rule in RERA?
The 70% rule requires a promoter to deposit seventy per cent of the money collected from buyers for a project into a separate escrow account. The funds can be used only for construction and land cost of that project. This prevents the diversion of buyer money to other ventures.
What is carpet area under RERA?
Carpet area is the net usable floor area of an apartment, excluding external walls, services shafts, exclusive balcony or verandah and exclusive open terrace, but including internal partition walls. RERA requires apartments to be sold on this basis. This makes comparing prices between projects more transparent.
Which projects need RERA registration?
A project needs RERA registration if the land exceeds 500 square metres or it has more than eight apartments. Registration must be done before advertising or selling. Projects with a completion certificate at the time the Act began, and simple repair or renovation work, are exempt.
What can a buyer do if possession is delayed?
A buyer can choose to stay in the project and receive interest for each month of delay, or withdraw and claim a refund with interest. A complaint can be filed with the state Real Estate Regulatory Authority. Appeals go to the Real Estate Appellate Tribunal.
How long is a builder liable for defects under RERA?
A builder is liable for structural defects and poor workmanship reported within five years of handing over possession. The promoter must rectify the defect within a stipulated period without charge to the buyer. If the defect is not fixed, the buyer can claim compensation.
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