Supreme Court Criticises RERA Functioning

Supreme Court Criticises RERA Functioning

Why in News? 

Recently, the Supreme Court of India has criticised the functioning of the Real Estate Regulatory Authority (RERA), observing that in several states it appears to be facilitating defaulting builders instead of protecting homebuyers. 

• Expressing deep dissatisfaction, the Court remarked that it “won’t mind if the institution was abolished” if it continues to function in a manner that benefits only developers. 
• It further emphasised that state governments must revisit and rethink the constitution and operational framework of their respective RERA bodies.

What is the Real Estate Regulatory Authority (RERA)?

• • About: The Real Estate Regulatory Authority (RERA) is a statutory regulatory body established under the Real Estate (Regulation and Development) Act, 2016 to regulate the real estate sector and ensure the sale of plots, apartments and projects in an efficient and transparent manner. It acts as a quasi-judicial authority to protect the interests of homebuyers and promote fair practices in real estate transactions. 
  • Establishment: The RERA was enacted by the Parliament on 25 March 2016 and became operational in phases from 1 May 2016 and 1 May 2017. The Act mandates the establishment of a Real Estate Regulatory Authority in every State and Union Territory, making it compulsory for developers and real estate agents to register their projects.
  • Objectives: The primary objective of RERA is to bring transparency, accountability and efficiency into the largely unregulated housing sector. It aims:
    • To protect the interests of allottees (buyers), reduce fraudulent practices and project delays.
    • Ensure symmetry of information between promoters and buyers.
    • Promote professionalism and standardisation.
    • Establish a fast-track dispute resolution mechanism to boost investor confidence in real estate markets. 
  • Ministry: The implementation and policy oversight of RERA is carried out by the Ministry of Housing and Urban Affairs, while the State Governments act as the appropriate authorities responsible for notifying rules.

• Functions: 

• • Project and Agent Registration: RERA ensures mandatory registration of all real estate projects exceeding 500 square metres or more than 8 apartments and requires all real estate agents to register before engaging in property transactions.
  • Monitoring Financial Discipline: Developers must deposit 70% of the funds collected from buyers into a separate escrow account, which can only be used for construction and land costs, preventing fund diversion and project delays.
  • Information Disclosure: The Authority maintains an official website database containing details of registered projects, promoters, timelines, approvals and legal status, enabling buyers to make informed decisions.
  • Grievance Redressal: RERA establishes a three-tier dispute resolution mechanism consisting of the Regulatory Authority, an Adjudicating Officer, and an Appellate Tribunal to ensure speedy justice.
  • Regulatory Enforcement: It has the power to conduct investigations, issue directions, impose penalties, or revoke registrations in cases of non-compliance, fraud or violation of contractual obligations.

What are the Issues Related to RERA?

• Non-Uniform Implementation Across States: Despite being enacted through the Real Estate (Regulation and Development) Act, 2016, implementation remains non-uniform across states due to India’s federal governance structure. Several states have diluted key provisions while framing their own rules, leading to regulatory inconsistency, legal ambiguity, and uneven consumer protection standards across jurisdictions.
• Delay in Establishment of Regulatory Authorities: Many states initially delayed the formation of permanent Real Estate Regulatory Authorities and Appellate Tribunals, resulting in administrative backlogs. In some cases, interim bodies functioned without full operational capacity, undermining the Act’s objective of time-bound dispute resolution within 60 days.
• Weak Enforcement of Orders: One of the most critical challenges is the weak enforcement of RERA orders passed against developers. Promoters often fail to comply with refund or compensation directives, forcing homebuyers to approach civil courts or High Courts, thereby increasing litigation costs and delays.
• Limited Technical and Financial Capacity: Several state RERA bodies face shortage of trained personnel, legal experts, and financial auditors required for project monitoring. This leads to inadequate scrutiny of project disclosures, escrow account usage, and construction timelines.
• Regulatory Capture and Appointment: Concerns have been raised regarding the appointment of bureaucrats without sectoral expertise as regulatory heads in some states. This may lead to regulatory capture, reducing institutional independence and weakening oversight over influential real estate developers.

Measures to Strengthen RERA Functioning

• Integration of Statutory Authorities: To prevent unfair delays, government departments and local planning authorities should be brought under the ambit of RERA. Currently, only builders are penalized for delays; however, holding officials accountable for slow sanctioning of plans or delayed issuance of Completion Certificates would ensure a more holistic and fair timeline for project delivery.
• Implementation of Single-Window Clearance: States must adopt a digital Single-Window System to streamline the approval process for over 50 different clearances. This would reduce the “approval-to-construction” lag, which currently spans 18 to 24 months. Integrating this with the RERA portal would allow for real-time tracking of project permissions, significantly lowering the risk of cost overruns.
• Strengthening Order Enforcement: RERA authorities must be granted greater executive powers to enforce their orders. Currently, many buyers hold “paper decrees” for refunds that developers ignore. Empowering the authority to directly attach properties or coordinate with the District Collector for immediate revenue recovery would restore consumer confidence in the legal process.
• Uniformity in State Rules: The Central Government should push for Standardized Model Rules across all states to prevent the dilution of provisions. Currently, definitions of “carpet area” or “ongoing projects” vary by state. Uniformity ensures that a homebuyer in one state receives the same level of protection as one in another, creating a stable national investment climate.
• Mediation and Conciliation Cells: To reduce the burden on RERA courts, every state authority should establish mandatory Conciliation Forums. By resolving disputes through alternative dispute resolution (ADR), the pendency of cases—which often exceeds the 60-day limit—can be reduced. This provides a faster, cost-effective route for minor grievances regarding maintenance or amenities.
• Enhanced Financial Monitoring: RERA should implement Blockchain-based tracking for the 70% escrow account mandate. This would provide an immutable ledger of how buyer funds are utilized, preventing fund diversion. Furthermore, allowing project-specific insurance can act as a safety net, ensuring that if a developer goes insolvent, the insurance covers the remaining construction costs.