RERA’s Powers Explained: What Legal Actions Can Be Taken Against Builders in India

By NyayKart Legal Team - Experts in RERA, consumer disputes and property law across India.

This Article Written by Riya Sinha Fifth Year, B. Com. LL.B, Chandigarh University.

The Real Estate (Regulation and Development) Act, 2016 was enacted to promote transparency, accountability and efficiency in the real estate sector and to protect the interests of homebuyers.

The enactment of the Real Estate (Regulation and Development) Act, 2016 (RERA) marked a transformative shift in the Indian property market. Historically characterized by delays and a lack of transparency, the sector now operates under a robust regulatory framework that holds developers accountable and provides clear legal remedies for buyers.

Whether you are a residential or commercial property buyer, understanding these specific powers is essential for safeguarding your investment.

1. Mandatory Project Registration (Section 3)

RERA’s foundational power is its "gatekeeping" role. No developer can market, sell or even advertise a project without first registering it with the state Authority if it exceeds 500 square meters or eight units.

• Penalty for Non-Registration (Section 59): Selling or marketing an unregistered project can lead to a penalty of up to 10% of the total estimated project cost.

• Continued Default: If the builder fails to register even after being notified, they face potential imprisonment for up to 3 years or an additional fine of 10%.

1A. Revocation of Registration (Section 7)

If a promoter:

• Violates RERA provisions

• Engages in unfair practices

• Defaults in project execution

• Is involved in fraudulent practices

The Authority can:

• Revoke project registration

• Bar the promoter from accessing the RERA website

• Freeze bank accounts

• Debar the promoter from future projects.

2. Mandatory Disclosures (Section 4)

Builders must upload:

• Land title documents

• Encumbrance details

• Sanctioned plans

• Project timeline

• Quarterly Progress Reports

• Number of units sold

Failure attracts penalties under Section 60 & 61.

3. The Absolute Right to Refund and Interest (Section 18)

Section 18 is the primary legal tool for buyers facing project delays. If a builder fails to hand over possession by the date specified in the agreement, the buyer has two distinct choices:

• Withdrawal and Refund: The buyer can exit the project and demand a full refund of the amount paid, plus interest from the date of payment until the date of refund.

• Compensation for Staying: If the buyer stays in the project, the builder must pay monthly interest for every month of delay until the physical possession is delivered.

• Fixed Interest Rate: To ensure fairness, the interest rate charged to builders for delays must be equal to the rate they charge buyers for payment defaults.

In M/s Imperia Structures Ltd. v. Anil Patni, the Supreme Court held that:

• Homebuyers can seek refund for delay even if construction is completed later.

• RERA remedy does not bar proceedings before Consumer Courts.

• The builder cannot compel buyers to accept delayed possession.

This case strengthened buyers' “absolute right to refund” under Section 18.

Rights of Allottees Under Section 19:

• Right to obtain project information

• Right to claim possession

• Right to claim refund

• Right to know stage-wise schedule

• Right to form Association of Allottees

• Right to receive necessary documents at possession

Can a Builder Cancel an Allotment?

A promoter can cancel an allotment only in accordance with the terms of the Agreement for Sale and must provide written notice. Arbitrary cancellation may amount to unfair practice and can be challenged before RERA.

4. Protection Against Structural Defects (Section 14)

RERA provides a long-term "warranty" on construction quality.

• Five-Year Liability: Any structural defect or poor workmanship brought to the builder's notice within five years of possession must be rectified free of cost.

• 30-Day Resolution: The builder is legally required to fix these issues within 30 days. Failure to do so gives the buyer the right to seek compensation through an Adjudicating Officer.

5.The Core Provision (Section 31)

Under Section 31, any "aggrieved person" may file a complaint with the Real Estate Regulatory Authority (RERA) or an Adjudicating Officer for any violation or contravention of the Act's provisions, rules or regulations.

• Who can file a complaint?

  • Individual Homebuyers: Those who have booked or purchased a property.

  • Allottees: Anyone who has been allotted a plot, apartment or building.

  • Associations of Allottees: Groups of buyers (such as a Resident Welfare Association) facing common issues.

  • Stakeholders: This includes real estate agents, legal heirs or even other developers affected by a promoter's misconduct.

Common Grounds for Filing a Complaint

Complaints under Section 31 are typically initiated for the following reasons:

• Delayed Possession: The most common grievance where builders fail to deliver the project by the promised date.

• Structural Defects: Discovering poor construction quality or workmanship within five years of possession.

• Unauthorized Layout Changes: When a developer alters the project design or sanctioned plans without the consent of two-thirds of the allottees.

• Hidden Costs: Imposing extra charges that were not disclosed in the initial agreement.

• False Promises: Advertising amenities or features that are not actually provided in the final project.

6. Restrictions on Layout Changes and Fund Use

Builders can no longer unilaterally change what they promised in their initial advertisements.

• Consent for Changes: A builder cannot alter sanctioned plans or project layouts without the written consent of at least two-thirds of the allottees.

• The 70% Escrow Rule: To prevent money from being moved between projects, 70% of the funds collected from buyers must be deposited in a separate escrow account. These funds can only be used for the land and construction costs of that specific project.

7. Financial Discipline: The 70% Escrow Rule

To prevent the "circular funding" trap- where builders use money from Project A to buy land for Project B- RERA mandates financial transparency.

• The Separate Account: 70% of the amounts realized for the real estate project from the allottees must be deposited in a separate account in a scheduled bank.

• Strict Withdrawals: Funds can only be withdrawn to cover the cost of construction and land. Furthermore, withdrawals must be in proportion to the percentage of completion of the project, certified by an engineer, an architect and a chartered accountant

Enforcement: How RERA Orders Are Executed

The law provides several pathways to ensure that builders do not ignore the Authority's directions:

1. Daily Financial Penalties: For non-compliance with an order, a builder can face a daily fine that cumulatively reaches up to 5% of the project cost.

2. Recovery Certificates (Section 40): If a builder refuses to pay a refund, RERA can issue a certificate allowing the local District Collector to recover the amount as arrears of land revenue. This can involve attaching bank accounts or auctioning the builder's properties.

3. Revocation of Registration: In extreme cases of repeated fraud, RERA can cancel the project's registration entirely, freeze its bank accounts and facilitate completion through the Association of Allottees.

4. Imprisonment for Tribunal Violations: Ignoring an order from the Appellate Tribunal can lead to imprisonment for up to 3 years or a fine of 10% of the project cost.

In Pioneer Urban Land and Infrastructure Ltd. v. Govindan Raghavan, the Supreme Court held:

• One-sided builder agreements are unfair and not binding.

• Buyers cannot be forced to accept possession after unreasonable delay.

• Clauses heavily favoring builders may be struck down as unfair trade practices.

This judgment protects buyers against oppressive contract clauses.

A Checklist for Prospective Buyers

Before you sign any MoU or Agreement for Sale, follow these steps:

1. Check the RERA Website: Verify that the project is registered and look at the "Quarterly Progress Reports" (QPRs) to see if construction is actually moving.

2. Verify the Title: Ensure the builder has the legal right to the land. As mentioned in our "Legal Checklist for Commercial Property," you should trace the ownership back at least 30 years.

3. Examine the Sanctioned Plans: Ensure the building you are being shown matches the plans approved by the local municipal corporation.

4. Search for Litigation: Use the e-Courts portal to see if the builder is currently embroiled in major lawsuits or insolvency proceedings at the NCLT.

Can Buyers Approach Consumer Court and RERA Simultaneously?

The Supreme Court in Newtech Promoters and Developers Pvt. Ltd. v. State of UP  clarified:

• RERA does not bar Consumer Forum jurisdiction.

• Remedies under RERA are additional.

• Buyers can choose the most beneficial forum.

This ensures buyers are not restricted to a single remedy.

Does RERA Override Other Laws?

Under Sections 88 and 89 of the Real Estate (Regulation and Development) Act, 2016:

• RERA remedies are in addition to other laws.

• In case of inconsistency, RERA provisions prevail.

This ensures stronger statutory protection for buyers.

Frequently Asked Questions (FAQs)

Q1: Can a builder charge more than 10% as a booking amount? 

No. Under Section 13, a builder cannot accept more than 10% of the property cost as an advance before signing and registering a formal Agreement for Sale.

Q2: What is the prescribed interest rate for delays? 

Most states prescribe SBI MCLR + 2%, but the exact rate depends on State RERA Rules.

Q3: How long does a RERA complaint take to resolve? 

RERA aims to resolve complaints within 60 to 90 days from the date of filing, providing a much faster alternative to traditional civil courts.

Q4: Can I complain if my project is not registered? 

Yes. You can file a complaint for the violation of Section 3 (mandatory registration). RERA has the power to fine the builder and force them to register the project.

Q5: Are verbal promises made by sales staff binding? 

Verbal promises are difficult to prove. However, under RERA, anything promised in brochures, advertisements or model flats is legally binding. It is always recommended to ensure these details are included in the registered Agreement for Sale.

Conclusion

RERA has shifted the real estate market from opacity to accountability. Today, a buyer is no longer helpless. With statutory refund rights, financial transparency, criminal penalties and enforcement through District Collectors, the balance of power has decisively moved in favour of homebuyers.

How NyayKart can help

If you are facing delayed possession, refund issues or unfair settlement offers, NyayKart provides end-to-end assistance: drafting legal notices, filing RERA complaints, representing you before consumer courts, negotiating settlements and executing refund recovery. Book a free consultation to evaluate your case and get a tailored action plan.