10 major benefits of the new RERA act for Property Buyers


Buying a home is every person’s dream. However, everyone is not able to afford a home as the real estate prices are still very high as compared to the income levels.

To add to the misery, every developer/builder earlier had his own norms and there were no standard norms. Every builder followed different practices and structured the builder-buyer agreement in such a manner which is in favour of the builder.

The common man who invested his lifelong savings in buying real estate had very limited rights. To protect and safeguard the interests of the home buyers and to ensure that they are not exploited by the developers/builders – the govt introduced the RERA Act to protect the interests of the property buyers.

What is RERA?

RERA stands for Real Estate Regulations Act and was introduced in 2016 to protect the interests of the home buyers. The main aim of RERA is to provide relief to the buyers from the malpractices of unfair builders.

RERA specifies certain norms for building and development of real estate which will enhance the transparency in transactions in the real estate sector.

It has provided several rights to the home buyers and has also specified certain rules and regulations to be followed by all builders/ developers.

Moreover, the RERA Act also specifies the creation of a Real Estate Authority and Appellate Tribunal for each state. In case of any wrongdoing by the builder/developer – the home buyer can also file a complaint to this authority.

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10 Major Benefits of RERA Act

  1. Standardized carpet area:

Earlier the carpet area on which the builder calculates the price of the property was not defined. Every builder/developer had his own method of calculation of the Carpet Area.

For the same flat, the builder would calculate the carpet area as 1500 sq ft and the other would calculate the carpet area of 1400 sq ft.

This used to happen as there was no standard formula for the computation of the Carpet Area. However, this has now been clearly defined by the RERA Act and the same formula would be applied by all builders/developers for calculation of the carpet area.

The definition of carpet area as given by the law is-

“carpet area” means the net usable floor area of an apartment, excluding the area covered by the external walls, areas under services shafts, exclusive balcony or verandah area and exclusive open terrace area, but includes the area covered by the internal partition walls of the apartment.

As the definition of Carpet Area has been specifically defined, this would introduce standardisation in the calculation of Carpet Area.

This has a direct impact on the Real Estate prices as most developers charge on the basis of carpet area. Builders compute the price of a property as follows:

Cost of Property = Carpet Area x Rate per sq ft

Earlier the builders use to inflate the Carpet Area as a result of which the cost of the property would also shoot up. However, now the method for calculation of Carpet Area has been clearly defined by RERA and therefore the developers would not be able to manipulate the calculation of carpet area in order to increase the prices.

  1. Rate of interest on default:

In case of default in payment by the buyer or default in completion of the project by the builder, the rate of interest to be paid shall be the same for both parties.

Earlier what used to happen was that in case the builder delays the possession of property – the interest paid by builder to the home buyer was less whereas in case the buyer defaulted – the interest to be paid by the buyer to builder was higher.

There was no parity in the interest to be paid by both the parties. The RERA Act has now clearly specified that the interest rate shall be the same for both the parties.

  1. Reduces the Risk of Builder Insolvency/ Bankruptcy

A developer usually has several projects which are being constructed simultaneously. Earlier Builders were free to divert the funds raised from Project A to fund the construction of Project B.

However, this would now not be possible as after the introduction of RERA, the builder is liable to deposit 70% of the amount realized in for the project in a separate bank account. He can withdraw from such account only on the basis of completion of project, which shall be certified by a civil engineer, architect and a chartered accountant in practice.

As the funds can now not be diverted to other projects and used for other purposes – this will ensure that the funds are used for the purpose only for which they are raised and not for other purposes.

Earlier, there have been certain cases wherein the builder raised the funds from home buyers for constructing their homes but used the funds for other purposes. They later became bankrupt and were not able to complete the construction of the property.

As the funds can only be used for the purpose for which they have been raised – this will ensure that the funds are not diverted elsewhere and that the money is used for the purpose for which it is raised thereby ensuring timely completion of the property.

  1. Right of the Buyer in case of False promises:

In case there is a mismatch in the commitments made by the builder and the actual project, the buyer has the option to withdraw from the project, wherein he is entitled to full refund of the amount paid as advance or otherwise along with interest and claim compensation.

  1. Advance Payment:

The builder can take not more than 10% of the cost of the apartment, villa etc. as advance or application fees as the case may be, before entering into an agreement of sale.

  1. Right of the buyer in case of Defect after possession:

In case of any structural defect or any defect in workmanship, quality, provision or service is discovered within 5 years after the possession of the apartment, such defect will be rectified by the builder at no extra cost within 30 days.

If the builder fails to do so, the buyer shall be entitled to claim compensation for the same.

  1. Rights of the buyer Delay in possession:

If the builder fails to complete the project on the due date of completion then the buyer has the option-

  • To withdraw from the project, wherein he shall be entitled to full refund along with interest payable from the due date of completion till the amount is refunded.
  • To continue with the project till the completion, wherein he will be entitled to compensationalong with interest payable from the due date of completion of project till the project is actually completed.

For instance, say the project was due for completion on 31-3-2017 but it couldn’t be completed on that day. So on 1-4-2017 you have the option to withdraw from the project. If you decide to withdraw from the project then for the period from 1-4-2017 to till the payment is made, you will be entitled to interest.

In case you choose not to withdraw from the project then say the actual completion of the project takes place on 31-3-2019 then from 31-3-2017 to 31-3-2019 you will be entitled to interest every month.

  1. Rights of the buyer in case of defect in Title:

If at any time after the possession of property you find that there is a defect in the title of property then you can claim compensation from the builder. It is not barred by limitation, which means there is no time limit within which you have to discover the defect.

  1. Right to information:

The buyer shall be entitled to all the information related to the project, be it the plan layout, execution plan, stage wise completion status etc.

  1. Establishment of Authority for Grievance Redressal:

Any grievance against the builder can be taken to the state authority set up under RERA, which shall have the power to redress all the grievances. In case you are dissatisfied with the order you can file an appeal with the Appellate Tribunal who will redress your case within 60 days, and in case of failure to do so, it shall record the reasons of such failure.

If the builder wants to appeal to the Appellate Tribunal against the order of the Authority, then he shall have to deposit at least 30% of the penalty, or such higher percentage as may be determined by the Appellate Tribunal, or the total amount to be paid to the allottee including interest and compensation imposed on him, if any, or with both, as the case may be, before the said appeal is heard.


RERA is applicable to all Builders and Developers except the following:-

  1. Where the area of land proposed to be developed does not exceed 500 sq meters or the no. of apartments proposed to be developed does not exceed 8
  2. Where the Promoter has received completion certificate before the introduction of RERA
  3. For the purpose of Renovation or Repair or Re-development which does not involve marketing, advertising, selling or new allotment of any apartment, plot or building.


  1. RERA is only applicable on development of property and not on renting of property.
  2. RERA covers all residential and commercial projects, including shops, offices and buildings.
  3. So as to ensure that every family has a house of their own, the govt has also introduced the Pradhan Mantri Awaas Yojana wherein subsidy on Loan is being given for the purchase of houses.
10 major benefits of the new RERA act for Property Buyers
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10 major benefits of the new RERA act for Property Buyers
RERA Act: With an objective to protect consumer interest and to bring efficiency and transparency into the country's real estate sector.
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SAVI Developers Blog
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