Pros and Cons of the RERA Act: A Comprehensive Guide

What is the RERA Act?

RERA mandates that real estate projects (over 500 square meters or 8 units) and agents register with state authorities. Developers must disclose project details—timelines, approvals, and layouts—and deposit 70% of buyer funds into an escrow account for construction. The act also establishes state-level RERA authorities and tribunals for dispute resolution. With this framework in mind, let’s weigh its advantages and limitations.

Pros of the RERA Act

1. Greater Transparency in Real Estate

RERA has made transparency a cornerstone of real estate transactions. Developers must upload project specifics to state RERA portals, including land titles and completion schedules. For example, a buyer in Pune can now verify a project’s legitimacy online, reducing the risk of falling prey to misleading promises or unregistered builders.

2. Robust Homebuyer Protection

The act safeguards buyers by holding developers accountable. If a project is delayed, buyers can claim interest (pegged to the State Bank of India’s MCLR plus 2%) or a full refund. In 2021, a group of buyers in Noida successfully used RERA to recover funds from a stalled project, a feat that was rare before the act’s enforcement.

3. Emphasis on Timely Delivery

RERA imposes penalties—fines or jail terms—for delays, pushing developers to stick to timelines. Large firms like Tata Housing have adapted by streamlining operations, ensuring buyers receive possession as promised. This has significantly reduced the menace of indefinitely stalled projects.

4. Clear Carpet Area Definition

Previously, inconsistent carpet area definitions led to pricing disputes. RERA standardizes it as the net usable floor space, excluding common areas. This clarity helps buyers—like those in Hyderabad comparing apartments—know exactly what they’re paying for, eliminating hidden costs.

5. Fast-Track Dispute Resolution

RERA authorities resolve complaints within 60 days, a stark contrast to the years-long court battles of the past. In Maharashtra, one of the most proactive RERA states, thousands of cases have been settled swiftly, offering buyers and developers an efficient redressal system.

6. Boosted Market Confidence

By curbing unscrupulous practices, RERA has attracted institutional investors. Cities like Bengaluru have seen a surge in funding for compliant projects, signaling a maturing market that benefits all stakeholders in the long run.

Cons of the RERA Act

1. Higher Compliance Costs

RERA’s rules—registration, escrow accounts, and regular updates—increase operational expenses for developers. Small builders in tier-2 cities like Patna often lack the resources to comply, leading some to scale back or exit the industry entirely.

2. Delays in Approvals

The registration process requires multiple clearances, which can stall project launches. In states like Odisha, bureaucratic delays have left developers waiting months for RERA approval, inflating costs and frustrating buyers awaiting new housing options.

3. Exclusion of Pre-RERA Projects

RERA applies to projects launched or ongoing as of May 2017, leaving older cases unresolved. Buyers stuck in pre-2017 projects, such as Delhi’s Unitech developments, must still rely on slow courts, exposing a significant gap in the act’s coverage.

4. Uneven Implementation Across States

State autonomy has led to inconsistent enforcement. Maharashtra boasts a strong RERA framework, while states like Andhra Pradesh have diluted provisions, such as exempting smaller projects. This disparity confuses buyers and developers operating across regions.

5. Risk of Rising Property Prices

Some developers offset compliance costs by hiking prices. A 2023 Knight Frank report noted a 5-8% increase in RERA-compliant project costs in Mumbai, potentially pricing out middle-class buyers in high-demand markets.

6. Limited Public Awareness

Despite its benefits, many buyers and small developers remain unaware of RERA’s provisions. In rural areas, lack of education about the act limits its reach, leaving stakeholders unable to fully leverage its protections or comply with its rules.

Who Benefits Most from RERA?

Homebuyers gain the most, with legal safeguards and transparency tilting the scales in their favor. Established developers willing to adapt can build credibility, while smaller firms face hurdles. Investors see long-term potential, though short-term disruptions persist. Pre-2017 project victims, however, remain largely sidelined.

RERA’s Broader Impact

RERA has professionalized real estate, curbing fly-by-night operators. By mid-2024, over 1,22,000 projects and 85,000 agents were registered, per Ministry of Housing data, reflecting widespread adoption. Yet, its success depends on uniform enforcement and addressing gaps like legacy projects.