RERA’s Role in Reducing Fraud and Unethical Competition Among Builders

The Indian real estate sector has historically been plagued by fraud, misleading advertisements, and unethical competition among builders. Buyers often fell victim to false promises, project delays, and financial mismanagement by developers. To counter these challenges, the Real Estate (Regulation and Development) Act, 2016 (RERA) was introduced, bringing in much-needed transparency, accountability, and consumer protection.

This blog explores how RERA has been instrumental in curbing fraudulent practices and promoting ethical competition among builders, with references to landmark case laws and recent developments.

Fraudulent and Unethical Practices in Real Estate Before RERA

Before RERA, several unethical practices were prevalent in the real estate industry:

False Advertising: Builders often marketed projects with misleading information about amenities, possession dates, and approvals.
Project Delays: Buyers were promised timely possession, but many projects remained incomplete for years.
Financial Mismanagement: Developers diverted funds from one project to another, leading to stalled developments.
Opaque Pricing Models: Many builders charged buyers based on the super-built-up area instead of the actual carpet area, inflating prices unfairly.
Absence of a Regulatory Body: Before RERA, there was no dedicated authority to address grievances, forcing buyers into lengthy legal battles.

Key Provisions of RERA That Reduce Fraud and Promote Fair Competition

1. Mandatory Project and Builder Registration

All real estate projects (above 500 sq. meters or with more than 8 units) must be registered under RERA before being marketed or sold.
Developers must provide complete project details, including approvals, layouts, and completion timelines on the RERA portal.
Real estate agents must also register to ensure transparency in transactions.

2. Standardization of Carpet Area Calculation

Builders can no longer mislead buyers with pricing based on super-built-up areas.
The Act mandates that buyers pay only for the carpet area (actual usable space), reducing overpricing.

3. Escrow Account to Prevent Fund Misuse

Builders must deposit 70% of the collected funds into an escrow account, ensuring that money is used only for the specific project.
This provision prevents the diversion of funds to other projects, reducing the risk of unfinished developments.

4. Strict Penalties for False Advertising and Fraudulent Activities

Builders found guilty of false advertising can face up to 10% of the project cost as a penalty.
If a builder fails to deliver on promises, buyers can withdraw from the project and claim a full refund with interest.

5. Project Completion and Compensation for Delays

Developers must complete projects within the stipulated timeline; failure to do so results in compensation to homebuyers.
Buyers can opt for a refund or claim interest for each month of delay.

6. Establishment of RERA Tribunals for Quick Dispute Resolution

Homebuyers now have a legal mechanism for filing complaints against builders, reducing fraud and unfair practices.

Each state has a Real Estate Regulatory Authority (RERA) and an Appellate Tribunal for handling buyer complaints.

Case Laws That Reinforce RERA’s Effectiveness

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

The Supreme Court revoked the RERA registration of Amrapali Group after thousands of buyers were left in limbo due to incomplete projects.
The court directed NBCC (a government entity) to complete the stalled projects and safeguard homebuyers’ interests.
This case established RERA’s authority in handling large-scale real estate fraud.

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

The Punjab RERA directed the builder to refund the full amount with interest after the developer failed to deliver the project within the promised time.
This case reaffirmed that homebuyers have a strong legal standing under RERA for delayed projects.

Recent Developments in RERA Strengthening Buyer Protection

1. Increased Crackdown on Non-Compliant Builders

Several state RERA authorities have started imposing hefty fines and blacklisting developers who fail to comply with regulations.
In Maharashtra, authorities penalized multiple builders for misleading advertisements and non-registered projects.

2. Enhanced Digital Transparency via RERA Portals

Many states have upgraded their RERA websites, allowing buyers to track:
- Builder’s history and past projects
- Financial progress and approvals of ongoing developments
- Complaints and legal actions against developers

3. Expansion of RERA to Cover Smaller Projects

Some states are considering reducing the threshold for RERA applicability, ensuring even small-scale housing projects follow ethical business practices.

4. RERA’s Role in Boosting Ethical Competition

RERA has encouraged developers to offer better services, maintain timely project completion, and enhance quality standards.

With stringent compliance rules, only serious and financially stable builders can operate, eliminating unscrupulous players from the market.

RERA is not just a pro-homebuyer legislation but also a crucial legal framework that ensures fairness for builders and developers. By providing structured dispute resolution mechanisms, enforcing buyer obligations, and safeguarding against external delays, RERA helps developers operate with confidence. Landmark case laws and recent rulings further reinforce RERA’s balanced approach in resolving real estate disputes.

Builders facing unjustified legal challenges can leverage RERA’s provisions to protect their rights, ensuring a more transparent and efficient real estate sector for all stakeholders.

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Marketing and Advertising Under RERA: What Builders Can and Cannot Do

The Real Estate (Regulation and Development) Act, 2016 (RERA) has significantly transformed the real estate sector in India by enforcing strict guidelines on project transparency, marketing, and advertising. Builders and developers are now required to adhere to specific rules to ensure that buyers receive authentic information and are not misled by false promises. This blog explores the legal framework governing real estate advertising under RERA, key provisions, permissible and prohibited marketing practices, and recent legal developments, including landmark case laws.

Key Provisions of RERA Governing Advertising and Marketing

RERA imposes several obligations on developers when it comes to advertising real estate projects. Some of the key provisions include:

1. Mandatory Registration Before Advertisement (Section 3)

Developers cannot advertise, market, or sell any real estate project without registering it with the respective state RERA authority.
The registration number issued by RERA must be included in all promotional materials, ensuring transparency.

2. Disclosure of Accurate Project Details (Section 11)

Developers must provide complete and truthful information in advertisements, including:
- Carpet area (not super built-up area)
- Project timelines and possession date
- Approvals and legal clearances
- Amenities and specifications
Misleading advertisements are considered a violation of RERA, attracting penalties and legal consequences.

3. Prohibition of False Promises (Section 12)

If a builder fails to deliver what was promised in advertisements, buyers are entitled to:
- A full refund with interest
- Compensation for losses incurred due to false claims

4. Standardized Terms in Agreements (Section 13)

Builders cannot demand more than 10% of the total cost before signing a sale agreement.
The agreement must align with the commitments made in advertisements.

5. Restrictions on Pre-launch Advertising

Pre-launch offers without registration are illegal and subject to heavy penalties.

What Builders Can Do Under RERA

Despite restrictions, builders can still engage in effective marketing within the legal framework. Here’s what they can do:

✅ Advertise RERA-registered projects with correct and verifiable information. ✅ Use digital platforms, newspapers, TV, and hoardings for promotions, provided they include the RERA registration number. ✅ Offer legitimate discounts, promotional schemes, and financing options as long as they are clearly mentioned in the sale agreement. ✅ Highlight project amenities and features, ensuring they align with actual approvals and sanctioned plans. ✅ Conduct promotional events and property exhibitions showcasing RERA-approved projects.

What Builders Cannot Do Under RERA

🚫 False Advertising and Misleading Claims

Builders cannot claim unrealistic amenities, approvals, or possession dates.
Misrepresentation of carpet area, super-built-up area, or pricing is strictly prohibited.

🚫 Advertising Without RERA Registration

Any form of marketing before obtaining RERA registration is illegal.

🚫 Hidden Charges or Undisclosed Costs

All pricing details must be transparent, and additional charges must be disclosed upfront.

🚫 Celebrity Endorsements That Mislead Buyers

Builders cannot use misleading endorsements from celebrities to falsely attract buyers.

🚫 Bait-and-Switch Tactics

Advertising one project and later offering a different property is a punishable offense under RERA.

Landmark Case Laws on Advertising Violations Under RERA

1. Lodha Group Misleading Advertisement Case (Maharashtra RERA, 2019)

Issue: Lodha Group was penalized for advertising a project without mentioning the RERA registration number.
Ruling: Maharashtra RERA imposed a hefty fine and ordered corrective measures.

2. Amrapali Group Fraud Case (Supreme Court, 2019)

Issue: Amrapali falsely advertised possession dates, leading to significant delays.
Ruling: The Supreme Court canceled the developer’s registration and handed over incomplete projects to NBCC for completion.

3. DLF Ltd. v. Competition Commission of India (CCI) (2011, Pre-RERA but Relevant)

Ruling: CCI fined DLF and highlighted the need for regulatory oversight, later addressed by RERA.

Issue: DLF misrepresented project approvals and changed specifications after sale.

Recent Developments in RERA Marketing Regulations

1. Increased Digital Monitoring by RERA Authorities

State RERA bodies are now actively monitoring digital and social media advertisements to prevent misleading claims.

2. Crackdown on Influencer Marketing

Developers using influencers for property promotions must ensure compliance with RERA guidelines.

3. Heavier Penalties for Non-compliance

States like Maharashtra and Karnataka have introduced stricter penalties for misleading advertisements.

4. RERA Compliance in Online Property Portals

Platforms like MagicBricks and 99acres must verify RERA registration before listing projects.

Recent Developments in Force Majeure Under RERA

1. COVID-19 and Blanket Extensions (2020-2021)

Many state RERA authorities granted automatic 6–9 months extensions to developers due to the pandemic.
Maharashtra RERA (MahaRERA) and Haryana RERA (HRERA) extended completion deadlines for ongoing projects.

2. RERA Amendments for Natural Calamities (2023)

Several states have proposed modifications in RERA rules to define Force Majeure events more clearly, ensuring that both developers and homebuyers are protected.

3. Strict Scrutiny on Force Majeure Claims (2024)

Developers must now submit detailed evidence and project progress reports to justify extensions.

RERA authorities have started rejecting Force Majeure claims where delays were due to financial mismanagement rather than external events.

RERA has significantly improved transparency and accountability in real estate marketing. Developers must ensure that all advertisements comply with RERA guidelines to avoid legal consequences and maintain consumer trust. Homebuyers should always verify RERA registration numbers before making any decisions. By adhering to these rules, the real estate industry can move towards a more ethical and buyer-friendly environment.

For homebuyers and investors, the key takeaway is: Always check for RERA registration before making a property purchase!

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