RERA Penalties and Legal Actions Against Builders for Non-Compliance

The Real Estate (Regulation and Development) Act, 2016 (RERA) was introduced to ensure transparency, accountability, and fairness in the real estate sector. One of its most significant aspects is the enforcement of strict penalties on builders and developers who fail to comply with the regulations. From financial fines to imprisonment, RERA has laid down various punitive measures to protect homebuyers and maintain discipline in the industry.

This blog explores the penalties imposed on builders under RERA, key legal actions, landmark case laws, and recent developments.

In this blog, we explore key differences in RERA regulations across states, notable case laws, and recent updates that are shaping the Indian real estate sector.

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Builders can face legal actions and penalties under RERA for the following violations:

1. Failure to Register Projects with RERA – Builders must register their projects with the state RERA authority before advertising or selling.
2. Delay in Project Completion – Developers must adhere to the promised timelines; any delays can result in compensation to homebuyers.
3. Misrepresentation in Advertisements – False promises in brochures, advertisements, or project details can lead to legal consequences.
4. Non-Maintenance of Escrow Accounts – Developers must keep 70% of the project funds in an escrow account to prevent fund mismanagement.
5. Structural Defects and Poor Construction Quality – Developers must rectify defects found within five years of possession at no additional cost to homebuyers.
6. Failure to Comply with Tribunal Orders – If a builder does not comply with orders passed by the Real Estate Appellate Tribunal (REAT), severe penalties, including jail terms, can be imposed.

While the core principles of RERA remain the same nationwide, states have adopted unique rules based on local market dynamics. Some of the major differences include:

RERA prescribes a range of penalties for non-compliance, which vary depending on the nature and severity of the violation. These include:

1. Penalties for Non-Registration of Projects

• Fine of up to 10% of the project cost for failing to register the project with RERA.
• Continued non-compliance may result in an additional fine of up to 10% of the project cost or imprisonment for up to three years.

2. Penalties for False Information or Misleading Advertisements

• Fine of up to 5% of the project cost if a builder provides false information in advertisements or during registration.

3. Penalties for Delay in Project Completion

• Homebuyers can seek refunds or claim interest on the delayed possession.
• Builders may have to compensate homebuyers at an interest rate equivalent to the SBI’s highest marginal cost lending rate (MCLR) + 2%.

4. Penalties for Non-Maintenance of Escrow Account

• Fine of up to 5% of the estimated project cost for failing to deposit funds into the escrow account.

5. Penalties for Failure to Fix Structural Defects

• Builders must rectify defects within five years; otherwise, they must compensate homebuyers.

6. Penalties for Non-Compliance with RERA Orders

• Fine of up to 5% of the project cost for failing to comply with RERA’s directions.
• In cases of repeated non-compliance, imprisonment for up to three years may be imposed.

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Several landmark cases have set precedents for strict enforcement of RERA penalties. Here are a few:

1. Amrapali Group Case – Bikram Chatterjee v. Union of India (2019)

• The Supreme Court canceled the RERA registration of Amrapali Group for failing to complete housing projects.
• The court directed the National Buildings Construction Corporation (NBCC) to complete the unfinished projects.
• This case reaffirmed homebuyers’ rights over developers’ interests.

2. Puneet Kaur v. TDI Infrastructure Ltd. (2021)

• The Punjab RERA ruled in favor of homebuyers and directed the builder to refund the entire amount with interest due to excessive project delays.

3. Imperia Structures Ltd. v. Anil Patni (2020)

• The Supreme Court held that homebuyers can approach both RERA and consumer forums for grievances, ensuring stronger legal protection.

4. Supertech Limited Case (2022)

• The Supreme Court ordered the demolition of Supertech’s illegal twin towers and directed the company to refund homebuyers with 12% interest.
• This ruling emphasized strict action against violations of building approvals.

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1. Increased Digitalization of RERA Portals

• Many states have upgraded their RERA portals, making it easier for homebuyers to file complaints and track project approvals.

2. Stricter Enforcement in Delayed Projects

• In 2023, Maharashtra RERA (MahaRERA) imposed heavy fines on multiple developers for project delays and failure to disclose updates.
• Delhi RERA also blacklisted several non-compliant builders.

3. Greater Focus on Affordable Housing Projects

• Government bodies are ensuring that affordable housing projects adhere to RERA timelines, prioritizing middle-class homebuyers.

4. States Amending RERA Rules

• Some states, including Uttar Pradesh and Haryana, are considering amendments to lower project size thresholds, ensuring smaller projects also come under RERA regulations.

RERA has significantly changed the Indian real estate landscape, holding builders accountable and ensuring homebuyers receive fair treatment. The penalties for non-compliance are severe, ranging from hefty fines to imprisonment. Landmark case laws and recent developments have further reinforced RERA’s authority, ensuring that developers adhere to the highest ethical and legal standards.

For homebuyers, it is essential to verify a project’s RERA registration and stay informed about their rights. For builders, compliance with RERA is no longer optional—it is a necessity to maintain credibility and avoid legal repercussions.

If you are planning to invest in real estate, always check the project’s RERA registration status on your state’s official RERA website to ensure a safe and secure transaction.

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