Promoter’s Duties Under RERA: From Start to Finish

Introduction

The Real Estate (Regulation and Development) Act, 2016 (RERA), is a play a key role in promoting trust, accountability, and transparency. The of main goal of RERA is to protect homebuyers and encourage responsible development. The strict duties placed on real estate marketers are at the core of this regulatory structure. From the early stage of information disclosure and project registration to the critical stages like construction, timely completion of the project and, eventually, property transfer, these responsibilities cover complete real estate project lifecycle. This blog examines the all the responsibilities that the promoters must follow under RERA, and how these mandates safeguard consumers and help to make it more regulated and reliable real estate market in India.

Information Disclosure and Project Registration: The Basis of Transparency (Section 11)

RERA's main focus is on transparency, and it is mainly attained by the strict standards for project registration which the promoter’s need to fully disclose all relevant information about the project.  These responsibilities are carefully laid out in Section 11 of the RERA Act of 2016, ensuring that buyers have access to all verified [1].

Mandatory Project Registration and Webpage Maintenance

All real estate developments must register with their respective State Real Estate Regulatory Authority in accordance with RERA. The first step towards responsibility, this regulation is more than just a formality as it wider scope the accountability of the promoters. Promoters are given login IDs to manage their project on the official website of the RERA authority after completing the registration process[2]. Important project details are publicly available on this page, which is accessible to both current allottees and potential purchasers. Usually every three months, promoters are required to update this page with a variety of information, such as:

1.Registration information: The unique registration number granted by the authority.

2.Project details: The number and types of plots or apartments booked, as well as the number of garages booked.

3.Status of approval: A clear and honest record of the approvals received and those pending from the several relevant agencies.

4.Construction progress: The present state of a project's completion, often requiring regular progress updates or photographic proof.

5.Additional pertinent information: Any other records or data that may be required under the state RERA regulations in question².

By keeping homebuyers updated on the project's progress, this ongoing disclosure system helps to reduce the information asymmetry that has historically afflicted the real estate industry.

Disclosure in Advertisements and Prospectus

RERA requires promoters to display the project's registration number and the address of the RERA website in all their advertisements and brochures to further increase transparency². This led to less chance of deceiving the homebuyer, as promoters earlier used to use make false promises. This enables the purchasers to independently confirm the project's authenticity and all the details of the project straight from the official RERA portal. If any deposit or advance payment is obtained through false or misleading information in advertisement this can lead to heavy penalties and compensation as promoters are responsible under Section 12 of the Act¹.

[Image Sources: Shutterstock]

Information at Booking and Allotment Stage

Promoters have important responsibilities right from the starting stages of booking and allotment. At this point, the promoters must give the homebuyers all key information and documents, such as:

Sanctioned plans, layout plans, and specifications: The project site or any other specified area must have these documents on display after being approved by the concerned authority². This ensures that the purchasers/buyer are well informed about the design and specifications of their units as well as the project.

Stage-wise time schedule: There must be a deadline for the project's completion that includes plans for basic utilities like electricity, water, and waste disposal². For homebuyers to plan their finances and future, the promoter must follow this set timeframe; and any delay without any explanation may result in legal action.

Together, these disclosure rules ensure that buyers receive accurate, timely and verified information from the promoter, this builds greater level of transparency, trust, and accountability in the real estate sector. These norms build a strong framework which protect homebuyer interest.

Respect for Project Specifications and Approved Plans (Section 14)

Beyond the initial disclosures, the promoter's need to follow with the approved plans and project specifications. This guarantees that the homeowner receives what was promised, Section 14 of the RERA Act requires the promoter to adherence with the authorised designs and the layouts¹.

Strict Compliance and Consent for Changes

Promoters must build the project exactly as per the approved plan, design and specifications which has been authorised by the concerned authorities. This clause forbids any unapproved project modifications that might have a negative effect on homebuyer’s unit. After being revealed to the allottee, any modifications to the approved drawings or design are subject to stringent requirements which need to be followed:

Minor Additions/Alterations: Individual allottee agreement can have minor changes, which are generally characterised as those which do not exceed 10% of the apartment's total carpet area².

Major Changes: Any major changes, like those exceeding more than 10% of the total carpet area, require the prior written consent of at least two-thirds of the project's allottees². This system empowers homebuyers because promoter need common consent, which also stops promoters from unilaterally changing the project's core elements which was earlier promised to them.

Liability for Defects and Repair

The RERA clause on defect liability is one of the most important clauses for safeguarding the homebuyers. According to Section 14(3), for five years from the date of giving over possession to the allottee, the promoter is still responsible for any structural flaws as well as any other flaws in the work of contractor, quality, or service delivery¹. If the promoter is made aware of such flaws during this time frame, they must address it in 30 days and fix them without any additional cost on the allottee². This clause holds promoters responsible even after the possession of the unit to its rightful owner, this ensures the property's long-term quality and structural integrity.

Financial Discipline and Accountability (Section 4 & 13)

To stop money from being diverted to another project and guarantee that project finances are handled openly, RERA establishes strict financial restrictions on to the promoters. Although there isn't any specific section that addresses financial discipline, the Act does contain some elements of it, especially when it comes to project registration and accepting advance payments.

Separate Bank Account and Fund Utilisation

Promoters must register a different bank account for each real estate project. One important requirement is that 70% of the money received from the allottees for the real estate project needs to be credited in this account². Only the development and construction of that project, including the cost of land, may be funded with this money. By preventing promoters from using cash from one project to finance another, this type of malpractice is stopped with this regulation which protects homebuyers' investments and guarantees on-time completion.

Restrictions on Advance Payments

Promoters are not allowed to take more than 10% of the price of the flat, plot or building as advance payment without first signing a formal sale agreement with the buyer/purchaser, according to Section 13 of the RERA Act¹. This clause prevents homebuyers from making sizeable down payments in the absence of formal sale agreement which need to be signed contract. The sale agreement itself needs to be registered and should contain all the necessary information which buyer need to know beforehand which include the date of possession, the payment schedule, and the interest rates that the promoter (in the event of a delay) and the allottee (in the event of a default) must pay².

This ensures that financial transactions between homebuyers and promoters are accountable and transparent so that no party have an unfair advantage over the other.

Timely Completion and Compensation for Delays (Section 18)

From the viewpoint of a homebuyer, one of the most reassuring parts of the RERA Act is that it has clear focus on timely project completion. No homebuyer wants to invest their hard-earned money and be left waiting endlessly. That’s why Section 18 of the RERA Act is so important—as it holds the promoter accountable for any delays in the project¹. If the project isn’t completed on time, the promoter must compensate the buyer according to this section. This means the burden of delay no longer falls on the homebuyer, offering a sense of security and fairness for the buyer.

Obligation for Timely Possession

Under the RERA Act, promoters are legally required to complete the project and hand over the possession of the unit by the date which was mentioned in the sale deed. A key component of RERA is this commitment to a fixed timeline, which was helps to reduce the widespread delays that were common in the years before the RERA Act. Since homeowners often plan their lives and finances around the possession date, this Act acknowledges that delays can cause them great financial loss and emotional pain.

Rights of Allottees in Case of Delay

The allottee has two main choices, if the promoter is unable to finish or turn over the flat, plot or building by the deadline which was mentioned in the sale agreement:

Absence from the project: The grantee is free to leave the project at any time. In this case, the promoter is responsible for returning the full amount that was paid by the allottee for that unit, plus interest at the prescribed rate which was mentioned in the sale deed². This interest rate serves acts as a disincentivise for the promotor against delays because it is usually greater than the going bank rates.

Project continuation: The allottee is entitled to get the interest for each month of delay until the transfer of possession if they decide not to leave the project². This ensures that the homebuyer will receive compensation for the major financial inconvenience that they have faced because of the delay, even if they choose to wait for the project to be finished, they won't be at loss.

Homebuyers now have a clear legal remedy and financial protection against any project delays thanks to these rules which they can avail because of it, homebuyers have greatly increased their power. Promoters are strongly encouraged to comply with their mentioned timeframe because of threat of large interest payouts that they must make if they fail to do so.

Title Transfer and Additional Post-Completion Obligations (Sections 16 and 17)

RERA Act doesn’t only cover the construction phase of the project—it also looks after the interests of homebuyers even after the project is completed. Once the building is ready, it is the promoter responsibility to legally transfer the title of the property to the rightful owner of the unit. They are also responsible for maintaining essential services like water, electricity, and sanitation until the all the residents have their possession. Additionally, if any structural defects or quality issues arise within five years of possession, the promoter must fix them at no extra cost. These post-completion duties ensure that homebuyers are protected for the long run, not just during the purchase

Execution of Conveyance Deed and Physical Possession

Within three months of the occupancy certificate must be issued, or within three months of 51% of the allottees joining the association, which comes first, the promoter is required to sign the registered conveyance deed in favour of the allotee under Section 17 of the RERA Act^1. This guarantees that the homebuyer will immediately get a formal transfer of the property's legal ownership. The promoter is also in charge of transferring the unit's actual physical possession which includes all required documents, in addition to the conveyance deed.

Insurance Obligations

The promoter is required under Section 16 of the RERA Act to have insurance for the project, which covers both the land's title and the real estate project's construction¹. This gives a financial protection against any unexpected situation which may derail the project. To ensure security for the property and its occupants, the benefits of this insurance must also be transferred to the allottee’s when the project get completeled².

Formation of Allottees' Association and Maintenance of Services

Promoters are required to assist the allottees in forming an association, society, or cooperative society. This association is essential to the management of the project after the completion and when the promoter have given possession to the allotee’s this is important to ensure who will take care of the common areas and other common facilities. Additionally, until the maintenance duty is transferred to the association, promoters must oversee supplying and maintaining basic services including trash management, electricity, and water supply². This ensures a seamless transition between the parties on the project's ongoing maintenance.

Case Laws and Recent Developments

Since RERA Act come into force, many important court decisions have come which helped in make this act clearer. These cases have strengthened the legal framework by not accepting promoter's negligence.

A few key judgements stand out for setting the precedent:

1.M/s. Newtech Promoters and Developers Pvt. Ltd. v. State of U.P. and Ors. (2021): This landmark judgment in the Supreme Court upheld the constitutional validity of RERA Act, as it reinforced the retrospective application of certain provisions, particularly for the ongoing projects. The Court emphasized that RERA aims to protect the homebuyers from pre-existing issues and ensure transparency in the real estate sector[3].

2.Imperia Structures Ltd. v. Anil Patni and Anr. (2020): The Supreme Court, in this case, clarified that remedies under RERA are in addition to, and not in relaxation of, remedies available under other consumer protection laws. This means homebuyers can approach both RERA and consumer forums for redressal, providing them with different way for justice[4].

3.Ghanshyam Sarda v. Leecon Buildwell Pvt. Ltd. (2022): This case was before the National Consumer Disputes Redressal Commission (NCDRC) reconfirmed that promoter's is liable for project delays and the entitled of homebuyer will be compensated with interest, even if the delay was due to reasons beyond the promoter's direct control. This emphasis the strict liability principle under RERA[5].

These judgments, and many others shows the commitment of the judges to uphold the spirit of RERA and ensuring that promoters are held accountable for their obligations. They serve as a strong action against non-compliance and provide a strong legal framework for homebuyers seeking redressal.

The Real Estate (Regulation and Development) Act, 2016 has created unmatched accountability and trust in the Indian real estate market. It has completely transformed the industry from once being regarded as the highly deceptive. Now homebuyers have been greatly empowered by the heavy duties imposed on promoters, ranging from careful project information disclosure and commitment to approved plans to guaranteeing early completion and offering post-possession support. RERA has changed the buyer-seller dynamic from one that was primarily unregulated and frequently exploitative to one that is regulated by precise guidelines and strong redressal procedures.

The Act has brought much-needed discipline to the real estate industry, which has been strengthened by an increasing number of court rulings. Promoters are now required to conduct operations with more care, financial restraint, and a sincere dedication to their contractual duties. RERA has created a solid basis for a more developed, well-organised, and customer-centric real estate industry, even though there are still many issues, namely with the uniform application throughout all states and the speedy dispute settlement. Its ongoing, implementation will be essential to gaining long-term confidence and attracting more capital to this important sector of the Indian economy.

Author: Manav Gulati, in case of any queries please contact/write back to us via email to chhavi@khuranaandkhurana.com or at  Khurana & Khurana, Advocates and IP Attorney.

[1] Real Estate (Regulation and Development) Act, 2016. Available at: https://indiankanoon.org/doc/85425648/

[2] Functions and Duties of Promoter (Sections 11–18) under RERA. Available at: https://lawbhoomi.com/functions-and-duties-of-promoter-under-rera/

[3] M/s. Newtech Promoters and Developers Pvt. Ltd. v. State of U.P. and Ors., (2021) 10 SCC 165.

[4] Imperia Structures Ltd. v. Anil Patni and Anr., (2020) 10 SCC 783.

[5] Ghanshyam Sarda v. Leecon Buildwell Pvt. Ltd., Consumer Complaint No. 104 of 2018, NCDRC, decided on 22.03.2022.