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Tata Capital > Blog > Loan for Home > What is RERA?

Loan for Home

What is RERA?

What is RERA?

The Real Estate Regulation and Development Act (RERA) aims to protect homebuyers' interests and boost investments in this sector. The Act came into force on 1st May 2016, when 59 sections were notified. The remaining provisions became effective from 1st May 2017.


Homebuyers always complained that real estate favored the developers. The Act aims to offer equitable and fair transactions to both the buyers and sellers in the primary market. The new laws are expected to simplify the purchase of properties and bring greater transparency and accountability. It will give India its first real estate regulator.

Highlights of RERA

The most positive impact is the unified legal regime that will be applicable when you buy any real estate property. The Act aims to provide standardization. Here are five highlights of this Act.

1. Compulsory registration

Any project that is over 500 square meters or includes more than eight apartments must be registered with the respective state authority. Any existing projects that have not received a completion certificate (CC) or occupancy certificate (OC) must also be registered. Developers must offer detailed information, such as land status, approvals, completion schedule, and promoter details at the time of registration. Builders may market the project only on successful registration and receive the necessary approvals.

2. Reserve account

Before the implementation of this Act, there were delays when developers diverted funds from one project to another. To prevent such diversions, the Act now requires builders to park 70% of the project receivables in a reserve account. This money may be used only for the land development and construction costs as certified by professionals.

3. Title representation

All promoters must make a positive warranty on their titles and interests on the properties. Homebuyers may be able to use this information in case any issues related to the title are discovered. In addition, promoters must avail of insurance against the construction and title and the proceeds of such insurance are available to the buyers when the sale agreement is executed.

4. Continuous disclosures by promoters

The successful implementation of this Act enables homebuyers to monitor the progress of the project. Promoters are periodically required to submit all the information related to the project for the benefit of the purchasers.

5. Standardized sale agreement

RERA provides for a standardized model sale agreement between the developers and homebuyers. It was common for developers to insert punitive clauses in case buyers were penalized for defaults, such as delay in disbursal of the home loan. However, the sale agreement did not include punitive clauses for any defaults made by the developers. Homebuyers may now look forward to balanced sale agreements with the implementation of this Act.

To prevent any violations of the provisions of this Act, a monetary penalty will be levied on the violators. This may be a fine of up to 10% of the project cost and imprisonment.
RERA is expected to bring positive changes to the real estate sector. Financial institutions foresee an increase in the demand resulting in greater housing loan opportunities.