Legal Strategies Every Builder Must Know to Protect Projects and Avoid Disputes

RERA’s core strength lies in its ability to empower homebuyers by mandating strict compliance from developers. Below are some of the key guidelines that work in favor of buyers while presenting challenges for real estate developers.

1. Mandatory Project Registration

RERA requires all residential and commercial real estate projects, exceeding a specific size (typically 500 square meters or more than eight apartments), to be registered with the respective state RERA authority. During registration, developers must disclose vital project information, including timelines, layout plans, approvals, and ongoing financial status.

Buyer Advantages:
For buyers, mandatory registration means access to verified and up-to-date project details. This safeguards them from misleading claims and ensures they are investing in a legitimate project.

Developer Challenges:
For developers, this regulation creates a significant compliance burden. Any delay or oversight in the submission of documents can result in penalties or rejection of registration. In worst-case scenarios, projects cannot be marketed without RERA approval, leading to potential revenue losses.

2. Disclosure of Project Details

RERA mandates developers to maintain complete transparency about their projects. This includes providing buyers with clear information on construction timelines, specifications, and financial progress. Additionally, developers cannot make unilateral changes to the project’s plans without the consent of two-thirds of the buyers.

Buyer Advantages:
Buyers gain the assurance that the project they invest in will adhere to disclosed plans. This transparency also reduces instances of hidden costs or alterations, giving them more control over their investments.

Developer Challenges:
Developers must ensure that all project plans are finalized before registration to avoid buyer complaints. Frequent buyer communications and approvals also slow down project execution.

3. Adherence to Timelines

Timely delivery of real estate projects has been one of the most pressing concerns for homebuyers. Under RERA, developers are required to adhere to committed deadlines. Failure to deliver on time results in penalties, including refunds with interest or compensation to the buyers.

Buyer Advantages:
Buyers no longer have to deal with indefinite delays. If the developer fails to meet deadlines, buyers are entitled to a refund or interest compensation for the time lost. This instills confidence among buyers.

Developer Challenges:
Developers face immense pressure to ensure that construction is completed within the stipulated timeline. This involves better planning, execution, and financial management, which may not always be easy, especially in cases of unforeseen delays like material shortages or labor strikes.

4. Defect Liability for Five Years

One of the most buyer-centric provisions of RERA is the five-year defect liability clause. Developers are held accountable for fixing structural defects, poor workmanship, or quality issues reported by the buyer within five years of possession.

Buyer Advantages:
Homebuyers enjoy an added layer of protection, ensuring that any post-possession defects are resolved without additional costs. This guarantees quality in construction and long-term satisfaction.

Developer Challenges:
For developers, this clause significantly increases liability. They must allocate resources to rectify defects reported years after project completion, adding financial and reputational strain.

5. Escrow Account Rule

To curb fund diversion, RERA requires developers to deposit 70% of the funds collected from buyers into an escrow account. This ensures that the funds are utilized solely for the project for which they were collected.

Buyer Advantages:
This rule protects buyers from scams where developers abandon projects mid-way due to mismanaged funds. It also ensures continuous progress in construction.

Developer Challenges:
Restricted access to funds can create cash flow challenges for developers. This requires careful financial planning and can delay payments to contractors or suppliers.

6. Redressal Mechanisms

RERA establishes a robust grievance redressal mechanism for buyers.

Buyer Advantages:
Buyers have a clear path to resolve disputes without the delays typical of civil courts. The dedicated tribunal system ensures fair hearings.

Developer Challenges:
Developers face the constant risk of complaints from buyers. Each dispute requires significant documentation, time, and legal representation, which can disrupt business operations.

RERA has undoubtedly created a more transparent and buyer-friendly real estate ecosystem. However, for developers, its stringent guidelines demand meticulous compliance and proactive legal strategies. By leveraging pre-litigation and litigation support, developers can navigate RERA challenges efficiently while safeguarding their business interests.